More money for weapons: Study: Higher military spending would be good for the economy

According to a study, higher expenditure in the defense could be noticeably boosted without being too tight in other areas of the state budget. If the EU countries are not only investing two percent of their economic output, but 3.5 percent, economic output could increase by 0.9 to 1.5 percent, according to an analysis of the Kiel Institute for the World Economy Friday is to be presented as part of the Munich Security Conference.

Author Ethan Ilzetzki refers to the current two percent specification of the NATO and the debate for an increase to 3.5 percent or even higher. However, the prerequisite for the boosting of the economy is that the EU countries rely on local weapons instead of shopping outside the EU.

An industry expert who does not want to be named in particular thinks this is difficult: “It will always be a product mix with armaments from the EU and from America,” he says. After all, some armor goods in Europe would not be built at all or not on the highest standard.

No “economic disaster”?

Study author Ilzetzki draws a positive conclusion from his investigation. “If the European governments do it correctly, they can keep the costs of military upgrading within limits,” says the professor from the London School of Economics (LSE). “This means that Europe can choose regional security through its military spending in the light of its priorities without being distracted by the fear of an economic disaster.”

Since Russia’s attack on Ukraine almost three years ago, Eastern European states, but also Germany, have made significantly more money for their military. The question of financability also plays a role in the Bundestag election campaign: The CDU and CSU leading in surveys want to increase the military budget in the long term in order to make Germany “again defensive”, as is in the election program of the two parties. There is criticism from other parties that increasing military spending could lead to cuts elsewhere.

Debts better than higher taxes

From the point of view of the study author Ilzetzki, the result of his investigation contradicts the assumption that governments would be given “weapons or butter” for higher military spending. Additional funds, workers and raw materials for military purposes were not only at the expense of private consumption, he writes.

The specialist warns against obtaining extra expenses via higher taxes. Instead, Europe’s governments should accept more debts to finance temporary additional expenses. The EU countries should ensure that a larger part of the money spent on weapons remains in Europe. You should also pull together and organize your military spending at EU level.