In the discussion about higher military spending, Defense Minister Pistorius is receiving support from Kiel economist Schularick. In an interview, he described sticking to the debt brake as a “security risk for Europe”.
The President of the Kiel Institute for the World Economy (IfW), Moritz Schularick, is calling on the federal government to spend more on defense – and to take on more debt to do so.
“German budget policy is a security risk for Europe,” Schularick told the “Süddeutsche Zeitung”. In order to close the enormous gaps in Germany’s defense capability, the Federal Republic will have to spend around three percent of economic output on defense instead of two percent in the foreseeable future.
Criticism of Finance Minister Lindner
“To achieve this, the government could, for example, suspend the debt brake or decide on a new special fund. Anyone who refuses to take out new loans for dogmatic reasons is putting party above country,” says Schularick, addressing Finance Minister Christian Lindner (FDP), who, unlike the SPD and the Greens, is insisting on a strict austerity course in the government.
Europe has neglected investments in its security and cannot adequately protect Ukraine against Russia without US help, Schularick told the newspaper. Given the uncertainty in the USA, Europe must be able to defend itself. Increased security spending would boost growth, as would tax credits for businesses to spur investment.
Warning about Chinese subsidies
Schularik also warned of a possible “China shock,” as Europe already imports 40 times more electric cars from China than the USA, which is now imposing punitive tariffs. He assumes that imports will continue to increase, said the IfW president. The Chinese government subsidizes its industry with hundreds of billions of euros a year, which distorts competition.
“We may notice in five or ten years that entire future industries are in Chinese hands.” The EU Commission should examine China’s subsidies and react accordingly in order to maintain competition, “if necessary with punitive tariffs.”