Bundestag Approves €100 Billion Defense Budget

Germany’s Bundestag approved the creation of a one time €100 billion defense fund proposed by Chancellor Scholz in response to Russia’s invasion of Ukraine.

The additional budget is expected to top up the regular defense budget of around €50 billion over several years to help bolster Germany’s military, which has started to become obsolete.

The government decided to amend the constitution to create the fund in order to exempt it from Germany’s debt brake that enforces fiscal restraint. Scholz’s proposal needed both the government and the opposition backing in order to reach two thirds parliamentary majority required for a constitutional change.

With the approval of the Bundestag, the fund is expected to enable Germany to meet the NATO target of spending 2% of its economic output on defense each year, making Europe’s biggest economy world’s third-biggest military spender behind the United States and China.

The Bundestag also passed a budget foreseeing 139 billion euros of new debt this year – Germany’s second-highest-ever level – to cushion Europe’s biggest economy against fallout from the Ukraine conflict.

The budget required parliament to allow an exemption from Germany’s debt brake for a third year in a row, with the new debt to go towards funding aid for households and companies struggling with high energy prices as well as support for Ukrainian refugees and Kyiv.

Germany’s Finance Minister Lindner said he wants to return to the brake next year. It would allow the government to spend no more than €15 billion-€17 billion in new debt.

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