Germany’s plan to save European defence and its industrial future

Germany’s defence policy has changed more in the past four weeks than it has in the past four decades.

In a historic vote, Berlin removed its constitutional debt brake, unlocking over €500 billion in public funds to rebuild its military and overhaul national infrastructure.

The new government has pledged to expand troop numbers, ramp up weapons production, and rewire parts of its car industry for defence. 

At the same time, it’s doubling down on electric vehicle incentives and industrial incentives to revive Europe’s green ambitions and boost European EV manufacturers.

How much is Germany spending?

On March 18, the Bundestag approved a constitutional amendment to lift the debt brake.

The decision enables €500 billion in spending over the next decade, with another €100 billion likely to follow if defence spending hits 3.5% of GDP.

Some of this funding is earmarked for railways and hospitals, but the strategic focus is clear: large-scale military modernization.

Germany had chronically underfunded its military since the 1990s.

By 2024, it will have only just met NATO’s 2% threshold for the first time in over 30 years.

The Bundeswehr lacks supplies, equipment, and infrastructure.

Barracks are crumbling. Troop numbers have stagnated. A recent parliamentary report found that even with the €100 billion fund approved in 2022, basic operational readiness was still years away.

Now, the new funds target everything from F127 battleships and Eurofighter jets to drones, satellites, and missile stockpiles. 

General Carsten Breuer wants 100,000 more soldiers and openly advocates for the return of military service.

He even warned that Germany must be ready for war within four years.

Defence Minister Boris Pistorius has shared similar concerns, citing Russian threats, as well as “unpredictability in transatlantic relations.”

The scope of ambition is new. So is the urgency.

What broke Berlin’s restraint?

Russia’s invasion of Ukraine triggered Germany’s original “Zeitenwende” in 2022.

But it was the return of Donald Trump that turned a pivot into a complete reorientation.

Trump froze weapons shipments to Ukraine, questioned NATO obligations, and signaled that Europe could no longer assume US protection.

Recent disclosures from within the US political leadership have shown that Europe is now seen less as a partner and more as a burden.

Trust in the transatlantic alliance has collapsed. Recent polls have shown that most Western European countries see Donald Trump as a threat to European peace.

That’s nearly as many as those who view Vladimir Putin the same way.

This breakdown has given Germany no choice but to step up.

Chancellor-in-waiting Friedrich Merz has long warned of US unreliability and now sees defence as both a domestic and European imperative.

Germany’s defence policy, once shaped by postwar pacifism and economic ties, is now focused on preparing for conflict and deterring threats on Europe’s doorstep.

Can Germany pull it off?

Raising the money was the easy part. The hard part is turning those euros into weapons, infrastructure, and capability. 

Germany’s defence sector faces well-known execution risks. Procurement is slow. Projects get bogged down in legal reviews.

Recruitment targets are missed repeatedly. The Bundeswehr has just 181,000 troops today. Breuer wants 460,000, including reserves.

Execution is also a political challenge. Social Democrats remain divided over the scale of military spending, especially as cuts to social programs become more likely. 

Lars Klingbeil, a defence-focused SPD leader shaped by his time in the US during 9/11, is expected to take over as finance minister.

He has no experience managing public finances but is tasked with balancing rearmament, investment, and industrial competitiveness, all while keeping the coalition from fracturing.

The industrial side will be just as complicated. Germany plans to convert unused auto factories into defence plants.

It also wants to protect Volkswagen and its peers from EU emissions fines that could weaken them during the EV transition. This is where economic policy and national security begin to merge.

Why EVs matter in a defence story

Germany’s industrial credibility still rests on its auto sector.

That’s why the coalition is pushing hard on electric vehicle incentives, tax breaks for EVs, subsidies for hybrids and hydrogen trucks, and a national push for charging infrastructure.

The message is that defence and green growth are both essential to national resilience.

Volkswagen is already responding. In Q1 2025, its global EV sales jumped 59% while European deliveries more than doubled. 

In Germany, nearly half of all EVs sold came from a VW Group brand.

With Tesla retreating in most European markets, Germany has retaken control of the regional EV narrative.

But there’s still pressure from China. In Q1, VW’s EV sales in China dropped 37%, while BYD continues to gain ground.

This is where Germany’s two-track strategy becomes clear. Rearmament and re-industrialization are happening in parallel.

They’re not conflicting goals. They’re two sides of the same coin: making Germany economically independent and strategically relevant again.

A defence economy, by design or by accident?

This whole plan was never part of a grand vision. It’s a reaction. A fast, improvised response to external abandonment and internal decay.

The uncomfortable truth is that this moment might have required an external shock to force overdue change.

And now, Germany has the chance to do something it hasn’t done since reunification: lead not out of guilt, but out of necessity.

And in doing so, it may prove that economic resilience and military deterrence are not competing agendas. 

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