German defense investment will double country’s 2022 debt

Germany will incur at least €200 billion in debt this year, half of which is due to a special fund to boost defense spending amid Russia’s war against Ukraine, Finance Minister Christian Lindner said Wednesday.

Speaking to reporters in Berlin, Lindner said Germany’s debt may even increase further this year due to economic “uncertainties” caused by the war in Ukraine and the resulting increase in energy prices, as well as the high influx of Ukrainian refugees.

As a result, Lindner said he would soon present a supplementary budget to cover these potential additional costs, such as planned financial remedies for citizens to deal with increased energy and fuel prices.

The government, Lindner said, had already planned to run up €99.7 billion in regular debt this year. But the recent decision to inject €100 billion into Germany’s chronically under-equipped army, the Bundeswehr, has doubled that number.

Chancellor Olaf Scholz proposed the €100 billion special fund at the end of last month as part of a historic shift on German defense and security policy. It was announced just days after Russia launched its invasion of Ukraine.

“We need planes that fly, ships that sail, and soldiers who are optimally equipped for their missions,” Scholz said at the time, vowing that Germany would in the future adhere to the NATO goal of spending 2 percent of its annual economic output on defense.

Lindner’s presentation of the 2022 German budget, which has already been approved by the government but still needs backing from lawmakers, also included the announcement of a legislative proposal that would enshrine the defense fund into the constitution, ensuring the money can only be used for military purposes.

The finance minister also said he aims to return by 2023 to Germany’s constitutionally set debt limit — which was temporarily suspended amid the coronavirus pandemic — and vowed that Germany would abide by the EU’s Maastricht criteria of not incurring a higher debt than 60 percent of its GDP by the second half of this decade.