Germany’s Neglected Military Spending and its Significance
Germany’s military spending has been a matter of concern for a long time. Despite persistent pressure from the United States, Germany has not spent more than 2 percent of its G.D.P. on defense since 1991, right after the reunification of East and West Germany. These statistics are according to the World Bank.
However, there are arguments that the government’s recent decision to increase the military budget by €1.7 billion, reaching €51.8 billion, by utilizing €19.2 billion from a special fund following Russia’s invasion of Ukraine only provides a temporary boost. Some experts express concern over this approach.
Additionally, the budget cuts made to social services have received criticism from economists, unionists, and welfare providers. These cuts include reductions in funding for child poverty alleviation programs and stricter income criteria for government-paid parental leave.
Marcel Fratzscher, president of the German Institute for Economic Research, strongly opposes this budget, labeling it as “economically unwise, antisocial, and unstrategic.” He emphasizes the need for investment in sectors like digitization, green infrastructure, and education to enhance Germany’s global competitiveness.
The Influence of Germany’s Aversion to Debt and Taxes
Germany’s historical resistance to borrowing led to the implementation of a constitutional “debt brake” in 2009, requiring a balanced national budget. Exceptions are made in times of crisis, such as the beginning of 2020.
Despite current circumstances, there is reluctance to consider increasing taxes on the wealthy or making tax adjustments to attract foreign investment, as demonstrated by Mr. Lindner’s stance.
In contrast, the United States is actively enticing businesses in the green energy and technology sectors with incentives, including tax breaks. German industrial leaders advocate for similar measures to maintain the country’s status as an industrial hub, expressing concerns that Germany is lagging in investment and location decisions due to its non-competitive tax framework.
The Future: Approval of the Budget by Parliament
The proposed budget is yet to be debated and approved by Parliament, with a vote expected to occur by the end of the year.
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