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Germany to raise defence spending to 3.5 per cent of GDP in 2029
Germany's finance minister on Tuesday vowed to lift the country's defense spending to 3.5 per cent of gross domestic product in 2029 as he presented the new government's spending plans.
Chancellor Friedrich Merz's coalition pushed plans through parliament to enable higher defence spending by loosening strict rules on incurring debt even before it took office last month. It acted ahead of the NATO summit starting Tuesday that aims to raise allies' defence spending target from 2 per cent of GDP to 3.5 per cent, plus another 1.5 per cent for potentially defense-related infrastructure.
Finance Minister Lars Klingbeil said Germany's defence spending will hit 2.4 per cent of GDP this year, and we will raise defence spending step by step so that we will reach a NATO quota of 3.5 per cent in 2029.
Klingbeil, who is also the vice chancellor, said he will be very vigilant that the money is spent efficiently, for example by aiming for greater cooperation at European level on procurement, research and development.
Germany for years drew criticism for failing to hit the existing 2 per cent spending target. But, shortly after Russia launched its full-scale invasion of Ukraine in 2022, then-Chancellor Olaf Scholz pledged to increase defence spending to 2 per cent.
He also announced the creation of a 100 billion-euro ($115-billion) special modernisation fund.
Germany met the 2 per cent target thanks to the fund, but it will be used up in 2027.
Merz has said that the government will in the future provide all the financing the Bundeswehr needs to become the strongest conventional army in Europe.
More broadly, the government's plans call for overall government spending to increase from 503 billion euros this year to 573.8 billion euros in 2029. The new government is also setting up a 500 billion-euro fund to upgrade Germany's infrastructure over the next 12 years.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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