Senate proceedings this week in Germany
Germany Establishes Special Fund for Bundeswehr, Boosting Defense Spending
In a significant move, the German government has established a "Special Fund for the Bundeswehr" with an initial allocation of €100 billion. This fund, operational since its inception, is set to finance a major push in military spending, with plans to spend about €77 billion from this fund between 2025 and 2027.
The primary purpose of this special fund is to provide a long-term financial basis for modernizing and expanding the Bundeswehr, Germany’s armed forces. This includes investments in personnel, equipment, and infrastructure, aimed at making the Bundeswehr "the strongest conventional army in Europe."
The funding for the special fund comes primarily from massive new government debt issuance. Germany plans to issue approximately €174.3 billion in 2026 to cover the defense infrastructure and military needs, marking a one-off financial mechanism outside the regular budget to accelerate military investment post the 2022 Russian invasion of Ukraine.
The special fund will finance significant and complex multi-year equipment projects of the Bundeswehr. Projects supported by this fund include the procurement of new weapon systems such as Eurofighter combat aircraft, Boxer armored vehicles, Patria infantry fighting vehicles, heavy transport helicopters, and missile defense systems like IRIS-T SLM and Arrow. Personnel increases are also planned, with thousands of new military and civilian posts, and temporary military positions being created to enhance operational readiness.
The special fund does not affect the core budget, ensuring that funds for internal and social security remain available. Notable changes include the income limit for mini-jobs being raised and indexed to 520 euros, and the upper limit for mid-jobs being raised from 1,300 to 1,600 euros. A one-time increase in the minimum wage by law will take effect from October 2022, benefiting millions of workers.
The revenue shortfall of 6.6 billion euros for transmission network operators will be covered by the Energy and Climate Fund (EKF). The Bundeswehr is also involved in the EU mission EUNAVFOR MED IRINI, making a significant contribution to the implementation of the United Nations arms embargo against Libya. The mission includes combating human smugglers, curbing the illegal export of oil, and rescuing refugees at sea. The mandate is set to be extended until 30 April 2023 at the request of the federal government.
In related news, the Bundestag will elect a new Federal Commissioner for Anti-Discrimination for a five-year term, with the appointment made by the Federal President. An amendment to the General Equal Treatment Act (AGG) will strengthen the independence of the Federal Anti-Discrimination Agency. The agency, established in 2006, offers legal advice for those affected by discrimination based on age, disability, gender, ethnic origin, religion or sexual identity.
References: 1. Deutsche Welle 2. Handelsblatt 3. Spiegel Online 4. Tagesspiegel 5. FAZ
- The special fund established by Germany for the Bundeswehr is part of a broader policy-and-legislation push in the politics of defense spending and war-and-conflicts, notably in response to the 2022 Russian invasion of Ukraine.
- The finance industry is playing a significant role in backing Germany's military modernization plans, with the government planning to issue a substantial amount of new debt to fund the special fund.
- The energy industry is also affected, as the revenue shortfall for transmission network operators will be covered by the Energy and Climate Fund (EKF).
- The special fund will not only influence the general news around Germany's defense industry but also impact the internal policy-and-legislation, as the revenue shortfall has led to adjustments in the minimum wage and income limits for jobs.
