German Finance Minister Christian Lindner expects up to 9 billion euros ($9.7 billion) in additional defence spending from 2028 if the country can reduce its debt levels, he said in comments to the DPA news agency published on Tuesday.
The additional funds could be freed up if Germany gets its debt below an EU-set target of 60% of gross domestic product from 63%, Lindner, of the fiscally conservative Free Democrats (FDP), told DPA.
“If we fall below this limit, then the repayment of coronavirus debt planned from 2028 could be discussed again,” he said.
The German government took out emergency loans totalling around 300 billion euros in 2020, 2021 and 2022 in response to the coronavirus pandemic and the war in Ukraine, while suspending the debt brake that limits government borrowing.
“Without having to change the debt brake, I can then see new financial room for manoeuvre,” Lindner said on Tuesday on social platform X.
Germany is budgeting for a debt repayment of 9 billion euros per year from 2028 and of 10.8 billion euros per year from 2031.
“However, if the burden of the pandemic on the debt level has already been overcome by then, the repayment could be significantly reduced,” the minister said.
“This would make billions available that will help us achieve the leap to the NATO target in the federal budget after the end of the special programme for the Bundeswehr,” he said.
Following the Russian invasion of Ukraine in February 2022, Germany set up the 100-billion-euro special fund to purchase modern weapons. It also pledged to reach NATO’s target of spending at least 2% of GDP on defence.
The German government is currently preparing the budget for 2025 and the financial plan up to 2028.
The year 2028 is considered to be particularly difficult as the special fund will run out of reserves and an additional 20 to 25 billion euros will likely be needed in the regular defence budget to meet the NATO spending quota.
This would not be the first time that the government coalition has extended the repayment of crisis loans in order to create new room for spending.
The tactic was used in 2022, by merging the repayment plans for the crisis loans for 2020 and 2021 with the newly planned loans for 2022 and setting the repayment period at 31 years from 2028 to 2058.
This gave the government an additional margin of several billion euros per year, as the repayment of the older crisis loans would have started earlier and was planned for a shorter period.
(Reuters)