2024-02-20 21:49:00
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The debate about the debt brake and security investments is coming to a head. While the SPD and Greens warn against cuts, Lindner plans to make it easier to invest in the defense industry.
Berlin – After the 2024 federal budget was passed, the next financial debate is already underway in the traffic light coalition. This time it’s all about defense spending, which, in order to fulfill Germany’s obligations as a NATO member, will sooner or later have to be covered from the regular budget. Many investments are currently financed from a special fund of 100 billion euros, which will expire in 2028.
Scholz promises: Germany will increase defense spending in the long term
Chancellor Olaf Scholz (SPD) commented on this at the Munich Security Conference and emphasized that Germany must continue to make high defense spending from the general budget even after 2028. “Germany is investing two percent of its gross domestic product in defense this year and in the coming years, in the 1920s, the 1930s and beyond,” Scholz said at the conference.
He added: “My goal is that after the special fund expires, we finance the expenses for the Bundeswehr from the general budget.” Scholz emphasized to the South German newspaperthat most people would understand why two percent of economic output must be spent on defense to ensure security, peace, democracy, the rule of law and prosperity.
However, to cover these expenses, savings must be made elsewhere. According to calculations by Mirrors This would mean expenditure of almost 108 billion euros in 2028. The federal defense budget currently amounts to 52 billion euros.
Savings in pensions and social benefits: Debate about the budget is entering the next round
With these statements, the Chancellor is triggering a renewed debate about the distribution of budget resources. Because if you want to double defense spending and at the same time comply with the debt brake, you have to make savings elsewhere. The largest item in the federal budget is the social budget, which accounts for almost 40 percent of government spending. The largest single item is pension insurance, for which the federal government has budgeted 127.3 billion euros in 2024. A further 47 billion euros are earmarked for social benefits.
The Chancellor’s statements have alarmed the SPD and the Greens, who continue to insist on suspending the debt brake. Adis Ahmetovic, SPD politician, said to the Spiegel: “For this task (Strengthening the Bundeswehr, editor’s note) “To comply with this and at the same time guarantee social cohesion in our country with all the necessary investments, suspending the debt brake is becoming increasingly inevitable.”
Chancellor Olaf Scholz (SPD) speaks during the 60th Munich Security Conference (MSC). © Felix Hörhager/dpa
Ralf Stegner, SPD MP, also warned of a contradiction between internal and external security. He emphasized: “That is why either a special fund for the modernization of our country or at least a reform of the debt brake is necessary.” Agnieszka Brugger, deputy member of the Green Party, warned urgently against another debate on cuts: “I can only warn urgently against another devastating debate on cuts.” She added: “I see zero scope if we increase prosperity, our security and the consensus “We don’t want to endanger society in these serious times.”
Meanwhile, Finance Minister Christian Lindner (FDP) announced at the Siko that investments in the defense industry would be simplified. “We will reduce regulatory hurdles in the EU and Germany,” Lindner told the news agency Reuters. He emphasized that a “second turning point” was necessary to enable the defense industry to make the necessary investments in view of the security situation in Europe.
The defense industry must become more attractive
Chancellor Olaf Scholz and Defense Minister Boris Pistorius (both SPD) also emphasized the need to expand capacity. The arms company Rheinmetall announced that it wanted to produce artillery ammunition in Ukraine. Lindner told Reuters: “Although the state is a client and customer of the security and defense industry, the companies still need private investment and financing.” He added: “Therefore, a second turning point is necessary that improves the reputation and framework conditions for the industry.”
There were discussions with representatives of the financial sector and the security industry on the sidelines of the conference, according to the Finance Ministry. The background is that some insurance funds or development banks are not allowed to invest in the military sector. In addition, some investors are concerned about a loss of image and public criticism if they invest in defense companies.
However, given the sharp increase in demand for new weapons and ammunition, the industry’s capital requirements are increasing. Scholz had already pointed out that weapons in Germany would have to be manufactured industrially in the future. “At the same time, there is a clear message that the federal government stands behind this sector. Banks, insurance companies and funds should no longer shy away from commitments because they fear for their public image,” said Lindner.
Scholz had already advocated long-term contracts with defense companies to enable the construction of new weapons and ammunition factories. In view of the Russian rearmament that has been going on for years, the Chancellor emphasized that the West is economically stronger and must now demonstrate this. Even if Russia used all the revenue from its raw material sales, it would not be able to match European defense spending. “Simply because our economic system is successful,” said Scholz.
With material from Reuters
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