US President Donald Trump has repeatedly lashed European allies for failing to meet a commitment to spend two percent of GDP on defence by 2024, with economic powerhouse Germany coming in for particular criticism.

Germany's announcement that it is increasing its defence budget looks to have brought some relief in a row that threatens to dominate a summit of NATO leaders next month.

"I welcome the fact that Germany has stopped the cuts... and also (has) plans to increase defence spending by 80 percent over a decade," Stoltenberg said as he arrived for a gathering of all 29 NATO defence ministers in Brussels.

"This is steps in the right direction, I welcome them and it is part of a pattern we now see across Europe and Canada, where allies are spending more."

Chancellor Angela Merkel indicated on Wednesday that German defence spending would rise to 1.5 percent of GDP by 2025.

While still short of the magic two percent, this would still represent an 80 percent hike over a decade.

In the short term, Berlin plans to boost its military budget by three billion euros to 41.5 billion euros ($49 billion) next year.

Pentagon spokesman Eric Pahon echoed Stoltenberg's welcome, saying the US was "encouraged by Germany's effort".

It marks a softening in tone from the tough message brought by US Secretary of State Mike Pompeo to a meeting of NATO foreign minsters in April.

Then the ex-CIA chief said bluntly that Germany was not doing enough to meet the target it had signed up to at the Wales summit in 2014.

German Defence Minister Ursula von der Leyen said Berlin "fully supports the two percent target".

"The Bundeswehr (German army) is growing again, it is being modernised," she said as she arrived at the defence ministers meeting.

"Next year we will already be at 1.3 percent (of GDP)."

Tuesday's talks come under the shadow of increasingly bitter spats between Washington and Europe over punishing US tariffs on steel and aluminium as well as Trump's decision to pull out of the Iran nuclear deal and the Paris climate accord.

Stoltenberg said he had to work to do to stop what he called "serious differences" within the alliance.