German Chancellor Olaf Scholz said during an interview after his speech at the Munich Security Conference that a future government should create an exemption for spending on defense and security when dealing with the nation’s constitutional limit on federal public debt.
Germany’s debt break rule is written in the constitution and it forces Germany to make ends meet with the money it takes in. Only in exceptional circumstances can the debt brake be lifted, and the government may take on new debt. Recently, Olaf Scholz has called for the debt break to be lifted.
As the country faces new elections on February 23, Scholz said he was sure that the country’s future leadership would have to put defense exemptions into place to loosen debt brake.
“It will be absolutely impossible to finance 2% and even more without changing the debt regulation we have in Germany. It is impossible,” Scholz warned, adding that the current government has the money now with an extra fund, but this fund expires in 2027.
He said that cutting domestic investment and raising taxes in order to pay for defense was not the right path. Scholz noted that many European countries are also dealing with this same question.
When asked if a defense spending exemption should be applied temporarily or permanently, Scholz said that it could be “for a long time or possibly permanently.”
“Everyone in the G7 has a debt to GDP ratio of over 100% [except for] Germany,” Scholz said, noting that the US, Italy and Japan all fell into this category.
“So that’s the reality we are facing. We have the strength, we have the power, and we have the economic capabilities to do what is necessary.”
When asked if the German public is ready for the scale of increased defense spending that he proposes, Scholz said yes.
“There is a broad support for all those saying we should do more,” he said.
But Scholz added that if Germans are told that increased spending means the drastic cutting of investments domestically, they would not support it. The German chancellor said this is why the debt break must be loosened, as it presents the only solution to the problem.