By Holger Hansen
BERLIN (Reuters) – Germany’s Bundestag lower house of parliament on Friday approved the creation of the 100 billion euro ($107.2 billion) special defence fund that Chancellor Olaf Scholz announced in response to Russia’s invasion of Ukraine.
The money is destined to top up the regular defence budget of around 50 billion euros over several years to help re-build Germany’s military that has suffered years of neglect following the end of the Cold war.
The government decided to amend the constitution to create the fund in order to exempt it from Germany’s so-called debt brake that enforces fiscal restraint. As such, it needed – and received – backing from the opposition conservatives as well as the ruling coalition in order to reach the two-thirds parliamentary majority needed for a constitutional change.
The fund should enable Germany to meet the NATO target of spending 2% of its economic output on defence each year, making it the world’s third-biggest military spender behind the United States and China. The Kremlin warned earlier on Friday that Germany’s remilitarization meant increased security risks.
The Bundestag also passed a budget foreseeing 139 billion euros of new debt this year – Germany’s second-highest ever level – to cushion Europe’s biggest economy against the fallout from the Ukraine conflict.
This required parliament to allow an exemption from Germany’s debt brake for the third year in a row, with the new debt to go towards funding aid for households and companies struggling with high energy prices as well as support for Ukrainian refugees and Kyiv.
Finance Minister Christian Lindner wants to return to the brake next year, which according to government sources would allow cabinet to spend no more than 15-17 billion euros in new debt.
($1 = 0.9329 euros)
(Reporting by Holger Hansen; Writing by Sarah Marsh; Editing by Hugh Lawson)
