Mehr Verteidigung mit mehr Schulden

Abstract Over the past ten years, German defense spending has been significantly below the growth path that would have been appropriate to meet NATO targets. The 2 percent target was not achieved until 2024. However, no credible budget plan to stabilize this spending has ever been presented. The new NATO target is now to be achieved more quickly. A quota of 3.5 percent is already being targeted for 2028 or 2029. However, this increase will be achieved exclusively through new borrowing of up to over 100 billion euros per year, which will account for two-thirds of total defense spending. A sustainable fiscal policy should aim to finance current defense costs from tax revenues and reduce borrowing.