Germany approves landmark $75b in military purchases

Summary

• German lawmakers approved roughly €50 billion in arms contracts on Dec 17, including missiles, armoured vehicles and satellite systems, amid Russian threat.
• Germany aims to modernise its armed forces, the Bundeswehr, becoming Europe’s strongest army and meeting NATO’s defence spending target of 3.5% of GDP by 2029.
• Chancellor Friedrich Merz exempted defence spending from debt rules, using a special fund created after Russia's 2022 invasion of Ukraine to boost rearmament.

BERLIN - German lawmakers approved a record number of arms contracts during a closed-door meeting on Dec 17, kicking off a defence splurge of roughly €50 billion (S$75 billion) amid the threat posed by Russia.

The 30 military procurement orders covered a wide range of materiel and services, setting the course for the expansion of capabilities and increased operational readiness of Germany’s Bundeswehr armed forces, the defence ministry said in a statement.

“This brings the total number of proposals approved this year to 103, once again launching a historic number of major defence projects with a total volume of €82.98 billion,” the ministry added.

The projects approved on Dec 17 cover a broad spectrum, including €21 billion for basic military gear and clothing, more than €4 billion for Puma infantry fighting vehicles, €3.4 billion for self-propelled howitzers and €3 billion for Arrow 3 air-defence interceptor missiles, according to procurement documents. Bloomberg News reported the pending approval earlier this month.

Other contracts included €3.7 billion for up to 4,000 Eagle V 4x4 armored vehicles from General Dynamics European Land Systems; €1.8 billion for SPOCK 1 reconnaissance satellites from Rheinmetall and Iceye; €1.55 billion for Patriot PAC-3 MSE interceptor missiles from Lockheed Martin; and €1.23 billion for IRIS-T SLM air-defense missiles from Diehl Defence.

It marks both the largest number of big-ticket military orders and the highest overall sum of defence spending ever approved in a single session of the Bundestag lower house of Parliament’s budget committee. More contracts are to follow in the coming year.

The efforts are part of Chancellor Friedrich Merz’s broader ambition to transform the Bundeswehr into Europe’s strongest conventional army in light of growing threats from Russia and as the US questions the continent’s commitment to NATO.

Former Social Democrat chancellor Olaf Scholz, who kicked off the military expansion, called it a historic turning point, or “Zeitenwende.”

Mr Merz has accelerated the buildup, abolishing borrowing limits for defence so there would be more funds to rearm. 

The €50 billion in spending represents roughly one-tenth of Germany’s federal budget in 2025 and will be partly financed by a special debt-financed fund for military modernisation created under Mr Scholz shortly after Russia’s full-scale invasion of Ukraine in 2022.

Germany’s ruling coalition of Mr Merz’s conservatives and the centre-left Social Democrats is aiming to hit NATO’s new commitment for core defence spending of 3.5 per cent of gross domestic product by 2029, well ahead of the target date of 2035. BLOOMBERG