by Robin Fehrenbach, Jakob Flemming, and Julia Friedlander

Since Germany’s reunification, defense spending has been a taboo topic in the country. Russia’s war with Georgia and incursions into Ukraine in 2014 raised relatively few strategic concerns in Berlin, and it took until February 2022 to shake the system loose. From guns versus butter debates to the unwinding of spending orthodoxies and industrial transformations, the last several years have witnessed a small revolution in the national dialogue as well as in the broader economy. The country has begun building a military-industrial complex essentially from scratch and exploiting all means to finance it—including using the public purse, commercial banking, and private capital. Policymakers and industry leads must deliberate what will be financed nationally, in consortium or through European Union (EU) and NATO mechanisms. It is all new.

European institutions are also expanding their mandate. The European Commission appointed Lithuanian Andrius Kubilius as its first commissioner for defense in a bid to draw defense consolidation into the technocratic machine best known for streamlining trade and financial regulation across the bloc. In November 2024 at the Berlin Security Conference, then-Commissioner-Designate Kubilius called for a “Big Bang” approach in defense policy, which would entail “producing a clear Industry Output Plan, based on the analysis of capability gaps according to NATO evaluations and covered by European production of defence equipment where we have capability gaps, with a clear target date to fulfil this Plan around 2030.” [1]

The political will is there – and the private sector is ready to contribute

The June 2025 commitment of NATO Allies to spend 5 percent of gross domestic product (GDP) on security and defense until 2035 provides the new baseline and blueprint for European defense [2]: 3.5 percent is to be invested into weapon systems and ammunition, 1.5 percent into critical infrastructure. NATO Secretary General Mark Rutte articulated this shift after pre-summit consultations with President Donald Trump, but he already had the facts to back up his assertions to the US president [3]. Just weeks earlier, Germany had upended its constitutional debt brake for security and defense investments and created the Sondervermögen for infrastructure.

After years of circuitous debate, the presumed new chancellor, Friedrich Merz, invoked the outgoing German Bundestag mandate to relax the debt brake [4]. The move ultimately gained support across the centrist political spectrum, ensuring that both state-driven and external financing mechanisms would be used to reach NATO pledges. The drastic increases in defense spending remain broadly in line with fiscal principles, requiring what some would call an accounting trick, and others a compromise. Defense investments are now exempt from the constitutional debt brake and can total up to 1 percent of GDP [5]. Anything beyond 1 percent of GDP for defense investments requires credits in special funds, usually referred to as Sondervermögen. While on-budget expenditures and investments in security and defense depend on the incoming tax revenues of the German economy, discretionary spending is effectively freed from these constraints, imposing no specific limit on such extra funding. Defense spending has gone from a crawl to a sprint, overnight.

It is a sea change that the government will now rely on private funding to uphold its national security obligations.

Government stimulus tends to trigger private sector interest, which is poised to play a crucial role in scaling up defense-related resources, increasingly billed as a reliable, growing, and even socially responsible investment sector. Commercial and investment banks as well as private equity and venture capital firms are rapidly developing products for both institutional and private clients, reflecting broader awareness among decision-makers from the public and private sectors that capital is needed to meet defense spending goals. As Deutsche Bank Chief Executive Officer Christian Sewing put it, “we need to efficiently combine public funds with private capital to finance expansion. Banks and investors are ready for this – for example, Deutsche Bank’s corresponding loan portfolio amounts to a mid-double-digit billion-euro amount.” [6]

Two recent high-level events that the Atlantik-Brücke hosted in Berlin brought together stakeholders from the military and private sector to discuss how private capital can fund the German defense build-up, sending a clear signal that private investors are ready to channel capital into Germany’s defense capabilities. It is a sea change that the government will now rely on private funding to uphold its national security obligations.

