Germany will rearm in a way not seen since World War II after the likely next chancellor, Friedrich Merz, said his government would significantly increase defence spending.

The announcement means that Germany will effectively have to ignore its constitutionally-established "debt brake" in order to increase its defence budget by $107 billion a year as Europe prepares to weaken the US defence umbrella.

"There are moments when a country's history takes an unexpected turn," he told Zeit newspaper, adding that Merz's plans "could prove to be one such moment."

The plans were presented as part of accelerated talks between Merz's centre-right CDU/CSU alliance and the centre-left Social Democrats (SPD) over a possible coalition after last month's general election.

Their pace was further accelerated after the televised dispute between US President Donald Trump and his Ukrainian counterpart Volodymyr Zelensky, after which the White House froze aid to Kiev.

Mertz, a longtime Atlanticist who previously opposed financing public spending through large-scale debt, quickly changed his mind given the breakneck pace of events.

Germany's EU partners, gathering for a key summit to discuss Ukraine and defence, had expected action from Berlin after months of political paralysis following the fall of Chancellor Olaf Scholz's government in November.

Along with a huge increase in defence spending, Merz wants to create a €500bn fund to modernise Germany's creaking infrastructure and help it pull out of two consecutive years of recession.

If successful, the plans could be a "real game changer" and also "quickly overcome Germany's economic stagnation," said Sebastian Dullien, director of the IMK economic research institute.

Boris Pistorius, Germany's current defence minister, described the plans as "a historic day for the army and for Germany".

According to the Spiegel newspaper, it is also a far cry from Merz's stance during the election campaign, when he stuck to the CDU's traditionally tough image on fiscal policy.

"Nevertheless, it is good that Merz is breaking his election promises," the newspaper said.

But the plans need to be pushed quickly through the outgoing parliament, where they will need a two-thirds majority to change the debt brake, most likely with the help of the Greens.

The CDU/CHS and SPD will then have to work out the rest of the coalition agreement before taking office and spending the dizzying sums.

Jakob Ross of the German Council on Foreign Relations said the significance of the plans was "very much to do with psychology and the signals such messages send".

As for how these huge sums might be spent in practice, Ross said many questions remain unanswered.

"Who is going to build the necessary weapons? Does Europe have access to the necessary raw materials? What will happen to inflation when such sums are pumped into the economy?" he asked.

There is also the question of coordination with other EU countries and with Brussels, where EU chief Ursula von der Leyen has also presented a plan to mobilise some €800 billion for Europe's defence and to support Ukraine.

"I really think there is potential for conflict, especially with Paris," Ross said.

He recalled the reaction to the €100 billion special fund announced by Scholz after Russia invaded Ukraine in 2022, which was quickly exhausted.

"Then (French President) Macron was caught off guard and warned that Germany could 'isolate itself,'" Ross said.

"Now we're talking about more than twice that amount, and naturally European partners are going to ask what that will mean for their own economies, for the eurozone and for the balance of power in Europe." | BGNES