Germany’s famous welfare will be cut down in 2024, though military budget will increase.
The German government unveiled appalling budget cuts for 2024, as Europe’s largest economy tries to limit the effects of recession and inflation. "We are only at the beginning of the fiscal turnaround," German Finance Minister Christian Lindner said.
Germany has been struck with recession in June after two quarters of negative economic growth. In the first part of 2023, German GDP dropped by 0.3%.
Germany’s economy contracted due to two years of pandemics and alternate Covid restrictions followed by Europe’s biggest war in 80 years.
The Russian invasion of Ukraine caused a severe energy shortage in Germany. Not only did energy prices skyrocket, it also caused a massive industry output reduction. Though energy prices are now back to normal, German industries still lag behind.
Therefore, budget cuts were needed to cover the enormous German debt.
Every sector from education to healthcare, from infrastructure to the green transition, received budget cuts. Germany’s welfare, renowned in the world for its generosity, will have to take many steps back.
The government’s plan is to stop taking on more debt. Indeed, German Chancellor Olaf Scholz introduced a spending limit previously lifted during the Covid pandemic. In light of the new measures, the government will be unable to borrow more than 0.35% of annual GDP.
Defense budget increases
The only budget line that sees an increase in 2024 is defense. Germany will increase its military budget by €2 billion in 2024 to €52 billion overall.
Germany’s defense budget was increased in 2023 as well, resulting in the country’s largest rearmament since World War II. Last year, Olaf Scholz raised an additional €386 billion in debt to finance new military spending.
Germany will comply with NATO’s 2% military budget rule with the new budget increase. So far, the United States has been the only NATO nation adhering to that rule.
Washington has demanded an increase in the European defense budget for decades, always falling on deaf ears.
But the illegal Russian invasion of Ukraine changed everything. Germany is one of Ukraine’s main military supporters, with German Leopard 1 and 2 tanks roaming the battlefront.
An increase in the defense budget implies a continuation of the war, which NATO nations clearly are preparing for. Despite Ukraine getting on the offensive and Russia being increasingly weak, the war still has no end in sight.
Furthermore, a losing Russia could be more dangerous than a winning one. Nobody knows how Russian President Vladimir Putin will take a possible defeat, and European nations need to prepare for the worst case scenario.
