Status: 04/27/2022 3:59 p.m
A first reading on the “Bundeswehr Special Assets” will take place in the Bundestag today. What is behind the term and is the state incurring new debts with it?
This afternoon, the Bundestag will discuss the planned special fund for the Bundeswehr for the first time. Chancellor Olaf Scholz (SPD) announced such a special fund and its anchoring in the Basic Law at a special session of the German Bundestag at the end of February after Russia had invaded Ukraine. The government now wants to provide 100 billion euros to modernize the equipment of the Bundeswehr. An overview of the financial policy background.
What is a special fund?
From an economic point of view, a special fund is an “extra budget”. This means that special funds are outsourced from the federal budget. They are set up to fulfill special tasks that can be solved more effectively and quickly. For example, a special fund “Aufbauhilfe 2021” was set up to deal with the flood disaster in the summer of 2021 in order to provide the victims with financial aid as quickly as possible.
The legislature is responsible for decoupling funds from the federal budget. This means that Parliament must pass a law to set up a special fund. They are normally administered by federal agencies, but this can also be delegated to non-federal agencies.
Even if the special funds are legally decoupled from the federal budget, they are subject to the debt brake, which is why they must be taken into account when new debt is taken out. “However, this only applies to special funds that were included after 2011. All special funds that were decided earlier are not taken into account in the debt brake,” explains Sebastian Dullien from the Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Böckler Foundation in an interview With tagesschau.de. That is also the reason why, for example, the special funds that were approved during the 2008 financial crisis are still being used. In the case of the special fund that is being discussed in parliament today for the Bundeswehr, there should also be an exemption from the debt brake.
Why are special funds so attractive for the state?
The federal budget follows the principle of annuality. This means that all funds provided for in the budget for 2022 can be used this year. And they expire if not fully used by the end of the year. “If, in view of the Ukraine war, the Bundestag had taken out 100 billion euros in debt for classic financing from federal funds to upgrade the Bundeswehr, it could only have bought equipment this year,” explains Sebastian Dullien. The special fund could also be used to spend money on equipment in the coming years, in addition to the defense budget.
By the way, the current federal government is already threatened with a constitutional lawsuit: Because of the Corona emergency, the grand coalition had planned 240 billion euros in new debt last year, but did not need all the money. Instead of taking out fewer loans, Federal Finance Minister Christian Lindner (FDP) wants to park most of the unused funds in the Energy and Climate Fund (EKF) in order to finance investments in the coming years. The Federal Court of Auditors considers this to be “constitutionally dubious”, and the Union under CDU leader Friedrich Merz has filed a lawsuit against it.
Why is there criticism of the special assets?
“Special funds create a lack of transparency. They obscure budget truth and clarity,” explains Federal Audit Office President Scheller. Because the federal budget is subject to the principles of unity and completeness and should therefore offer parliament and the public the opportunity to grasp the budget situation at a glance. Due to the large number of special funds, however, numerous ancillary calculations have to be made for a good overview.
In addition, the term special assets suggests intrinsic value. “But that is often not the case,” Scheller said in an interview tagesschau.de: “Special funds are mostly spending authorizations that are financed with loans. This means that if money is called from special funds, then the state has to go into debt.” IMK expert Dullien adds: “That’s why special assets, even if they’re not called that, are federal debt.”
What is criticized about the special fund for the Bundeswehr?
A special point of criticism of the “Bundeswehr special fund” is that equipping it is actually a core task of the state, according to the President of the Audit Office: “The financing of this core task therefore belongs in the core budget, not in a special fund.” There is no legal reason to buy some tanks with money from the defense budget and others with special funds. In addition, the financing of maintenance costs is not yet clear: “The special fund is designed for 100 billion euros. How long-term financing of the Bundeswehr – beyond this 100 billion euros and adapted to NATO’s two percent target – should look like open so far,” says Scheller.
In addition, this special fund is to be exempted from the debt rule: “If the example catches on, if the instrument of special funds is transferred and expanded to more and more core tasks of the federal government, to other policy areas, the debt rule threatens to degenerate into a financial policy fig leaf. That’s why it’s allowed here no dam burst.”
How many special assets are there?
26 special funds are listed in the 2020 federal budget. Federal funds include the financial market stabilization fund, the energy and climate fund and the sewage sludge compensation fund. It was set up to pay compensation for personal injury and damage to property caused by sewage sludge used in agriculture.
“In recent years there has been a growing tendency to finance more through special funds,” reports Scheller, head of the authorities. The President of the Federal Audit Office sees the danger here that future federal budgets could become ever more intra-saver.