NATO's 5% Defense Target Drives Infrastructure Investment: Germany Poised to Gain 720,000 New Jobs

Amid ongoing economic weakness and corporate layoffs in Germany, a recent study suggests that NATO-led security infrastructure investment could become a new engine for economic growth. If Germany proceeds with the planned investments, it could create around 720,000 jobs and generate approximately €131 billion (about NT$4.84 trillion) in annual economic output.

At the beginning of this month, NATO member states reaffirmed at the Ankara summit their commitment to achieving the goal of allocating 5% of GDP to defense-related spending over the next decade. Of this, 3.5% is designated for military forces, weapons systems, and operational capabilities, while the remaining 1.5% is to be invested in critical infrastructure such as transportation, energy, ports, airports, civil defense, and cybersecurity.

A joint research report by Germany’s DekaBank and strategy consulting firm EY-Parthenon estimates that European NATO countries will need to invest around €320 billion annually to meet the 5% defense investment target, with Germany’s share amounting to approximately €62 billion.

The study projects that these investments could generate around €822 billion in annual economic output across Europe, with Germany contributing about €131 billion. For every euro invested, approximately €2.51 in economic activity is stimulated, increasing Europe’s overall GDP by about 1.5%.

The research estimates that such investments could create around 4.4 million jobs across Europe, with Germany accounting for approximately 723,000. The benefits would extend beyond defense contractors, as industries such as construction, information and communications, logistics, and electronics and electrical engineering are expected to receive significant new orders due to upgrades in transportation networks, energy facilities, ports, airports, communication systems, and civil defense infrastructure.

Jan Friedrich Kallmorgen, Partner for Geopolitical Strategy and Defense at EY-Parthenon, stated in a press release: 'Critical infrastructure such as transportation, energy, ports, airports, and networks are essential pillars of modern defense. These investments not only enhance military capabilities but also benefit a broader range of industries, producing a wider economic stimulus than weapons procurement alone.'

Sandra Krusch, Managing Partner at EY-Parthenon Germany, added: 'Upgrading critical infrastructure can provide Germany with the much-needed economic growth momentum, while modernizing transportation, logistics, and energy systems to enhance national competitiveness.'

However, the study warns that the security infrastructure investments aimed at meeting NATO’s 5% defense spending target will only yield the projected job creation if they represent new investments, rather than a reallocation of existing transportation, energy, or digital infrastructure budgets to defense spending.

Moreover, Germany and many European countries have long faced chronic underinvestment in infrastructure, coupled with strained government finances. The report recommends that governments adopt public-private partnership (PPP) models to attract more private capital for dual-use infrastructure projects in energy, logistics, and communications.

As demand weakens in traditional manufacturing sectors such as automotive and machinery, an increasing number of German companies are viewing the defense and security industry as a new business opportunity. The study concludes that if these investment plans are successfully implemented, they could not only strengthen European security but also inject new growth momentum into Germany’s economy.