Based on this assessment, the EU created a program, SAFE (Security Action for Europe), to provide €150 billion in long-maturity loans for procurement efforts and fund projects based on common procurement [10]. SAFE projects should involve “at least one Member State benefitting from SAFE and another Member State, as well as Ukraine and EEA-EFTA [European Economic Area-European Free Trade Association] countries,” but will also temporarily fund individual member states’ procurement in acute security crises. It remains to be seen whether SAFE can fulfill Commissioner Kubilius’ big promise from September 2025 to “unify our fragmented defence procurement.” [11] For the time being, nation-states and private capital will provide the lion’s share of required funding, largely due to the direct economic impulse defense spending gives to national economies and their flagship contractors.

Through defense, Germany’s economy can change in shape and scope

Increased investment in military systems will impact the overall industrial and economic landscape in Germany. In addition to defense allocations, the Sondervermögen also includes €500 billion for infrastructure and climate protection [12]. It has not escaped the governing parties that the security crisis in Europe provides an opportunity to ignite a long-needed growth stimulus for the German economy. Germany remains the third-largest economy in the world, but is poised to record a third consecutive year of zero or negative growth. This year most likely will not bring the turnaround: In the second quarter of 2025, Germany’s economy decreased by 0.3 percentage points compared with the first quarter [13]. All major economic institutes in the country as well as the International Monetary Fund predict hardly any economic growth for Germany in 2025 [14].

Germany’s defense industry will also play a crucial role in building Ukraine’s deterrence capabilities.

Germany’s economy has developed formidable strengths in the automotive, machine engineering, and chemical industries over the past few decades, leading to its export-oriented position in the global economy. This has changed significantly, especially over the past five years, as global competitors have improved their research and development in all kinds of industrial sectors, their labor force skills, and their knowledge. More robust supply chains and much lower energy costs have also contributed to the successes of foreign economies, mostly in the Indo-Pacific region and in South America.

Der Beitrag Waiting for the Big Bang: Executing the European Defense Build-Up in Germany erschien zuerst auf Atlantik-Brücke e.V..

Further elected members of the executive board of directors are Treasurer Professor Dr. Andreas Dombret, former member of the executive Board of Deutsche Bundesbank and Adjunct Senior Research Scholar at Columbia University, New York and Atlantik-Brücke’s Executive Director Dr. David Deißner.

Sigmar Gabriel succeeds Friedrich Merz as chairman who held the position for ten years.

Friedrich Merz thanked Atlantik-Brücke members and the board of directors for the good working relationship. „It was a great pleasure and honor to be chairman of Atlantik-Brücke for 10 years. One thing became clear repeatedly: The transatlantic relationship is more than trade policy, more than a security alliance. It is a value-based community, in which we also have to represent our interests. Taking a stance is not an easy, but an important task. I wish every success to my successor Sigmar Gabriel and his board of directors.”

Sigmar Gabriel expressed his gratitude for the trust placed in him by the members. He said: „The relationship to the U.S. is neither better nor worse compared to how we knew it since the 50’s, but simply different. To set new impulses in this relationship, Atlantik-Brücke is just the right starting point. If Atlantik-Brücke didn’t exist, it would have to be invented.”

The Annual Members’ Meeting furthermore elected the extended board. Confirmed in their position were the following board members:

• Kai Diekmann, Storymachine GmbH, Berlin
• Angelika Gifford, Technology Executive and Member of Corporate Boards, TUI AG, ProSiebenSat1 Media SE and Rothschild & Co., Munich
• Reiner Hoffmann, Chairman, German Federation of Trade Unions (DGB), Berlin
• Ambassador Wolfgang Ischinger, Chairman, Munich Security Conference (MSC), Munich
• Alexander Graf Lambsdorff, MdB (FDP) and Deputy Chairman of the FDP Parliamentary Group, German Bundestag, Berlin
• Parliamentary State Secretary Christian Lange, MdB (SPD), Federal Ministry of Justice and Consumer Protection, Berlin
• Omid Nouripour, MdB (Alliance 90/The Greens), Foreign Policy Spokesperson of the Green Parliamentary Group, German Bundestag, Berlin
• Karsten Uhlmann, Managing Partner, Frankfurter Brauhaus GmbH, Frankfurt (Oder)
• Michael Werz, Senior Fellow, Center for American Progress, Washington, DC
• Ute Wolf, Chief Financial Officer, Evonik Industries AG, Essen

