German economists advocate for new debt to finance German military.
The President of the Kiel Institute of the World Economy (IfW), Moritz Schularick and the head of the German Institute for Economic Affairs (IW), Michael Hüther, have spoken out in favor of new debt takings in support of the German military. According to Schularick, it is right and necessary to quickly mobilize a lot of money for the country’s defense capabilities in order to build a credible deterrent against Russia and to free Germany from dependence on the United States’ protection. He also emphasized that it is correct to finance the short-term budget deficit through debt, as structural changes in the budget are only realistic in the medium term.
IW President Hüther also considers a new, credit-financed special fund for the German military through a constitutional amendment still feasible in this legislative period. He stated that, in principle, ongoing defense expenditures should be financed from the normal budget, i.e., from tax revenues, but not for the necessary catch-up financing, as the case is in Germany, where decades of underfinancing have occurred.
According to Hüther, the 100 billion euros proposed do not suffice and it is rather a matter of 300 billion euros. He added that, in the new Bundestag, this would be hardly, if not at all, feasible, as it would require a constitutional majority. Therefore, the proposal by CDU leader Friedrich Merz to establish a new special fund for the German military or reform the debt brake is realistic and appropriate.
IfW President Schularick agreed with Hüther, saying that the democratic parties should use the remaining two-thirds majority in the old Bundestag to stay geopolitically capable of acting. He considered the most decisive and far-sighted step would be to exempt defense expenditures from the debt brake. The Kiel economist emphasized the need for long-term planning security for the armament industry and advocated for defense expenditures to be financed from the regular budget, as this would create reliability and allow for significantly higher expenditures in the long run.