Germany threatens the two percent goal: where is the money for defense?

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The Federal Government must plan higher defense spending in order to achieve NATO target of 2% of GDP by 2044.
The Federal Government must plan higher defense spending in order to achieve NATO target of 2% of GDP by 2044. (Symbolbild/ANAG)
In view of the changing geopolitical situation in Europe, the Federal Republic of Germany is forced to significantly increase its defense expenditure. Future governments have to expect a new calculation that promises annual defense spending of around 3.6% of the gross domestic product (GDP), such as Radio Gütersloh . Germany currently spends almost 2.12% of GDP for defense, which corresponds to around 90.6 billion euros. However, in order to meet the new NATO target requirements, additional financial resources are required in a high double-digit billion dollar height.

The federal government is currently planning to finance these increased expenses through reforms and new funds. Chancellor Olaf Scholz (SPD) has spoken out for a reform of the debt brake to set up a Germany fund for government investments. These suggestions encounter resistance, especially from the Union and the FDP, which critically consider a loosening of the debt brake. The Bundestag election campaign largely focused on maintaining the 2%quota, which will be sought for the Bundeswehr after the special fund of 100 billion euros.

NATO goals and structure of the expenditure

NATO recently decided to increase the defense spending on its Member States again. These adjustments are due to the ongoing conflict in Ukraine and the aggressive politics of Russia. However, Germany has agreed on a generous definition in the reports of its defense spending. It should be noted that interest payments for federal debt, pensions for former soldiers of the GDR army and around 7.5 billion euros for Ukraine flow into the calculations, which pushes the actual military expenses down.

according to n-tv indicates Germany to cross the 2% brand, however, the IFO Institute predicted that expenses 2024 of only 1.7% of the bip is reached. In order to finally meet the required quota, the federal government would have to plan up to 85 billion euros in its defense budget. The special fund that is added has helped reach the brand, but this is not enough to meet national and international responsibility.

The role of the USA and the pressure on Germany

The new targets of NATO are strongly reminiscent of the demands of former US President Donald Trump, who asked that all Allies should raise at least 5% of their GDP for defense. This would mean a burden of over 200 billion euros per year for Germany. The NATO currently sets 2% as a minimum goal, but the real expenses are very distorted by various cost definitions and political events. Scholz had promised in 2022 to comply with the 2%hurdle, which was not realized in the following years.

The government must therefore adapt to a significantly higher financing neediness according to the current framework conditions. The financing of the additional effort remains unclear what the entire discussion about defense policy in Germany brings into a critical phase. Planning for future skills goals is to be approved at a NATO defense ministerial meeting in June 2023, whereby the planning period is sufficient until 2044

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