From a fiscal planning perspective, increasing defence spending towards the
2% of GDP target by 2024 appears to be not unfeasible.
Germany’s fiscal account has been in a surplus since 2014 and DB forecasts it to remain positive
over the next two years (0.5% of GDP or some EUR 16 bn for 2017 and 0.2% of
GDP or around EUR 7 bn for 2018). The 2017 update of the Stability
Programme projects continued fiscal surpluses on the general government level
until 2021.10 However, spending increases in the German (federal) budget are
not only bound by the limits set in the European Stability and Growth Pact and
Fiscal Compact but also by the stricter “debt brake” included in German Basic
Law in 2009. This national law limits the structural fiscal deficit of the federal
government (i.e. Adjusted for cyclical and special effects) to 0.35% of GDP.
This means that even if Germany used all its fiscal leeway – which will almost
certainly narrow in the coming years – it could only finance the required EUR
43.5 bn increase without breaking national law, if it implemented compensating
measures, i.e. Either revenue increases and/or spending cuts elsewhere.