Germany unveils increased defence budget

Germany’s Cabinet on July 5 approved a draft 2024 budget that foresees lower spending, with defence among the exceptions, as Europe’s biggest economy sticks to rules limiting borrowing that were suspended during the coronavirus pandemic.

The government’s plan calls for spending of €445.7 billion (U.S. $485.7 billion), down nearly 7 per cent from the €476.3 billion (U.S. $519 billion) it expects to spend this year, Defense News reports.

Defence spending is set to rise by €1.7 billion to some €51.8 billion, some way short of what the defence minister initially sought.

Germany plans to reach a NATO target of spending 2 per cent of the gross domestic product on defence next year, a measure on which it has long fallen short, with help from a special €100 billion fund set up to modernize the German military after Russia’s invasion of Ukraine. Berlin aims to meet the target via its regular budget later this decade.

“Security, economic prosperity and industrial fitness for the future, climate neutrality, and cohesion are the most important characteristics of a budget that of course is challenged by the fact that many in recent years have got used to the big dimensions” associated with measures to tackle the effects of the pandemic and Russia’s war in Ukraine, Chancellor Olaf Scholz told lawmakers.

Scholz’s three-party coalition is returning this year to compliance with Germany’s so-called debt brake, which allows new borrowing to the tune of 0.35 per cent of annual gross domestic product.

It can be suspended to deal with natural disasters or other emergencies that are out of the state’s control — and was for three years after the coronavirus pandemic started in 2020 to allow for large amounts of borrowing to finance various support and stimulus packages.

Finance Minister Christian Lindner and his pro-business Free Democrats have been particularly adamant about saving money to adhere to those rules, and the coalition also has agreed at their insistence not to raise taxes.

Lindner told reporters that the government is “initiating the return to budget normality” and sending “a clear signal that Germany is committed to state finances that are sustainable in the long term.”

Germany’s parliament is expected to approve a final version of the budget in December.