Germany to borrow $220b more for defense, climate

Bloomberg

Germany plans additional borrowing of at least 200 billion euros ($220 billion) this year to finance a fund to modernise the military alongside already-planned debt for climate protection and other initiatives.
The latest borrowing binge marks the third consecutive year that Germany has breached constitutional debt limits and highlights how the new government is prepared to take a looser approach to spending.
In the 2022 federal budget — approved by the cabinet — the government is targeting as much as 99.7 billion euros in new borrowing, but the final figure is likely to be even higher.
Another 100 billion euros will come on top of that for defense.
Both Chancellor Olaf Scholz and Finance Minister Christian Lindner have made it clear that adjustments will be required to deal with the economic fallout from Russia’s war in Ukraine.
That would come on top of plans to spend billions of euros to tackle climate change and offset the lingering effects of the coronavirus pandemic on Europe’s biggest economy.
The current total is already the second-highest in Germany’s post-war history, just short of last year’s record new debt of 215 billion euros.
The defense spending is outside the federal budget in a so-called special fund. Scholz announced the surprise decision to allocate 100 billion euros to shore up Germany’s military capabilities in a speech to parliament last month.
After years of restrained investment in security, Germany aims to meet and even exceed Nato’s target for military spending of 2% of economic output each year.
The defense fund and Lindner’s budget plans through 2026 also cleared cabinet on Wednesday.
Next year, the government plans to restore the so-called “debt brake” and new borrowing is projected to shrink to 7.5 billion euros.