Germany: Is it better to spend on defense or on welfare?

Germany’s defense spending needs to be beefed up long-term. But should this come through more debt, or at the expense of social spending?

Germany needs to invest massively in beefing up its security

Chancellor Olaf Scholz caused a stir with an almost casual statement: “My goal is that we finance the expenditure for the Bundeswehr from the general budget once the special fund has expired,” he told the Süddeutsche Zeitung daily a few days ago.

The “special fund” is the €100 billion ($108 bn) established two years ago, after Russia’s full-fledged invasion of Ukraine. The fund is a special loan taken out to strengthen the German military. Ammunition has been procured and expensive weapons systems have been ordered.

Current estimates say that money will likely be used up by 2027.

A doubling of the defense budget?

German defense experts have calculated that instead of the €52 billion currently earmarked for defense in the federal budget, more than double that amount — €108 billion — will be needed. And that money is simply to be “…saved elsewhere,” as Scholz remarked in the interview.

This would be possible only by slashing the budget for Labor and Social Affairs. This year, it amounts to around €176 billion — over a third of the entire budget — and is earmarked for welfare and unemployment benefits and pension payments.

Eva Högl, a lawmaker with Scholz’s center-left Social Democrats (SPD) is the Bundestag’s Parliamentary Commissioner for the Armed Forces. She believes that the Bundeswehr needs dramatically more money than it has now to be able to defend the country against a possible attack. She puts the figure at €300 billion.

“It must be made clear to the population that we need to prioritize and change things if we want to continue to live in freedom and democracy,” Roderich Kiesewetter, a lawmaker with the center-right Christian Democrat opposition, told DW. He points out that without security, the economy would suffer. He warns that much more drastic restrictions would be put on public expenditure if, for example, Ukraine were to fall apart and millions of Ukrainians were to be displaced.

Kiesewetter’s conclusion: “I believe that playing off defense costs against the social budget is a misplaced debate given the threat that Germany is also exposed to.”

But the governing Social Democrats and their leftist coalition partner, the Greens, are worried. Tanks and weapons instead of social benefits payments and pensions? That is hardly something they can sell to their electorate.

According to SPD General Secretary Kevin Kühnert, Scholz has been misunderstood. In an interview with public broadcaster ARD, Kühnert said that social security and the territorial security of Germany, the EU and NATO belong together like “two inseparable sides of the same coin.”

Higher military spending combined with simultaneous welfare and pension cuts would strengthen right-wing populists, warned SPD lawmaker Ralf Stegner.

More debt or new special funds?

The “debt brake” enshrined in the German constitution stipulates that the government may only take out new loans to a very limited extent. That is why the Bundeswehr’s special fund was established through a loophole: With the support of the CDU/CSU opposition it was written into the constitution as a special fund, fed by new debts taken on outside the budget.

Ricarda Lang, co-chair of the Green Party, believes such a measure could be repeated. “That would be one way of ensuring that we can spend enough on defense,” she said and added: “Funding cannot come from the current budget alone. We must ensure that the security situation is not played off against social security in the country.”

However, the smallest coalition partner in Scholz’s three-way coalition government, the neoliberal Free Democrats (FDP), are siding with the conservative opposition refusing fresh debt or tax hikes. “We need more funds to finance personnel, supplies and ammunition in the long term. This cannot be done with extra debt, we must reprioritize the overall budget,” FDP defense politician Alexander Müller told Der Spiegel weekly.

The debate has only just begun, but it is already going round in circles. But no one disputes that the Bundeswehr urgently needs to be modernized.

This article was originally written in German.

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Author: Jens Thurau