Gold coins and banknotes

Defense Spendings as one of several major budgetary challenges

New discussion by Silke Uebelmesser in ifo Schnelldienst
Gold coins and banknotes
Illustration: pch.vector - Freepik


The start of the Russian war against Ukraine on 24 February 2022, was a major turning point (“Zeitenwende”) in international and national politics. In response, a special €100 billion fund for the Bundeswehr was agreed to strengthen the alliance and defence capabilities. Germany's defence budget has been below the NATO target of 2% of GDP since the 1990s. It is now planned to reach the 2% target by 2024. The financing of increased defence spending through a special fund is seen as a temporary relief for the core budget. The challenges posed by the war in the Ukraine coincide with other major changes, such as the energy crisis, the reassessment of global economic relations, climate change, and demographic shifts. These changes require substantial financial efforts and may weaken economic growth. It is crucial to build a solid fiscal base and create favourable conditions for private investment, while prioritising spending on education, research and development, digitalisation and physical infrastructure to minimise welfare losses. Transparency, public awareness, and trust in long-term stability are essential to successfully manage these changes and maintain social cohesion. The "Zeitenwende" represents only a fraction of the changes that lie ahead, and the interplay of different challenges will require  fiscal, economic, social and societal responses that may entail some sacrifices in terms of prosperity.

The text (in German) can be found here External link(together with other texts on the same topic).