Germany’s Defense Budget and Special Funds Not Enough to Meet 2 Percent Target in 2024

The draft budget for 2024 leaves open how the German government intends to achieve its goal of spending 2% of economic output on defense. This is according to calculations by the ifo Institute ahead of the budget discussions in the German Bundestag this fall. For 2024, the government is planning a defense budget of EUR 52 billion as well as EUR 19 billion of spending from the special fund for the German Armed Forces (including interest payments). “That’s just 1.7% of economic output, leaving a shortfall of EUR 14 billion that would have to be classified as defense spending in other ministries,” says ifo military expert Marcel Schlepper.

Expenditure by other ministries has in the past also been included in the calculation of defense spending. In 2014, the figure was EUR 1.6 billion. To reach the 2% target in 2024, it would have to rise to EUR 14 billion – almost a tenfold increase in the space of ten years. “The federal government should be open about the extent to which other ministries are committing new spending to defense or whether this is simply a relabeling exercise for expenditure items that have been around for some time,” Schlepper says. All that is known so far is that EUR 4 billion has been earmarked for upgrading the military capacity of foreign partners such as Ukraine. Information is lacking on the remaining EUR 10 billion. This approach contrasts with the transparency in the regular defense budget, which, for example, details the weapons systems that are being procured, Schlepper says. 

The rapid increase in defense spending by other ministries is decoupled from expenditure that falls under the responsibility of the Federal Ministry of Defence. Since 2022, the defense budget has actually declined in price-adjusted terms. What’s more, there has been a failure to disburse existing funds. By mid-2023, only EUR 1.2 billion had flowed out of the EUR 100 billion special fund for the German Armed Forces.