Federal Chancellor Friedrich Merz (CDU) passes next to the Bundeswehr soldiers with military honors in front of the Federal Chancellery before he welcomed the Prime Minister of Denmark.
Bernd von Jutrczenka Picture Alliance Getty images
Tax increases and fast debt can be a new reality of Germany, because NATO allies will soon face a higher target of defense expenditure.
According to NATO, the country in 2024 in 2024 spent about 2% of the gross domestic product (GDP), reaching over 90 billion euros (104 billion dollars) estimate. Although these expenses are in line with the existing NATO goal, there are now 5% of the goals of expenses who are now members of the military alliance apparently He agreed.
Pursuant to the new regulations, members should allocate 3.5% of GDP to classic defense expenses and 1.5% on wider related issues, such as infrastructure and cyber security.
LED led by the USA for more defense expenditure was highly questionedWith some NATO members who claim that they will have difficulty assigning more funds to such expenses, while others support. While Germany has He said it was supported The proposal of US President Donald Trump, questions about whether the 5% goal is really feasible for the largest economy in Europe.
Finances
Jumping with 2% GDP expenditure up to 5% would cause Germany to spend an additional tens of billions of euros on defense, with Chancellor Friedrich Merz saying At the beginning of this year, 1% of the country's GDP accounts for about EUR 45 billion.
These additional expenses will probably have to be financed by loans, said CNBC Hubertus Bardt, managing director of the Economic Institute and Koeln.
“Despite this, such an increase will lead to remarkable distribution conflicts in the annual budget of the country,” he said, according to the translation of CNBC. He added that in addition to loans, the Berlin administration would probably also have to conduct discussions on the implementation of financing cuts elsewhere – along with tax increases.
Emilie Hoeslinger, a researcher from the IFO Institute, meanwhile she pointed out a German Last tax return. The new principles of Berlin mean that defense expenditure above a certain threshold is exempt from the so -called debt brake in Germany, which limits how much debt the government can take and dictates the size of the structural budget deficit of the federal government. Germany also approved the Special Fund of EUR 500 billion.
“Expenses for defense of financing through an additional debt give the government more freedom in a short period,” she said according to CNBC translation. “But the increased need for debt will lead to higher interest costs in the average period, which will be charged to the federal budget,” she said.
Bardt repeated these fears.
“Full financing through loans is almost impossible long-term,” he said.
Another potential problem, which experts issued in discussions on higher defense expenses, are the fiscal principles of the European Union, which may interfere with the block members to greater debt.
The rules, however, can be temporarily suspended in exceptional circumstances, and some countries, including Germany required Such a relief based on defense and security.
Is 5% feasible?
According to Jens Boysen-Hogrefe, a senior economist at the Kielce Institute for the World Economy, Germany could “easily” implement the defense goal of 5% GDP, but in the long run they fought.
“Time average (5% of the purpose of the expenditure can be met) with some challenges, long -term required a significant reform of public budgets,” said CNBC translation. He added that the EU is unlikely to offer deep resistance in this matter and that ultimately the German government should be able to counteract any pressure by adjusting their annual budgets.
Nevertheless, “it will be difficult to take such expenses in a short time. Even 3.5% (the target is) unlikely for the coming year and (for) 2027,” said Boysen-Hogrefe.
“Historically it would be a very high number, which, however, can be achieved with sufficient time – although it will not be easy,” said Brandt with Iw Koeln, noting that much depends on whether 1.5% devoted to wider security expenses will have to represent new costs.