Newly appointed to the extended board were the following members:

• Eveline Metzen, General Manager, American Chamber of Commerce in Germany e.V., Frankfurt am Main
• James von Moltke, Member of the Management Board, CFO, Deutsche Bank AG, Frankfurt am Main
• Julie Linn Teigland, Managing Partner for Germany, Austria, Switzerland, Ernst & Young GmbH, Mannheim
• Anahita Thoms, Partner, Head of Germany’s International Trade Practice, Baker & McKenzie, Düsseldorf
• Frederike von Tiesenhausen Cave, Global Head of Public Affairs, Bloomberg L.P., London
• Nagila Warburg, Entrepreneur and Board, Warburg Archive Foundation, Hamburg

Atlantik-Brücke Auditors Dr. h.c.  Klaus-Peter Müller, Honorary Chairman of the Supervisory Board, Commerzbank AG, Frankfurt am Main and Dr. Lutz R. Raettig, Chairman of the Supervisory Board, Morgan Stanley Bank AG, Frankfurt am Main were confirmed by the Annual Members’ Meeting.

Der Beitrag Sigmar Gabriel new chairman of Atlantik-Brücke erschien zuerst auf Atlantik-Brücke e.V..

It really is an era coming to an end. After ten years, Friedrich Merz as the chairman is leaving and John Emerson has already left – but not really. Let me start with you, dear Friedrich Merz. You are looking back on ten important and successful years. What was your biggest success, the most positive transatlantic event?

[related]FM: First of all, I am really happy to co-host the biggest German-American Conference we ever had at Atlantik-Brücke together with the American Council on Germany (ACG) tonight and tomorrow. It is a great honor that we are attracting so many people to our conference. Sitting here and looking over to the Adlon Hotel, I am reminded of one of the best meetings I had in my capacity as chairman of the Atlantik-Brücke with John’s predecessor Bob Kimmitt. At the very beginning of my tenure, I invited him for dinner there. It was not an easy conversation because cooperation between the ACG and the Atlantik-Brücke had been a little fraught before. I said: Bob, let’s talk about what has happened and let’s look forward to what we can do jointly in the future. We came to the conclusion that we should leave the past behind and restore our cooperation. This was the continuation of a very fruitful collaboration between our two organizations, which we should make sure we continue in the future.

Which moment worried you the most?

FM: The biggest disappointment was the failure of TTIP. When I see what is happening in the US these days, I wish that we at least had TTIP. But to be honest, I am not so sure if this would really help as long as the American President is not willing to stick to the agreements the US government entered into. Nevertheless, we should come back to a rules-based cooperation between Europe and the United States. A transatlantic free trade agreement is one of the most important things we could and should achieve in the future. We all worked very hard on TTIP and we met in several places in Germany to fight for TTIP.

The biggest disappointment was the failure of TTIP.[quoter]Friedrich Merz[/quoter]

John Emerson, you said the two of you were working together for six years. You were trying to achieve TTIP, and you are still true friends. Can you describe your cooperation and what is the key to this special friendship?

JE: I have to say what a great pleasure it is to sit up here and look into this room and see so many friends. Old friends, new friends, but particularly friends from our time in Germany. Secondly, I have to say, that there was probably no one I enjoyed working with in Germany more than Friedrich Merz. Friedrich hosted the opening dinner at which I spoke when I got introduced to some in this room and many in the German public the day I presented my credentials to President Gauck. And then literally the last speech that I gave and the last event that Kimberly and I and our girls attended, Friedrich hosted with Atlantik-Brücke again. He threw an incredible party for us. On behalf of all of us, we are really sad to see you go.

