Chancellor Angela Merkel is poised to back increases in German spending on defense and infrastructure in a budget plan that seeks to address global risks and the refugee crisis thatâ€™s her biggest domestic challenge.
The blueprint, set for approval by Merkelâ€™s Cabinet, foresees a 2.7 percent increase in spending next year and balanced federal budgets through 2020, according to a draft obtained by Bloomberg. While the Defense Ministry is slated to get 6.8 percent more funding in 2017 compared with previous plans, the biggest absolute increase is for social-welfare and labor-market programs. That partly reflects spending to aid some 1 million refugees who came to Germany last year, the most since World War II.
â€œBesides measures related to the refugee influx, the focus of the additional impulses is on domestic and exterior security,â€ according to the budget document. Finance Minister Wolfgang Schaeuble plans to present the plan, which will underpin three months of detailed budget talks in parliament. With stepped-up spending for asylum seekers as well as German residents, Merkelâ€™s budget priorities amount to a fiscal stimulus for Europeâ€™s biggest economy and underscore a reduced reliance on exports to drive growth.
Building companies are poised to benefit from increased funding for public housing and â‚¬3 billion in extra spending on roads, rail and broadband earmarked for 2017 and 2018. One of the biggest beneficiaries of the 2017 budget is the construction industry, they will benefit from the planned expenditure for social housing.
As Merkel faces criticism at home and abroad for her open-border policy on refugees, her promise to German voters to avoid new government debt is under attack from the Social Democrats. Balanced budgets â€œshouldnâ€™t become a fetish,â€ Thorsten Schaefer-Guembel, the partyâ€™s deputy national leader, said in a Deutschlandfunk radio interview Wednesday.
Under the plan, Germany would spend an additional â‚¬9.4 billion on military equipment between 2017 and 2020. Next year, defense spending would increase to â‚¬36.6 billion, or 11 percent of planned federal spending of â‚¬325.5 billion.
Thatâ€™s part of a â‚¬130 billion 15-year defense spending plan presented by Defense Minister Ursula von der Leyen in January, which calls for additional Leopard main battle tanks as well as armored vehicles for Germanyâ€™s armed forces.