Germany's 2025 State Investment Surge Fueled by Defense Spending

Germany’s gross public investment reached €147.5 billion in 2025, a 12.3 % increase over 2024 and the biggest annual rise since 2000. The surge was driven primarily by a 47.7 % jump in equipment investment, largely for the Bundeswehr’s armaments and other defence procurements.

The higher spending pushed state gross investment to 6.5 % of total public expenditure and to 16.3 % of total fixed‑capital formation in Germany, while its share of GDP remained at 3.3 %, below the EU average of 3.9 %. Construction investment was modest, up only about 2 % year‑on‑year. In the first quarter of 2026 the overall growth slowed to 3.2 % quarterly, though equipment investment continued to rise.

Economist Sebastian Dullien of the Hans‑Böckler‑Stiftung noted that “modernisation of the country is proceeding,” and warned that extra borrowing from special defence funds must be directed to new investments rather than other budget items such as tax cuts or pension benefits.