The budget shortfall reached €127 billion last year, the highest since 2022, according to official statistics
Germany’s military spending shot up by over 23% to €39 billion ($45 billion) last year, pushing the budget deficit to the highest level in four years, the Federal Statistical Office has reported.
Following the escalation of the Ukraine conflict in 2022, Berlin began a military buildup, with defense expenditure projected to exceed €500 billion by 2029. The German government has stated it wants the country’s armed forces to be “war-ready” by then, citing a perceived Russian threat.
Moscow has repeatedly dismissed as “nonsense” allegations that it harbors aggressive plans against the European members of NATO.
In a press release published on Tuesday, the Federal Statistical Office estimated that Germany was €127.3 billion in the red in 2025, with all levels of government operating at a deficit. According to the analysis, the shortfall was €22.9 billion higher than in 2024.
The federal government accounted for the lion’s share of the deficit at €85.4 billion.
Among the reasons for this trend, the agency cited the government’s decision to increasingly fund certain areas, including military spending, through borrowing.
Last year, Germany’s central bank warned that it expected the government shortfall to reach 4.8% of economic output by 2028, the highest level since 1995, when deficits peaked in the years following German reunification.
The Bundesbank attributed the trend to higher defense allocation and continued financial support to Ukraine, among other factors. Germany’s economy saw two years of recession in 2023 and 2024, and a period of near-stagnation in 2025.
Despite the adverse economic outlook, Chancellor Friedrich Merz has pledged to transform the German armed forces into the “strongest conventional army in Europe.”
On Monday, Russian Foreign Ministry spokeswoman Maria Zakharova warned that the “last time the German political elite set out to make their country ‘the main military power in Europe,’ it ended in tragedy for all of humanity.”
