{"id":12516,"date":"2023-11-11T07:42:27","date_gmt":"2023-11-11T07:42:27","guid":{"rendered":"https:\/\/infundpros.com\/business\/german-chancellor-olaf-scholz-admits-uncertainty-over-defence-spending\/"},"modified":"2023-11-11T07:42:27","modified_gmt":"2023-11-11T07:42:27","slug":"german-chancellor-olaf-scholz-admits-uncertainty-over-defence-spending","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=12516","title":{"rendered":"German chancellor Olaf Scholz admits uncertainty over defence spending"},"content":{"rendered":"<div>\n<p>Stay informed with free updates<\/p>\n<p class=\"article__content-sign-up-topic-description\"><span>Simply sign up to the <!-- -->German politics<!-- --> myFT Digest &#8212; delivered directly to your inbox.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=95d47316-b357-4fc3-b25d-34645eef8abc&amp;concept-id=0248d815-2074-4259-9848-806189cbecaa\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Germany is struggling to sign defence contracts because of uncertainty over the government\u2019s commitment to future funding plans, chancellor Olaf Scholz has admitted, as he pledged to \u201cguarantee\u201d hitting Nato spending targets for the next decade and a half.\u00a0<\/p>\n<p>Speaking to military officials, industry executives and think-tanks at a conference organised by the defence ministry on Friday, the chancellor said he recognised the urgent need for his government to clarify its security spending plans in the medium and long terms.\u00a0<\/p>\n<p>\u201cProcurement processes can only be planned and implemented sustainably if the Bundeswehr can rely on [future funds],\u201d Scholz said.\u00a0<\/p>\n<p>Finding the money to enable increased defence spending will be \u201ca great political task\u201d, he added, but one the government was already working on. \u00a0<\/p>\n<p>Following Russia\u2019s full-scale invasion of Ukraine in February 2022, Scholz\u2019s government pledged a <em>Zeitenwende<\/em> or \u201cturning point\u201d in Berlin\u2019s attitude to defence and committed to hitting the Nato benchmark of military spending equivalent to 2 per cent of gross domestic product.<\/p>\n<p>That pledge has sat uncomfortably with Germany\u2019s tightly constrained fiscal situation. A constitutionally enshrined \u201cdebt brake\u201d limits public debt to 60 per cent of GDP, meaning vast increases to the defence budget, as pledged, will strip funding for other politically sensitive departments.\u00a0<\/p>\n<p>A workaround was found last year with the creation of an emergency \u20ac100bn \u201cspecial fund\u201d to top up military spending.\u00a0<\/p>\n<p>Dispersals from the fund mean Germany is on track for the first time ever to hit its 2 per cent target in 2024 and 2025 \u2014 around \u20ac85bn in each year. But with the fund forecast to be fully disbursed soon after that, many in the defence sector fear the government is struggling to grasp the scale of the budgetary hole that will be exposed.\u00a0<\/p>\n<p>According to the German Council on Foreign Relations, a think-tank, the annual defence funding shortfall could amount to up to \u20ac40bn from 2028.\u00a0<\/p>\n<p>However, Scholz committed Berlin to meeting the Nato spending target well into the next decade. <\/p>\n<p>\u201cWe will guarantee this 2 per cent permanently, throughout the 2020s and 2030s,\u201d Scholz said on Friday. <\/p>\n<p>\u201cI say that very consciously because of course some of the things ordered now will be delivered in the 2030s.\u201d\u00a0<\/p>\n<p>The chancellor\u2019s remarks hint at the possibility of the 2 per cent benchmark being written into German legislation, or even the constitution. <\/p>\n<p>The pledge could also raise tensions within government. Germany\u2019s hawkish finance minister, Christian Lindner, a member of the liberal Free Democrats, one of the three parties in Scholz\u2019s coalition government, has expressed strong support for big increases in military funding, but has said he cannot support an expansion of government spending overall. <\/p>\n<p>Other government budgets would thus face severe cuts if the 2 per cent defence target is to continue to be hit. That is likely to sit poorly with the Greens and Scholz\u2019s Social Democrats, and the departments they control. <\/p>\n<p>\u201cWe will solve it in such a way that the Bundeswehr gets the resources it needs \u2014 even after the special fund expires,\u201d Scholz said on Friday. <\/p>\n<p>The chancellor highlighted two joint military projects with France: the MGCS programme for a new generation of tanks; and the FCAS programme to develop a future fighter aircraft, which is potentially Berlin\u2019s most expensive defence procurement venture.\u00a0<\/p>\n<p>Both projects have been beset by delays and squabbling with Paris, but Scholz said they remained at the centre of German future defence plans. <\/p>\n<p>\u201cWe have advanced the FCAS fighter aircraft project with France and Spain and will now quickly also advance the MGCS main battle tank project under German leadership with France,\u201d he said.\u00a0<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.ft.com\/content\/95d47316-b357-4fc3-b25d-34645eef8abc\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Stay informed with free updates Simply sign up to the German politics myFT Digest &#8212; delivered directly to your inbox. Germany is&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"class_list":{"0":"post-12516","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>German chancellor Olaf Scholz admits uncertainty over defence spending | inFundPros<\/title>\n<meta name=\"description\" content=\"Stay informed with free updatesSimply sign up to the German politics myFT Digest -- delivered directly to your inbox.Germany is struggling to sign defence\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/infundpros.com\/?p=12516\" \/>\n<meta property=\"og:locale\" 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