It also promised a further increase to €49.67bn (£43.5bn) next year — the equivalent of 1.38 per cent of GDP.
But the figures still fall far short of Mrs Merkel’s pledge last year that Germany would meet the Nato 2 per cent spending target within the coming years.
They also fall short of the €12bn (£10.5bn) increase called for by Ursula von der Leyen, the defence minister — who warned that joint defence projects with European allies could be at risk without more spending.
Olaf Scholz, the finance minister, has been an opponent of increased defence spending and at one point was offering a rise of only €2bn (£1.7bn) next year.
That brought the government under fire from Hans-Peter Bartels, the German parliament’s military watchdog, who warned in March that the projected budget was not enough for “fully equipped” armed forces.
“The troops expect that the Nato pledge be reliably implemented,” Mr Bartels said.
The spending plans also came under fire from the outspoken US ambassador to Germany, Richard Grenell, who said in March they sent a “worrisome signal to Germany’s 28 Nato allies”.