In a guest commentary for the “Handelsblatt”, Director and CEO of the German Society for Foreign Policy, Guntram Wolff, writes that the traffic light coalition overlooks an important adjustment screw in the debate about the budget hole.
While it is a basic principle in economics that those who are in debt must reduce their expenses. For example, the SPD should scale back state social spending, the Greens must moderate their green ambitions, and the FDP should consider tax increases.
However, instead of just cutting costs, one must now seek ways to earn more. This does not work through tax increases, which merely shift wealth back and forth. Instead, there must be a real increase in production and performance in Germany, so that there is more left for sensible investments and wealth creation.
Wolff: “Germany is living in a new world”
An important part of the current problem is the changed framework conditions that Germany has been facing since the Russian attack on Ukraine.
“Since the Russian war of aggression against Ukraine, Germany is living in a new world,” writes Wolff. “Thus, the Federal Republic will now inevitably have to spend significantly more for its own defense capability and in support of Ukraine if it wants to live up to its responsibility for the security of the continent.”
In short, it is no longer just about old debts. Both the military and the economy will need increased investments in the future to secure Germany and its prosperity.
Two scrapped holidays could plug half of the budget hole
According to the International Energy Agency (IEA), the so-called green transformation of Germany would burden the public budget in the future with about 0.5 percent of the gross domestic product (GDP), Wolff writes in the “Handelsblatt”.
Necessary additional expenses for state economic investments and military costs that are not covered by the already decided special fund add up to an additional 0.5 percent of the gross domestic product.
Calculations suggest that this amount could “finance about half of the amount of nearly one percent of GDP” by “abolishing two holidays”.
In 1994, Germany scrapped a holiday – and financed the long-term care insurance
As radical as the step may seem, it is actually not, Wolff further writes in the “Handelsblatt”.
Already in 1994, the Federal Republic abolished the “repentance and prayer day” as a day off to finance the long-term care insurance. Germany’s neighbor Denmark also abolished the “Great Prayer Day” from 2024 to finance increased military spending.