I have to say, that there was probably no one I enjoyed working with in Germany more than Friedrich Merz.[quoter]Ambassador John B. Emerson[/quoter]

There are three levels to the German-American friendship and relationship. There is a government to government level – and sometimes there are things that we agree on and sometimes there are things that we don’t agree on. There is also the business to business level. There is no reason in the world that we cannot continue negotiating a great trade agreement. And then there is the people to people level, which is very much reflected by what we see tonight in this room.

Friedrich Merz, you recently said, and I quote you directly: We are eyewitnesses of a fundamental political and economic shift. You underlined that change while mentioning the election of the 45^thU.S. President and the party convention of the Communist Party of China in October 2017. What exactly are these tectonic changes that we are facing?

FM: I mentioned a third date, which was the 23^rdof June 2016, when the majority of the British decided Britain should leave the EU. These three events, the Brexit vote, the American election and the party convention of the Communist Party in China mark a fundamental change in our history. When we look back at these events some time from now, we will realize what really happened. Let me quote Professor Heinrich August Winkler, who said: We are in the midst of a cultural fight about the future of our liberal order. He concludes that it is really uncertain whether we will win. But there is something that makes me optimistic: when I travel to the United States, my experience is that in these complicated times, more Americans than ever before are willing to defend what we achieved over the last seven decades. Let’s preserve our freedom and our liberty.

These three events, the Brexit vote, the American election and the party convention of the Communist Party in China mark a fundamental change in our history.[quoter]Friedrich Merz[/quoter]

John, what do you think about this?

JE: If you talk to most Americans and tell them that there is a real crisis in the German-American relationship, they say: What are you talking about? We love Germany. Angela Merkel still is probably, if not the most, one of the two most respected foreign leaders in the United States of America. The multilateral institutions that were created over the last 70 years, as creaky and in need of reform as some of them are, have been largely responsible for helping to create 70 years of peace and prosperity, growth and national security throughout the West. As we move away from working in and through those institutions towards a more transactional nation to nation approach, we risk moving away from the values that hold us together.

As we move away from working in and through multilateral institutions towards a more transactional nation to nation approach, we risk moving away from the values that hold us together.[quoter]Ambassador John B. Emerson[/quoter]

John, Sigmar Gabriel, the possible next chairman of Atlantik-Brücke, said Europeans only care about themselves, for world issues they rely on the United States.Is this description true?

JE: Absolutely. President Obama got a lot of heat for an interview with The Atlantic, in which he talked about free riders in terms of the whole burden sharing concept. In fairness to Sigmar Gabriel’s commentary on Europeans, Americans didn’t necessarily mind that we were running things. That wasn’t a role that the United States of America shrunk from, particularly during the Cold War. However, those issues that Friedrich talked about are significantly growing. Particularly in relation to China and to the rise of nationalist populism around the world that has much more of a cultural genesis than an economic genesis, particularly here in Europe where immigration is the jet fuel for that movement. Those are issues that we can confront best when we are working together.

Friedrich Merz, you are one of the voices who constantly mentions that, let me put it in my words, Germany is punching below its weight. Where exactly should Germany step up?

FM: It is not only the Trump administration which is complaining about our defense budget. When former defense secretary Robert Gates left office, he gave a public speech on the deficit of funding and the NATO budget. Still, the majority of Germans is not aware of the fact that the U.S. is paying 70 percent and that Europe is only contributing 30 percent to the NATO budget. On the other hand, the question is: What is the right answer from the European side of the Atlantic to these challenges we are facing? The bigger problem within the transatlantic relationship is on our side of the Atlantic. The member states of the European Union have to start speaking with one voice.

The bigger problem within the transatlantic relationship is on our side of the Atlantic.[quoter]Friedrich Merz[/quoter]

Can you give us an example?

FM: When Jean-Claude Juncker travelled to Washington, D.C. in July of 2018 and had a debate with President Trump in the Oval Office, he gave a very clear statement about trade. He could only convince the President not to implement more tariffs on European goods because he had a letter signed by 28 European heads of state backing his point. Europe has to be clearer and we have to be united. That brings me to another point: The Germans have to take on more leadership within the European Union. Germany has a big responsibility to bring all Europeans to the table to agree on a common European position.

