The German Defence Ministry is considering five different proposals to reduce its army by about a third and planning an overhaul of the armed forces.
Defence Minister Karl-Theodor zu Guttenberg favours the proposal to reduce the number of soldiers from 252,000 to between 165,000 and 170,000 as part of the post-war reform of Germany's military, according to government sources.
"The military will become smaller, better and more efficient. We're going to have an army that meets the security and defence challenges and not one that fits how much we can spend," Guttenberg said.
Mandatory military service would also be suspended from mid 2011, though conscription would remain in the constitution, according to the proposal.
Finance Minister Wolfgang Schaeuble said defence spending would also be cut by €8.3bn in the next four years, according to Reuters.