German state investments hit quarter-century high amid defence boom

German government investments soared in 2025 following a landmark decision to boost spending on defence, infrastructure and climate action.

Gross investment totalled €147.5 billion ($168 billion) in 2025, up 12.3% compared with the previous year - the biggest jump since the year 2000 - the Federal Statistical Office said.

The rise was driven by a steep increase in state investment in equipment, which grew by almost half - up 47.7%. The statisticians said this was in part attributable to higher spending on weapons systems and other procurement by the Bundeswehr, Germany's armed forces.

Last year, the government pushed through plans to loosen Germany's strict debt rules and unlock hundreds of billions of euros to boost the ailing economy.

The deal created a €500 billion loan-based special fund for investments in infrastructure and climate-related measures to be spent over the next decade, and eased the debt limit for increased defence spending.

The impact of the government's additional borrowing capacity for defence and investments was evident in the federal 2025 investment figures, said Sebastian Dullien, research director at the Institute for Macroeconomics and Business Cycle Research at the Hans Böckler Foundation. 

"The country's modernization is making progress," he added.

The state as major clientState gross fixed capital formation accounted for 16.3% of Germany's overall €907.8 billion in gross fixed capital formation last year, the agency said. 

The government's contribution was greatest in construction investment, at just over 17%. However, state construction investment grew by only 2% compared with 2024 - significantly weaker than in previous years, the statisticians noted.

Dullien said the government must ensure that the additional debt arising from the special fund actually flows into new investment. "There is certainly a need for action here," he said.

Estimates suggest that a considerable share of the funds have been used for other purposes - such as cutting value-added tax in the restaurant sector, funding a pension scheme for mothers and reducing corporation tax.

Despite the marked rise in investment, Germany still performs below the EU average. The share of gross state investment in economic output stood at 3.3% in 2025, compared with an average of 3.9% across the European Union. 

The Netherlands (3.5%), Italy (3.8%), Austria (3.9%), France (4.5%) and Poland (5.4%) all had higher rates than Germany. Estonia topped the rankings among the 27 EU member states with a share of 7.6%.