BERLIN — Germany is set to increase its military budget to 3.5 percent of GDP by 2029, government officials in Berlin told POLITICO on Monday.

The pledge comes just 24 hours before NATO leaders gather in The Hague, where tensions are expected to run high as U.S. President Donald Trump presses allies to dramatically scale up their defense commitments. 

For 2025, Berlin has allocated €86 billion to defense, equal to 2.4 percent of gross domestic product, officials said. By 2029, annual defense expenditures are expected to reach €153 billion, or 3.5 percent of GDP — marking the country’s most ambitious rearmament effort since reunification.

To finance the ramp-up, Chancellor Friedrich Merz’s government has suspended the constitutionally enshrined “debt brake,” clearing the way for defense spending above 1 percent of GDP to be debt-financed. 

Brussels has also been looped in. Germany has formally requested flexibility under the EU’s Growth and Stability Pact, seeking permission to classify the surge in defense investment as exceptional spending.

A €100 billion special fund for the German Armed Forces — announced in 2022 after the start of Russia’s all-out invasion of Ukraine — is expected to be fully depleted by 2027, making the structural increase in the core budget all the more significant.

Meanwhile, Merz has signaled a willingness to spend up to 1.5 percent of GDP on “defense-adjacent infrastructure,” including transport corridors and strategic mobility projects, coinciding with NATO’s wider agreement to split the 5 percent target sought by Trump to 3.5 percent for hard defense spending and 1.5 percent for other expenditures related to defense.

His Cabinet is expected to greenlight the expanded defense budget on Tuesday, followed by a formal address to the Bundestag on Wednesday — just ahead of his departure for the NATO summit.

The package also includes a robust aid commitment to “states attacked in violation of international law,” above all for Ukraine, with €8.3 billion earmarked for 2025 — double the level planned by the previous Scholz administration. That figure will climb to €8.5 billion annually from 2026 onward, officials said.