Scholz rejects Trump's 5% NATO spending demand as far too costly

German Chancellor Olaf Scholz on Monday dismissed incoming US president Donald Trump's demands that Germany and other NATO allies spend at least 5% of gross domestic product (GDP) on defence, reported dpa.

"Five percent would be over €200 billion ($204 billion) per year, the federal budget is not even €500 billion," Scholz said at an election campaign event in the central German city of Bielefeld. "That would only be possible with massive tax increases or massive cuts to many things that are important to us."

However, Scholz promised that Germany would adhere to the current NATO target of spending at least 2% of GDP. Germany reached that mark last year for the first time since the end of the Cold War.

"I guarantee that we will continue to spend 2% of our economic output on defence," said Scholz, a member of the centre-left Social Democrats (SPD). "Anyone who says that's not the way to go must also say where the money will come from."

Germany's defence spending was boosted by a €100 billion special fund created in the wake of Russia's February 2022 full-scale invasion of Ukraine, which put new focus on the poor state of some European militaries.

But it remains unclear how Germany will maintain that level of spending long-term, given the tight budget situation and strict rules against deficit spending anchored in the country's constitution.

NATO set itself the 2% target in 2014.

Last week, Trump demanded 5% from the alliance partners. He is set to take office on January 20.

Earlier on Monday, Defence Minister Boris Pistorius, a fellow member of Scholz's SPD, said dramatically more investment is needed to make the German armed forces, known as the Bundeswehr, capable of countering the threats now facing Europe.

"Increasing the war capability of the Bundeswehr in the coming years, and as quickly as possible, is the top priority of the hour," Pistorius said in the central German city of Kassel, where he formally handed over the first of dozens of advanced new German-built wheeled howitzers to Ukraine's ambassador.

"We will continue on this path in 2025. And we know that in the following years, we will have to invest even more in our security," he said. "Two percent can only be the beginning. It will have to be significantly more if we want to continue at the pace and to the extent that we have to."

Current German Vice Chancellor Robert Habeck, who is running as the Green Party's top candidate in the upcoming national election, has also called for increasing Germany's defence spending to around 3.5% of GDP.

The opposition centre-right CDU/CSU bloc, who are leading in the polls, included a vow to spend at least 2% of GDP on defence in the party's election manifesto.

(By Michael Fischer, Carsten Hoffmann and Bryn Stole)