We have to spend more on defense. It is the message that the German Government repeats tirelessly at a time when Europe is looking for how to confront Russia and reduce its dependence on the security of the United States. For the first time in three decades, Germany will this year meet NATO's requirement to allocate 2% of gross domestic product (GDP) to defense. But maintaining this commitment takes its toll on the rest of the items in a country whose faltering economy will barely grow 0.1% this year, according to the latest forecast from the country's main economic institutes. And cutting social spending threatens to generate citizen discontent that will be capitalized on by the extreme right.
Against this backdrop, German Finance Minister Christian Lindner has already warned that belts will have to be tightened in the new federal budget that will begin to be negotiated this month. The boom years in which each ministry presented budgets higher than the previous year are over. Before April 19, each department must submit its spending needs to the Ministry of Finance. All this threatens to strain relations between the tripartite partners, especially between Lindner's Liberals and his two Social Democratic and Green partners.
Financial restrictions and the liberal leader's refusal to issue new debt have raised alarm bells about possible social cuts. “It would be fatal to show that we cut the welfare state because we need more money for the army. We are not only in a phase of external threat. Democracy is also under pressure. “Social spending is necessary to keep the country united,” the German Economy Minister and Vice Chancellor, the Green Robert Habeck, warned this weekend in an interview with the
Frankfurter Allgemeine Zeitung
.
Social Democrats and Greens warn of the danger of contrasting foreign security with social security and warn that attempts to cut the welfare state will only further polarize society and make political action even more difficult. Instead, they ask to make the debt brake more flexible in Germany, which with a public debt of 64% of GDP is one of the countries with the lowest percentage of debt of all industrialized countries. Economists such as Marcel Fratzscher, president of the DIW, agree with this opinion, who believes that the austerity of this budget is “detrimental both to the economy and to long-term economic transformation” and advocates an exception to the debt brake to boost economic growth. investments.
Lindner, on the other hand, is committed to establishing spending priorities. “This State does not have a revenue problem that it should solve through more taxes or more debt. You have a spending and efficiency problem. We can fulfill all our duties if we maintain discipline in the state budget and create sustainable social systems,” she indicated in a recent interview in the weekly
Die Zeit
.
Citizen subsidy review
At the moment, in the debate on the budget, the Minister of Finance has requested a review of what is known as the citizen subsidy, aid to cover basic expenses. “We must do everything possible so that people who can work really do so,” he told the
Rheinische Post
newspaper this Wednesday , regarding aid that he said contains very few incentives for its beneficiaries to want to enter the world of work.
The only ministry that can breathe easy is Defense, which also has a special fund approved in 2022 of 100,000 million euros aimed at strengthening the German army and acquiring new weapons systems and of which more than two thirds are already contractually committed. of this amount, as reported this week by the minister of the branch, the social democrat Boris Pistorius.
This fund, which will be exhausted no later than 2027, comes from loans that can be contracted without violating the debt brake. Once exhausted, the amount allocated to national defense – which in 2024 stood at 71.75 billion euros (19.8 billion from the fund) – must be financed entirely from the federal budget.
The economic weakness combined with defense spending has generated a significant budget gap, which will continue for the next few years. According to economists, in 2025 alone there could be a deficit of close to 20 billion euros.
In the end, as Björn Kauder, an economist at the Institute of German Economics in Cologne (IW), explains, it is a simple matter: if defense spending is increased, it must be reduced in other areas. “Given that social spending represents about half of the federal budget, it is obvious that social spending must be reduced,” he says.
Kauder recalls that in recent years numerous new social benefits have been adopted and he would consider stopping the expansion of the welfare state “an advance.” “Politicians don't have the strength to make real cuts,” he says. “The fear of Alternative for Germany may be the reason why politicians do not dare to act,” he adds about the rise of the German far-right party.
Gone are the 2010s, when low interest rates and a boom in the labor market created great room for maneuver in public budgets. “Many things could be allowed and it was not necessary to establish priorities. As a result, politicians have forgotten how to set them,” explains Kauder. “The time of plenty is over. Rising interest rates and a weakening labor market are causing budget problems, as are the war in Ukraine and migration. Germany's economic growth is currently very weak compared to international standards. In this sense, we need new measures.”
With this panorama, everything predicts a strong dispute within the coalition government in the coming months that could push it back to the limit. It is enough to remember how difficult it was for the coalition to prepare a budget for 2024. According to information from sources close to the Government to which
Der Spiegel has had access,
in addition to the Ministry of Defense, only the Environment and that of Justice, both with budgets much lower than that of Defense. Others will face the challenge of reducing their expenses.
For example, the Ministry of Foreign Affairs will have 5,100 million euros in 2025 (about 1,600 million less than this year), Family 13,000 million (900 million less), Education 20,300 million (almost 1,000 million less). Meanwhile, Development will be one of the most affected, with around 9.8 billion (about 1.4 billion less), which led its minister, Svenja Schulze, to make it clear that she will “strongly” oppose these cuts, since, according to He said, in the current budget, “the pain threshold has clearly been reached.”
Schulze's ministry allocates almost half of its budget to bilateral cooperation with developing countries. Non-governmental organizations like One have already raised the alarm. According to its director, Stephan Exo-Kreischer, to the
Süddeutsche Zeitung,
this “clear cut” indicates a “lack of understanding of global politics” on the part of Lindner, since Germany is losing “one partner after another” in Africa, while , Russia and China are becoming strong in that region.
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