Nato’s costly arms race puts Europe under financial strain

A Nato arms race in response to fading support from Donald Trump's America will cost more than ever because of high prices for materials, a German army inspector has warned.

Eva Hoegl said Germany has already burnt through 80 per cent of a one-off €100 billion ($109.14 billion) pot of money that was borrowed to upgrade the armed forces. Despite this she said the German military still lacks personnel and some of its army barracks are in a “disastrous” state.

Talks on forming a new government in Germany have raised the prospect of a further spending spree as Mr Trump shakes up the world order. Britain last month announced a major increase in defence spending while France has floated the idea of sharing its nuclear deterrent with neighbours.

But the cost of buying military equipment means Germany, the wealthiest Nato country after the US, is down to the last €18 billion ($19.65 billion) or so of its rearmament fund. “Because of increased prices for energy and raw materials, expenditures in these areas will rise further in future,” Ms Hoegl said in a report to parliament.

Her report said a lack of personnel is adding to Germany's problems. The average age of soldiers has risen to 34, there has been no progress towards reaching a 200,000-strength military, and more than a quarter of new recruits in 2023 did not stay beyond a probation period.

While money has been invested in research, development and new arms equipment, the German military still has “considerable problems” with its infrastructure, Ms Hoegl said. She described a “renovation backlog” in which “some barracks and properties are still in a disastrous condition”.

Germany did last year hit Nato's target of spending two per cent of national income on defence, for the first time since it was adopted in 2014. But Mr Trump has since raised the stakes by suggesting European countries should push for five per cent.

The parties negotiating a new coalition under German chancellor-in-waiting Friedrich Merz want to relax Berlin's strict debt rules to exempt most military spending. They also hope to borrow a further €500 billion ($546.05 billion) to invest in energy, civil defence, health care and transport.

Mr Merz wants to use the outgoing parliament – where parties friendly to Nato and Ukraine had the two-thirds majority needed – to approve the new funds but it is uncertain whether that will work. The Green party is holding out for a more fundamental shake-up of the debt rules and questions the legitimacy of using the old parliament.

Defence ministers from Germany, France, Britain, Italy and Poland were meeting in Paris on Wednesday to discuss work on building up their deterrence against Russia. Peace talks in Saudi Arabia on Monday led to the US resuming military supplies to Ukraine but Europe is uncertain what Mr Trump will do next.

A gap between Europe and the US in military spending has been a prime grievance for Mr Trump since his first term in the White House. His defence chief Pete Hegseth told Nato allies last month that the US “will no longer tolerate an imbalanced relationship which encourages dependency”.

Britain's Defence Secretary John Healey said ahead of the Paris talks that European nations “are stepping up” at a time of conflict. “By deepening our defence co-operation, boosting spending and enhancing our collective strength, we send a clear message: we will not waver in standing with Ukraine and defending our shared values,” he said.