Germany Diverted over a Third of Defence-Designated Debt, Ifo Says
The think-tank said €11 billion in borrowing did not fund defense and security spending, while the finance ministry called the analysis flawed.
- On Thursday, an Ifo analysis reported that Germany used 38.5% of extra debt taken under a defense-related exemption in 2025 for non-defense purposes, challenging fiscal practices amid scrutiny in the Bundestag.
- Chancellor Friedrich Merz reformed constitutional debt brake rules to boost military funding, though the government has faced repeated accusations of using these fiscal reforms to support day-to-day spending.
- According to Ifo, of the €28.6 billion in additional 2025 borrowing, €11 billion did not translate into security spending, with researcher Emilie Hoeslinger stating leeway was used elsewhere.
- A spokesperson for the ministry dismissed the findings as "legally and methodologically flawed," arguing the relevant constitutional threshold for defense spending is above 1% of GDP.
- The ruling coalition defends its draft 2027 budget in the Bundestag, while the AfD, which topped Sunday's election in Saxony-Anhalt, threatened to seek a constitutional review by Germany's top court.
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17 Articles
The Ifo Institute accuses the Federal Government of not having used debt in accordance with its intended purpose. It is about high billions.
Around 38.5% of additional borrowing fails to generate higher defense and security spending, Ifo report asserts
Germany diverted over a third of defence-designated debt, Ifo says
According to an analysis by the German Ifo economic research institute, more than a third of the additional debt raised in 2025 under the exception rule for defense and security spending was not used by the German government for these purposes. However, the Ministry of Finance disputes the findings of the analysis.
Around eleven billion euros of defence debt are said to have been used for purposes other than defence. The Ifo Institute defends this accusation. However, it does not see any legal violation.
Where there is security in debt collection, there is not always security in it. Eleven billion euros went somewhere else, the Ifo Institute analyses.
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