Germany has a big responsibility to bring all Europeans to the table to agree on a common European position.[quoter]Friedrich Merz[/quoter]

Do you agree with that, John?

JE: That’s a very fair statement. Thinking about the effort to get the EU member states agree on sanctions against Russia as consequence of the illegal annexation of Crimea and the invasion of Ukraine, I do recall Angela Merkel being very insistent on making sure everybody is lined up. But we were constantly talking to Germans about investing more in the southern part of Europe where we have all this youth unemployment, and not worrying so much about the Schwarze Nullin our budget. If Germany does not take a lead in investing in national security and in other areas, no other country is going to do it.

If Germany does not take a lead in investing in national security and in other areas, no other country is going to do it.[quoter]Ambassador John B. Emerson[/quoter]

In 2015, Atlantik-Brücke presented President Bush Senior with an award. You, Friedrich Merz, were invited to Bush’s house in Kennebunkport, Maine. Please share those moments and describe why exactly you awarded President George H. W. Bush.

FM: That was one of the most moving events in my tenure at Atlantik-Brücke. We had a very long Saturday in their private home in Kennebunkport. It was very encouraging to see that the President was still very interested in Germany. We had a deep conversation on German reunification and the events that led up to it. He was very interested in hearing how the country is governed from Berlin now, a city which was very close to his heart because of its  history.

JE: At least Germans of a certain age never ever forget that the man is absolutely revered here. Angela Merkel did not go to his funeral because of protocol. She went to his funeral because she wanted to be there.

Talking about the future, we have to jumpstart a dialogue with the America of tomorrow. The majority of the Americans soon won’t have European roots. What would you recommend, how can we start this dialogue?

JE: We underestimate the impact and the importance of youth. When you see the impact of the kids in Florida, who were the survivors of that school shooting or when you see the girl from Sweden who’s led the grassroot effort on climate change, it actually gives me great hope. For organizations like us both having Young Leaders programs, we have to keep building on this asset and maintaining it. We ought to empower our young people more and to listen to them more.

We underestimate the impact and the importance of youth.[quoter]Ambassador John B. Emerson[/quoter]

We will come to an end. Chancellor Merkel said in her commencement speech recently at Harvard University, I quote: Nothing can be taken for granted, democracy is not something we can take for granted, neither is peace, neither is prosperity. What should we do to fight for these shared values?

FM: The most important point is to show people in our respective countries that we are still sharing these values. I would like to give you one clear indication that this is really working. We are going to the US with our annual delegation in October every year. Last year we went to Oklahoma, a state where we had never been to before. The people there were so enthusiastic about the German-American cooperation and their hospitality was outstanding. It’s quite simple: People have to meet people.

What can you add, John?

JE: Living in Los Angeles, which is Berlin’s sister city, I couldn’t agree more with that. Look at the Paris climate change agreement for example. The reality is: We are actually doing quite well. Because the state level, the local level, the business level and the people to people level are realizing this plan. The federal government isn’t that important. And that can happen on issue after issue. Additionally, democracy and the values that we hold dear are like a marriage – you’ve got to work on it. You have to always be thinking about it, you have to be flexible and willing to grow and change. I want to give a shout-out to the members of the press, because you are having a tough experience in today’s world. The fact is, it is your responsibility to hold the rest of us accountable to live up to the values that we claim we are living up to.

I want to give a shout-out to the members of the press, because you are having a tough experience in today’s world. The fact is, it is your responsibility to hold the rest of us accountable to live up to the values that we claim we are living up to.[quoter]Ambassador John B. Emerson[/quoter]

This conversation was moderated by Tina Hasselwho is the Berlin Bureau Chief of ARD German Television.

Der Beitrag In conversation with true Atlanticists Friedrich Merz and Ambassador John Emerson erschien zuerst auf Atlantik-Brücke e.V..