100 billion for the Bundeswehr
New borrowing could double
02/27/2022, 4:58 p.m
The plan to allocate an additional 100 billion euros to upgrade the Bundeswehr has met with broad approval. But how should this special fund be financed? According to Finance Secretary Toncar, the debt brake should nevertheless be complied with again soon. The Union sets conditions for consent.
As a result of the Ukraine war, the federal government assumes that the new debt targeted for 2022 may double from a maximum of 100 billion euros to more than 200 billion euros. That’s what it’s likely to come down to, a person familiar with budget planning told Reuters. Elsewhere it was said that the amount of net borrowing in the core budget had not yet been decided. Chancellor Olaf Scholz had previously announced that the federal government would invest a special fund of 100 billion euros for higher defense spending this year.
The borrowing to equip the special fund will “be booked in full in 2022, in addition to the borrowing in the federal budget,” said Finance State Secretary Florian Toncar to Reuters. “Therefore, there are no effects of the special fund on the upper limits permitted under the debt brake for borrowing from 2023.”
Even before the war, budget politicians had doubts that new borrowing could be capped at 100 billion euros. The reasons given included the compensation for reduced tax revenue and the longer Corona business aid, but also the necessary investments for climate protection and the recently agreed package of measures to reduce energy costs.
Federal Finance Minister Christian Lindner (FDP) described the 100 billion target as a “basic value” on Thursday, the day of the Russian invasion of Ukraine. According to previous planning, the draft budget for 2022 and the medium-term financial planning are to be decided by the cabinet on March 9th. Whether it will stay that way was initially open on Sunday.
Union: No blank check
2022 will be the third year in a row that the debt brake will be lifted. This was planned anyway and justified with the consequences of the corona pandemic. The sanctions imposed on Russia and the war in Ukraine could also slow down economic development. Now the 100 billion euros announced by Scholz for a special fund for the Bundeswehr are being added. “A higher level of new debt cannot be ruled out,” said Lindner’s adviser, the former economist Lars Feld, of the “Rheinische Post”, even before Scholz’s announcement. “A weaker economic development will also bring with it lower income.”
The Union faction in the Bundestag supports the establishment of the Bundeswehr special fund, but attaches its approval to conditions. “We will not sign any blank checks, but expect intensive consultation. So far we only know the headline,” said the parliamentary group’s first secretary, Thorsten Frei, to the editorial network Germany. Scholz has mapped out a possible path in the Bundestag, but the details are still completely open.
At the same time, Frei called for “consequences” for budgetary policy as a whole. A modern Bundeswehr and a credible military deterrent are imperative. This requires a new focus in the federal budget. “This cannot be at the expense of future generations,” said Frei.
The head of the Munich Ifo Institute, Clemens Fuest, welcomed the planned increase in defense spending. Now the question of financing arises. “The war in Ukraine can justify exceeding the debt limit. However, the additional expenditure should not be financed entirely through debt in the medium term,” recommends Fuest. In the coming years, however, spending cuts and tax increases should make a financial contribution, said Fuest.