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Federal Chancellor Friedrich Merz (CDU) passes past the soldiers of the Bundeswehr with military honors before the federal chancellor before welcoming the Prime Minister of Denmark.
Bernd von Yutichenko | Drawing alliance Gets the image
Tax hiking and high debt can become a new reality of Germany, as NATO allies will soon face a higher purpose of defense.
According to NATO, the country spent about 2% of its gross domestic product (GDP) in 2024, amounted to more than 90 billion euros estimate. Although these costs meet the existing NATO target, it does not meet 5% of the military alliance expenses now justify He agreed.
According to the new rules, members are expected to allocate 3.5% GDP for classic protection costs and 1.5% to wider related issues such as infrastructure and cybersecurity.
Pressing under the guidance of the US was to receive additional defense costs is very challengedIf some NATO members say they will fight for more money for such costs and others support. While Germany has said he was supported US President Donald Trump’s proposal, questions, are delayed whether the target goal is on the biggest economy in Europe.
Financial
Jumping with 2% GDP costs up to 5% will see that Germany conducts additional tens of euros to defense annually, and Chancellor Friedrich Merz saying Earlier this year, 1% of the country’s GDP will be about 45 billion euros.
These additional costs are likely to be funded, said CNBC Hubertus Bardt, Head of the IW Koeln Economic Institute.
“Despite this, such an increase will lead to prominent conflicts in the country’s annual budget,” he said, according to CNBC translation. He added that in addition to loans, the Berlin administration probably should also conduct a debate on the implementation of financing elsewhere – together with the increase in taxes.
Emily Hoslinger, IFO Researcher, meanwhile pointed to Germany Last fiscal turn. Berlin’s new rules mean that the cost of defense above a certain threshold is exempted from the so -called German debt brake, which limits how much debt the government can take over and the dictation of the federal government’s structural budget. Germany also approved 500 billion euros of a special infrastructure fund.
“Funding for protection costs due to additional debt gives the government more opportunity in the short term,” she said in accordance with the CNBC translation. “But the increase in debt need will increase the interest costs in the medium-term, which will weigh on the federal budget,” she said.
The bard repeated these problems.
“Full financing through loans is almost impossible long-term,” he said.
Another potential issue that experts outlined in discussions around higher defense costs is the financial rules of the European Union, which can interfere with the members of the block that takes great debt.
The rules, however, may be temporarily suspended under exceptional circumstances, and some countries, including Germany request Such a deferral on the basis of protection and security.
Is it possible 5%?
Germany can “easily” to implement the 5% GDP target in the short term, but will ultimately fight, according to Jens Boysen-Hogrefe, senior economist of the Kiel Institute.
“The medium-term, (5% of the expense target can be fulfilled) with certain problems, long-term persons will need a significant reform of state budgets,” he said in accordance with CNBC translation. He added that the EU is unlikely to resist this, and that the German government should eventually be able to withstand any pressure by adapting the annual budget.
However, “it will be difficult to get such costs in a short period of time. Even 3.5% (target) is unlikely for next year and (for) 2027,” said Boymen Hagagrof.
“Historically, it would be a very high figure that can be achieved enough – although it will be not easy,” said Brand Yves Coel, noting that it would also depend on whether 1.5%should be on security expenses.
