Germany is poised to increase its defense budget by as much as €10 billion ($10.7 billion) next year to help fund additional spending needs triggered by Russia’s war on Ukraine, according to people familiar with the plans.
(Bloomberg) — Germany is poised to increase its defense budget by as much as €10 billion ($10.7 billion) next year to help fund additional spending needs triggered by Russia’s war on Ukraine, according to people familiar with the plans.
Defense Minister Boris Pistorius is pushing for the extra cash in the 2024 finance plan, which would lift the total allocated to €60 billion, said the people, who asked not to be identified discussing confidential information.
Finance Minister Christian Lindner in principle shares the view that defense spending should be increased but won’t likely agree to the full amount Pistorius wants, the people added. Lindner’s ministry in Berlin did not immediately respond to a request for comment.
The extra cash would be on top of the debt-financed special fund worth €100 billion Chancellor Olaf Scholz announced shortly after the Russian invasion to finance the rebuilding of Germany’s military in coming years.
At the time, Scholz said the fund would enable Germany to both reverse years of neglect and comply with a NATO guideline of spending 2% of economic output on defense. However, the government has since scaled back its ambitions.
Officials have said it may again fail to hit the 2% target this year and instead will reach the goal “on average in the next five years.” They blame longstanding procurement issues, entrenched bureaucratic hurdles and backlogs at defense companies for the difficulties.
Pistorius told reporters in Brussels on Wednesday that NATO members should spend a minimum of 2% of GDP on defense, adding that simply aiming to get close to the target won’t be sufficient.
Scholz’s coalition government plans to wrap up the budget negotiations in the next two weeks so that cabinet can approve the draft in mid-March and send it to parliament.
This year, Pistorius plans to spend €50 billion from the regular defense budget and tap €8.5 billion from the special fund, according to the people.
In addition, the government will use some €2 billion from a separate pot to procure ammunition and other military gear for Ukraine, taking overall defense spending to around €60 billion.
–With assistance from Natalia Drozdiak.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.