Draft budget for 2020 passed by German cabinet with bn 45.1 euros for military

The German cabinet on Wednesday passed a draft budget for 2020 that calls for a 1.7 per cent spending hike and relies on ministries to cut costs to avoid new debt in light of an economic slowdown, a government official said on Wednesday. Finance Minister Olaf Scholz's fiscal room for manoeuvre is getting tighter because tax revenues are likely to come in lower than expected this year as exporters are hit by weaker foreign demand, trade disputes and Brexit uncertainty.

A government official said that the cabinet approved Scholz's draft budget plan for 2020 and the mid-term financial planning until 2023. The draft foresees spending of 362.6 billion euros, but sources have said ministries will have to identify total spending cuts of 625 million euros each year, with programme delays and other measures to contribute additional savings.

The draft budget foresees a further increase in military spending in 2020 but does not provide a plan for how to reach the NATO target of spending 2 per cent of economic output on defence in the years beyond. Military spending would rise by 2.1 billion euros over a previous plan for 2020, boosting the share of defence spending to 1.37 per cent of gross domestic product from 1.25 per cent in 2018 and 1.3 per cent this year.

The military budget is slated to rise to 45.1 billion euros in 2020 from planned spending of 43.2 billion this year. But the share of military spending would drop back to 1.25 per cent in 2023, with any further spending increases to be negotiated year by year, sources have said.