Under the plans, young men will be required to register for potential military service, though it will remain essentially voluntary.
Germany suspended compulsory military service in 2011, but the conflict in Ukraine has reignited the debate around whether young men and women should be required to serve in the army, known as the Bundeswehr.
Presenting the plans on Wednesday, Defence Minister Boris Pistorius said the situation facing the armed forces was "completely different from what it was just a few years ago".
"Russia has now been waging a war against Ukraine for almost two and a half years, in violation of international law," he said.
"According to all international military experts, it must be assumed that Russia will be in a position to attack a NATO state from 2029."
Under the plans, all school leavers will be sent a questionnaire asking them about their interest in the army as well as their health and physical abilities, according to a draft document seen by AFP.
All young men will be required to return the questionnaire, while for women it will be voluntary.
Based on their answers, a contingent of young men and women will then be invited to a selection process.
The strongest candidates will be recruited for an initial six-month stint of military service, with the option of extending for those who are interested.
Pistorius said the new model would aim to win over 5,000 extra recruits per year from 2025 and would look to increase this figure going forward.
- 'First step' -
Opposition parties have called on the government to go further and reintroduce compulsory conscription.
The conservative CDU-CSU alliance in May voted in favour of a temporary return to conscription, approving a motion tabled by the party's youth wing.
The conservatives had already pledged to introduce a year of compulsory community service for young people, which could be completed in the army or by working in civil society.
But the youth wing argued this would take too long to introduce and put forward a period of compulsory service for a limited number of people as a stop-gap.
Pistorius had also earlier hinted he may be considering some form of return to compulsory military service.
"If there are not enough volunteers, we will also have to enlist young people to serve," he told Die Zeit newspaper in May.
But on Wednesday he said a return to compulsory conscription was off the table for now, though he also said the new model was a "first step" and "does not rule anything out in the future".
Finance Minister Christian Lindner, from the liberal FDP, called Pistorius's plans "a step in the right direction".
"Instead of a new compulsory service, we should get more people interested in serving in the Bundeswehr and strengthen the reserves," he said.
- Stalled recruitment -
But the conservatives said the new model did not go far enough, accusing Pistorius of watering down his original plans to please opposing voices in Germany's three-way coalition government.
"It would have been right to create all the conditions now for... introducing compulsory military service," conservative lawmaker Florian Hahn told the Funke media group.
Since 2011, military service has been entirely voluntary in Germany, consisting of a period of between seven and 23 months in the armed forces combined with civic engagement.
Since Russia's invasion of Ukraine in February 2022, the army has struggled to attract new talent as officials seek to boost troop numbers.
Despite a concerted recruitment drive, the Bundeswehr welcomed just 18,802 new members in 2023 -- only 27 more than in 2022.
According to AFP sources, lawmakers in the German parliament's defence committee were divided over the question of whether the new model should apply to both men and women equally.
However, making military service compulsory for women would require a change to Germany's constitution, with Pistorius arguing that this would take too long.
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