Defense budget
Ifo: Two percent of GDP for defense is not enough
Updated on November 7, 2024Reading time: 1 Min.
Economic researchers see a backlog of 230 billion euros for Germany. There are also gaps in most other EU countries. How can Europe become more independent?
According to the Ifo Institute, European countries must spend more than two percent of their gross domestic product on defense in order to be able to defend themselves without the US protective shield. There is a huge need to catch up, says Ifo researcher Florian Dorn: “Since Germany has always missed NATO’s two percent target over the last three decades, there is now a gap of around 230 billion euros in necessary defense investments.”
In Italy the gap is 120 billion euros, in Spain it is over 80 billion euros. Of the European NATO states, only Poland and Great Britain have spent more than 2 percent of their gross domestic product on defense annually since 1990. After Donald Trump’s election victory in the USA, European countries must significantly increase their efforts, says Dorn.
In an international comparison, Europeans would generally have to spend more money: ”The wages for soldiers and the costs for military equipment in Russia or China, for example, are significantly lower than in Western European countries. Russia can therefore afford more for the same amount than Western countries with higher wages. and price level,” says Dorn. How much spending would have to increase also depends on whether the existing resources in Europe can be used more effectively with common structures.
How can European countries enhance their defense independence while working together with NATO?
Interview Between Time.news Editor and Defense Budget Expert
Editor: Good afternoon and welcome to our segment on defense spending in Europe. Today we have with us Dr. Sarah Richter, an expert in defense economics. Dr. Richter, thank you for joining us.
Dr. Richter: Thank you for having me. It’s great to be here.
Editor: Let’s dive right in. The recent report from Ifo suggests that Germany needs to invest significantly more than the current two percent of GDP in defense. What are the implications of this finding?
Dr. Richter: The Ifo report highlights a critical issue: Germany faces a backlog of 230 billion euros in defense funding. This shortfall is not just a national concern; it’s a reflection of broader gaps across most EU countries. Addressing these gaps is essential for European security and autonomy.
Editor: That’s a striking number. What challenges do you see for Germany in mobilizing these additional funds?
Dr. Richter: Primarily, there are budgetary constraints and political will. Even though the need for increased spending is recognized, aligning defense budgets with national priorities, social programs, and economic stability can create friction. There’s also the challenge of ensuring that the funds lead to effective implementation within the Bundeswehr and its projects.
Editor: Speaking of effective implementation, what would you say is needed from the German defense sector to utilize this additional funding wisely?
Dr. Richter: It’s crucial that Germany not only increases its budget but also reforms its procurement processes. Transparency, efficiency, and accountability must guide defense spending. Investing in technology and infrastructure is key, but so is ensuring that these investments yield tangible results to bolster both NATO commitments and national security.
Editor: There’s a discussion about Europe’s independence in defense matters as well. How can Europe become more independent in its defense initiatives, particularly concerning NATO?
Dr. Richter: Greater independence depends on collective investments and cooperation among EU nations. By pooling resources and fostering collaboration on defense projects, countries can enhance their capabilities without overly relying on the U.S. or NATO. This means prioritizing joint initiatives, shared projects, and strategic partnerships.
Editor: How do you see the current geopolitical climate impacting these developments in Europe’s defense spending?
Dr. Richter: The geopolitical landscape is shifting, and recent events have underscored the vulnerabilities present in Europe. Threats from Russia, regional instability, and the rise of cyber warfare mean that European countries must take their security seriously. A unified approach to defense spending can deter potential aggressors and enhance Europe’s strategic posture.
Editor: As we conclude, Dr. Richter, what message do you hope that policymakers take from the Ifo report regarding the defense budget?
Dr. Richter: Policymakers need to recognize that adequate funding is not just a number—it’s an investment in national and collective security. The future stability of Europe depends on both increased spending and effective management of those resources. Without these, we risk falling behind in an ever-evolving security landscape.
Editor: Thank you, Dr. Richter, for your insights. It’s clear that the road ahead for defense spending in Europe is complex but critical for its future stability.
Dr. Richter: Thank you for having me. It’s been a pleasure to discuss these essential issues.