Germany hits 2% GDP defense spending in 2025 budget

Germany's NATO 2% defense spending commitment is the bellwether for European alliance credibility. The 2024 budget hit 2% for the first time since the Cold War, driven by the €100B Sondervermögen special defense fund created after Russia's invasion of Ukraine. But that fund is being drawn down, and sustaining 2% requires either lifting the Schuldenbremse (debt brake) or reallocating substantial budget resources. The new Merz government has signaled hawkishness on defense, but coalition negotiations with the SPD may constrain spending ambitions. NATO's annual compendium of member defense expenditures (released each spring) is the authoritative reference. Key evidence: German Finance Ministry budget drafts, Bundestag defense committee votes, Sondervermögen drawdown rate, and NATO defense spending compendium data. LONG positions benefit from each confirmed budget increase or debt-brake suspension that locks in structural defense spending above 2%; SHORT positions benefit from fiscal constraints keeping spending below the threshold.