Wednesday, 30 November, 2022
HomeWorldRussia-Ukraine war pushes Germany to shed fiscal prudence, country doubles defence budget

Russia-Ukraine war pushes Germany to shed fiscal prudence, country doubles defence budget

‘Turning point’: After months of negotiation with opposition parties, the German government reached a deal Sunday to increase defence spending to Euro 100 billion.

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New Delhi: Having watched the Russia-Ukraine conflict for three months from the sidelines, Germany on Sunday dropped all caution and doubled its defence spending to €100 billion.

The deal was formalised after lengthy negotiations between the government and opposition parties over increasing the defence budget.

After the Ukraine war started, German Chancellor Olaf Scholz had announced in Parliament that Russia’s invasion was a “turning point in the continent’s history”.

To prepare Germany for this, Scholz allocated an additional €100 billion for the country’s armed forces in February, nearly doubling its last budget of €47 billion. The agreement on Sunday finally brought to fruition Scholz’ resolve.

Special fund for military procurement

With this deal, Germany has now reworked years of fiscal prudence in defence expenditure, marking a turning point in the country’s contemporary history.

The deal will now allow the German government to meet NATO’s requirement in arms spending of 2% of a country’s gross domestic product — “on average over years”.

The priority of the enhanced funding will be on modernising the German army. The parameters of the Sunday agreement in Berlin also entail setting up a fund for defence procurement.

According to the publication DW, “A new separate law will be drafted, setting out details of the (military) fund and the financing of the Bundeswehr (armed forces).”

Additional borrowing, in the form of “debt”, will be undertaken by the government to finance this fiscal outlay. The deal involves amending budgetary rules in the Constitution to allow this additional spending.

Amending budgetary rules is essential as a “budgetary cap” exists on government borrowing.

Therefore, the ruling coalition government needed the support of opposition parties to reach a two-thirds majority for changes in Constitutional budgetary rules and allowing additional debt.

Major step for Germany

The German Minister for Defence Christine Lambrecht lauded the agreement as a “major step” that was urgently needed.

Chancellor Scholz described the deal as a “huge step”. He wrote on Twitter, “With 100 billion, we ensure that the Bundeswehr can fulfill its defence mission better than ever before.”

This certainly is good news for German chief of staff Lt General Alfons Mais, who had said in February, “The army that I am allowed to lead is more or less powerless.”

Also read: In major defeat, Ukraine loses key railway hub to Russia but counterattacks in Kherson


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