Germany's defense spending dilemma: Meeting NATO targets amid financial constraints

Germany may have a problem maintaining defense spending above the NATO target. To this end, Berlin will need to relax debt restrictions - writes Bloomberg.

The German military fund after Russia began a full-scale war in Ukraine amounts to £82 billion. Chancellor Olaf Scholz revealed that Germany will meet the NATO spending conditions also after 2027, when the pool from the fund may run out. However, it is unclear where Berlin will get the funds from.

The debt brake prevents important investments in our future - said SPD co-chair Lars Klingbeil, quoted by Bloomberg.

According to the currently applicable mechanism - created in the wake of the 2008 financial crisis - annual net loans can reach a maximum of 0.35 percent of GDP. Except in the case of natural disasters or other crisis situations.

These rules are enshrined in the German constitution, and any pressure to change them would require the support of a two-thirds majority of votes in parliament, which is very unlikely under current conditions - emphasizes Bloomberg.

The opposition opposes the increase in debt, although this is not ruled out by Economy Minister Robert Habeck from the Greens. The Vice Chancellor counts on "more pragmatism" in the political actions of opponents.

In his opinion, raising the debt ratio by one percentage point means an additional £33 billion. In this situation, Habeck believes that "there is no difference whether we have a debt ratio of 63 percent or 64 percent."

This is particularly important, as most of the funds from the military fund have already been used. However, in 2024 for the first time in 18 years, Berlin achieved NATO spending targets.

According to research conducted by the German Press Agency, the German federal government planned defense spending for the current year at £56 billion. This is a record amount in the history of Germany. According to the latest NATO forecasts, this means that Germany's GDP rate will be 2.01 percent.