Germany’s defence minister is “annoyed” by a real terms cut to the military budget on the eve of the Nato annual summit in Washington.

The German army was promised a €100 billion (£84.5bn) rearmament fund after decades of underinvestment were brutally exposed by Russia’s illegal invasion of Ukraine.

But much of the overhaul will have to be funded from the military budget of Europe’s biggest economy, which lags far behind the Nato target of spending 2 per cent of GDP on defence.

Defence minister Boris Pistorius, of Olaf Scholz’s centre-Left SPD, wanted about £5bn a year on top of his £44bn budget.

After weeks of negotiations with the SPD’s coalition partners, he was given just over £1bn, which is not enough to cover 2.2 per cent annualised inflation rates or surging weapons prices.

The German government is under pressure to show fiscal discipline after a court ruled that using undeployed coronavirus recovery funds for green initiatives and industry support was unconstitutional.

The decision blew a hole of more than £50bn in its finances, forcing Berlin to find spending cuts of up to £33.8bn.

Mr Pistorius is frustrated that the real terms cut to the rearmament project, dubbed the Zeitenwende, or dawn of a new era, by the Chancellor, sends the wrong message and hampers the transformation of the military.

“It’s annoying for me because it means I can’t get certain things up to the speed that the Zeitenwende and the threat situation require,” he said on a trip watching German troops on a Nato exercise in Alaska.

European powers are under pressure to demonstrate their resolve to stand firm against Russian aggression, particularly in terms of defence spending.

Estonia and other countries bordering Russia are calling for the Nato target to be raised to 2.5 per cent, while some nations like Poland are already spending 4 per cent and plan to spend more.

The Nato summit is being held before November’s US presidential election, when Donald Trump could win a second term.

In his first term, Mr Trump repeatedly attacked his Nato allies for not spending enough on defence. On the campaign trail, he has suggested he would not send US troops to help Alliance members who did not pay their way, if they were attacked.