Military spending in Germany will increase substantially next year to finally reach the 2% of GDP that NATO has been demanding from its members for years, a financial and geopolitical consequence of the Russian invasion of Ukraine, which has turned modernization of the armed forces a priority issue for the tripartite government of Chancellor Olaf Scholz.
As, at the same time, the government coalition of social democrats, greens and liberals has promised to cut public spending to return to fiscal discipline, all the Ministries suffer cuts -especially those of Transport, Science and Family-, and only that of Defense comes out reinforced.
This is the scenario drawn by the general State budget for 2024, approved on Wednesday by the Council of Ministers, and which will go to the Bundestag (lower house of Parliament) in September for debate and processing – which is why the text will experience very probably modifications-, with a vote scheduled for December 1.
With this budget bill, the leading economy in the eurozone forecasts spending of 445.7 billion euros for next year, compared to the 476.3 billion budgeted for 2023. All in all, spending in 2024 will exceed 25% of its 2019 level.
“There is no margin for expenses that are not offset by other measures that mean long-term savings,” said the finance minister, the liberal Christian Lindner, a defender of fiscal orthodoxy, when presenting the text to the press.
Only the Ministry of Defense is saved from the snip, and this is due to the change of mentality announced by Scholz in the Bundestag three days after the start of the Russian invasion of Ukraine, launched by Vladimir Putin on February 24, 2022. In that session , Scholz spoke of the Zeitenwende (turning point) that the invasion implied, and promised to create a special fund of 100,000 million euros for the modernization of the Bundeswehr (armed forces) and an increase in the annual investment in defense of more of 2% of GDP.
Until now, this desire had barely been noticed in practice, so the budgets negotiated for 2024 constitute the first clear expression. Thus, to reach military spending equivalent to 2% of GDP, Germany will spend 71,000 million euros. The amount is broken down into 51,800 million from the budget (compared to 50,000 in 2023) and 19,200 million from the aforementioned special fund for the armed forces of 100,000 million, of which only a tiny part has been spent. In 2022, a year already dominated by the war in Ukraine and despite the Zeitenwende promise, military spending was 1.49% of GDP.
In these budgets prepared for 2024, the deficit is estimated at 16,600 million euros, compared to 45,600 million in 2023. This is how Germany intends to once again respect the mechanism known as the debt brake, anchored in the Constitution, which in times of normality prohibits the State from borrowing more than 0.35% of its GDP each year.
The clause is back in force this year, after having been suspended for three years so that the Government could inject funds to limit the impact of the coronavirus pandemic and face the energy crisis due to the cut off of Russian gas, a derivative of the war in Ukraine. According to Minister Lindner, the budgets put an end to the “crisis mode of budget expansion” generated by the years of pandemic and energy emergency, which forced public financing of various types of aid for families and companies.
This draft budget comes when Germany is in technical recession after chaining two consecutive quarters of decline in its gross domestic product (GDP). In the last quarter of 2022 it fell by 0.5% and in the first of this year the contraction was 0.3%, as reported by the Federal Statistical Office (Destatis). However, the Bundesbank expects GDP to leave negative territory in the data for the second quarter of 2023, which will be released on July 31.
