Germany Faces Massive Funding Gap in Defense Budget, Study Finds
Germany will face a significant funding gap in its defense budget in the coming years, according to a study by the Institute of the German Economy (IW). By 2028, the special fund for the German Armed Forces is expected to be exhausted, leaving a shortfall of 22 billion euros, the study found.
If the NATO’s two percent defense spending target is assumed to be achieved by 2028, the funding gap would actually increase to 74 billion euros, the study showed.
The special fund for the German Armed Forces is expected to be depleted by the end of 2027. To fill the gap, either a new special fund would need to be established or the shortfall would have to be covered from regular budget funds.
The government’s plans to increase regular defense spending from around 50 billion euros in 2028 to 80 billion euros, financed by a corresponding reduction in the “General Financial Administration” plan of nearly 30 billion euros, are seen as unrealistic by the IW economists Hubertus Bardt and Michael Hüther.
“This is a booking in the air, which is not underpinned by material facts” Bardt said to the RND.
Without this unrealistic increase in defense spending, the funding gaps of 22 and 74 billion euros in 2028 would arise, the study found.
“Achieving the two percent target within the existing budget framework after the special fund is exhausted will require significant additional savings, additional tax revenue, or an additional loan” the study said.
In the years 2025 to 2027, the two percent target could still be narrowly reached, but if the bottom line is three percent, a gap of 9 and 54 billion euros would emerge in 2025 and 2027, respectively.