Germany’s armed forces need an additional 25 billion euros every year

German Armed Forces need an additional EUR 25 billion per budget year. This is the amount needed to meet the investment of 2% of GDP announced by the German Chancellor Olaf Scholz. For 2022, Germany’s basic defense budget amounts to some €50.3 billion, or 1.3% of the country’s economic output. Added to this is the special debt-financed program amounting to 100 billion euros.

“These 100 billion are all well and good, but given Russia’s attack on Ukraine and the turning point in the concept of defense in Europe, it is not enough for the long term”, believes a researcher of the ifo. Florian Dorn.

He adds that the nominal increase in the defense budget of 7.2% in 2022 will be almost entirely swallowed up by expected inflation. Even under the most pessimistic economic scenario, this year’s defense budget is lower than last year’s when measured in terms of GDP. Dorn also states: “The era of peace dividends, in which defense savings provided financial leeway for other political projects, is over. This one-off special fund will by no means be sufficient to completely close the funding gap of recent years, to eliminate all short-term shortcomings and to sustainably reorganize the Bundeswehr. In addition, more efficient structures should be put in place to use these funds. After all, it’s not just about spending more money, it’s about using the funds better.

“The relatively low defense spending and the relatively modest number of European defense contracts mean that national defense industries must collaborate even more closely if we are to maintain technological affiliations as well as our autonomy in security policy,” says a ifo researcher Marcel Schlepper. Since 1992, Europe and especially Germany have experienced intensive disarmament. By 2020, Germany had reduced the number of its battle tanks by 88% and the number of fighter jets and helicopter gunships by 78%. Even if Germany, France, and the United Kingdom pooled their battle tanks, they would outnumber Russian and Chinese means by a factor of five and eight, respectively. As for fighter jets and helicopter gunships, Russia would have twice as many, China three times as many. Europe depends on American security guarantees. But just as the United States has done, China and Russia are also developing complex technological innovations such as stealth jets and hypersonic missiles for their vast armed forces.

Source: ifo Institute