Germany's Bold Economic Revival with Record Investments

Germany's cabinet approved a significant economic revival plan with record investments in defense. Amid a tight NATO context, the plan aims to counter far-right support and adjust to the changing global defense landscape. The drafts propose increased investment and borrowing until 2029 to stimulate economic growth.

Germany's cabinet has greenlit a groundbreaking budget for 2025, along with a budget framework for 2026, featuring record investment levels to rejuvenate the nation's struggling economy. The approved drafts aim to spur growth following back-to-back years of economic contraction, featuring a notable focus on defense spending ahead of a key NATO summit.

Defense Minister Boris Pistorius emphasized the historic significance of the increase in defense funding, stressing Germany's role within NATO as expectations rise. The center-right-led coalition government faces challenges, including swaying support away from far-right movements and compensating for the evolving defense dynamics as America reduces its continental focus.

The economic strategy involves substantial borrowing, supported by a special infrastructure fund, positioning Germany for new economic strength while maintaining lower debt interest payments compared to other large European economies like France and Italy. Lawmakers are set to finalize the 2025 budget in September as the country seeks to establish long-term financial resilience and growth.

(With inputs from agencies.)