The German chancellor made the announcement at a special session of the Bundestag in response to Russia's invasion of Ukraine.
Russia's invasion of Ukraine has ushered in a "new era" in world history, and the past week's events have raised serious questions over the ability of Western allies to deter "warmongers", German Chancellor Olaf Scholz said.
Speaking at a special sitting of the Bundestag on Sunday, Scholz reiterated that the Ukrainians were fighting to preserve the values of liberty and democracy -- virtues he considers to be under threat from Russian aggression and President Vladimir Putin.
"We must support Ukraine in this desperate situation," Scholz said. "And we have done so to a large extent in recent weeks, months and years. But with the invasion of Ukraine, we have entered a new era," Scholz said.
"In Kyiv and Kharkiv, and also in Mariupol, people are not only defending their homeland -- they are fighting for freedom and their democracy, for values that we share with them."
Scholz pledged a one-off "special fund" of €100 billion to bolster Germany's defences, stating that the country will invest what amounts to more than 2% of its gross national product in military spending.
The German chancellor maintained that the spending increase was crucial to Germany's defence of its borders and the borders of its NATO allies.
"The third major challenge is to prevent Putin's war from spreading to other countries in Europe," Scholz said.
"This means, without ifs and buts, that we stand by our duty of support in NATO. President Putin should not underestimate our determination to defend every square metre of [NATO] territory together with our allies."
Scholz also thanked everyone who protested against Putin's war and stood up for a free and peaceful Europe, which he vowed to defend.