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NATO’s two percent target: This is how Germany could maintain it permanently

NATO’s two percent target: This is how Germany could maintain it permanently

Germany has achieved NATO’s two percent target, but how can success be ensured in the long term? Those responsible in Berlin are arguing about this.

Two years after the Russian invasion of Ukraine, the traffic light coalition and the opposition Union agree on one thing: Germany should immediately fulfill the NATO states’ commitment to spend at least two percent of economic output on defense. The government and the opposition jointly anchored a special loan for the Bundeswehr worth 100 billion euros in the Basic Law. Together with the defense budget, this will enable a jump above the two percent mark from 2024.

But the special fund will run out in 2027. By summer at the latest, Federal Finance Minister Christian Lindner (FDP) will have to show his colors about how he wants to organize higher defense spending after the special loan expires. In the past few days it has become clear that the SPD, Union, Greens and FDP have different ideas about this.

Reform or exemption from the debt brake

Politicians from the SPD and the Greens in particular are calling for a reform of the debt brake in the federal budget. They want to exclude investments from the calculation of borrowing – this could then also apply to defense procurement. One variant is to take expenses for the Ukraine war out of the budget and bundle them in a special pot outside the debt brake. Both paths would make it possible to finance higher defense spending. The Union leadership and the FDP reject both.

Increase in special assets

Federal Foreign Minister Annalena Baerbock has proposed an increase in the special fund. “Investments in the generational project of the European Security and Defense Union cannot be subject to one-year budgets and the debt brake,” said the Green politician, alluding to the Federal Constitutional Court’s guidelines on budget management. The CDU politician Roderich Kiesewetter had previously called for an increase to 300 billion euros. However, the CDU and CSU reject this. Your consent would be required for a change to the Basic Law, which stipulates the figure of 100 billion euros.

Funding from the defense budget

Lindner and CDU leader Friedrich Merz have made it clear that they want to achieve the two percent target through the federal budget – without the debt brake being lifted. You agree on the goal with Chancellor Olaf Scholz and Defense Minister Boris Pistorius (both SPD). They justify this, among other things, with the procurement of additional weapon systems. Then the need for maintenance also increases. However, these costs cannot be covered by a special investment fund. In addition, the defense budget must increase anyway due to growing personnel costs.

To do this, the defense budget would have to be increased by at least 25 billion euros per year. Lindner and Merz don’t see this as a problem because they are already voting for reallocations and savings in the federal budget elsewhere. The government points out that the number will be more likely to be achieved if tax revenues increase.

SPD parliamentary group leader Rolf Mützenich spoke out against cuts in the social budget as a precautionary measure. “Anyone who doesn’t want to make savings in the wrong place in this challenging time in terms of security policy should not oppose the corresponding reforms. Cuts in social cohesion are the wrong approach,” warned Green Party co-parliamentary group leader Britta Haßelmann.

Financing via the EU – defense bonds or EU budget

Other EU states also see the need to increase their defense spending. Cash-strapped EU states like France want to go through the EU. One idea is common EU defense bonds. French EU Industry Commissioner Thierry Breton has proposed a fund worth 100 billion euros. In Germany, however, this idea is met with rejection. Because it is assumed that this should be the start of shared debt. However, the fund could be organized in a similar way to the Corona aid fund in such a way that the EU Commission takes on the debt, but the repayment comes from the EU budget.

EU Commission President Ursula von der Leyen has proposed another variant: expanding the European defense fund, which will be housed in the EU budget. Their reasoning behind it: If the EU makes joint investments in defense projects, national parallel planning will be prevented and the money will be spent more effectively. Armaments material is already being delivered to Ukraine via the so-called European Peace Facility. The crux: With this approach, either the EU budget has to be reallocated in favor of security – or the 27 EU member states have to transfer more money to Brussels.

Source: Stern

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