Germany to miss 2 percent NATO defense spending target: think tank

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Germany will fall short of its pledge to spend 2 percent of its GDP on its military, a leading economic think tank warned on Monday.

Europe’s largest economy has committed to ramping up spending to meet the NATO-set target after years of neglect, going so far as to set up a €100 billion special fund to strengthen its military.

Calling the Russian invasion of Ukraine in February a historic turning point, Chancellor Olaf Scholz said in its wake that there was a clear need “to invest significantly more in the security of our country in order to protect our freedom and our democracy.”

But the German Economic Institute, a Cologne-based think tank, said that Berlin isn’t on course to hit the 2 percent benchmark despite the boost in funding. In a report, the institute notes that no extra cash has been committed for this year. Meanwhile in 2023, it sees a near-€18 billion shortfall despite an increase in outlays.

Government spending will continue to come just below target until 2027. At that point the special fund will be either used up, and defense spending will fall back to around 1.2 percent of GDP. If it’s still not all spent, then the preceding years will come in even further below target.

The €100-billion fund was created to bypass Germany’s constitutionally enshrined debt brake. But the Cologne think tank writes that political commitments — which rule out tax hikes or cuts elsewhere while upholding the debt break in its current form — remain too restrictive for Germany to meet its defense spending commitments.