As Germany grapples with economic headwinds, Finance Minister Christian Lindner proposes increased borrowing, while NATO pushes for higher defense spending. Meanwhile, German consumers tighten their belts amidst financial uncertainty, and the opposition calls for a nuclear power revival.
In a bold move to address Germany's economic challenges, Finance Minister Christian Lindner plans to significantly increase new borrowing in 2025. The net borrowing is set to reach €56.5 billion, €5.2 billion higher than initially projected last summer. This increase comes as a response to weaker economic growth and is permissible under Germany's debt brake rules.
The additional funds aim to offset tax revenue shortfalls and cover increased unemployment-related expenses. However, this measure falls short of bridging the existing €12 billion gap in Lindner's budget draft.
As the government grapples with fiscal challenges, German consumers are feeling the pinch. A recent survey by EY reveals that more than one-third of Germans (37%) now only purchase essentials. Luxury items top the list of spending cuts (58%), followed by delivery services (49%), prepared meals (48%), and gym memberships (43%).
Adding to the financial pressure, NATO is calling for a substantial increase in Germany's defense spending. The highest-ranking German NATO general, Christian Badia, argues that the current 2% GDP target is insufficient, urging Germany to aim for 3%. This would translate to an additional €40 billion annually for defense, based on Germany's current GDP of around €4 trillion.
NATO's new plans call for an increase in combat troop brigades from 82 to 131 across the alliance. As Germany is expected to contribute about 10% of NATO capabilities, this would require an additional 5 to 6 combat troop brigades on top of the 10 existing and planned ones.
Nuclear Comeback?
In a significant policy shift, the Christian Democratic Union (CDU), Germany's largest opposition party, has announced its intention to return to nuclear power. The party is advocating for the reactivation of recently decommissioned nuclear power plants, a move they claim could be implemented without major obstacles. This stance represents a dramatic reversal in German energy policy, which had previously committed to phasing out nuclear power. The CDU's position raises questions about whether a broader reconsideration of nuclear energy might be slowly taking hold in German political discourse, especially in light of ongoing energy security concerns and climate change mitigation efforts.