Long a heavyweight champion of providing humanitarian and development aid, Germany is now facing budgetary shortfalls that could lead to cuts in its foreign aid projects and humanitarian assistance (Official Development Assistance) spend.
In real terms, Germany is second only to the United States in total dollar amount of foreign aid, spending just over $35 billion in 2022 to fund some 150 projects around the world. But two-quarters of economic downturn, an ongoing energy crisis, lingering effects from the coronavirus pandemic, and inflationary woes, have seen Germany’s three-party ruling coalition clash over painful cuts of up to €22 billion from the budget in order to tackle the country’s rising debt levels.
On June 2, 2023, Germany’s Finance Ministry informed the other ministries of the government what budget funds will be available for them next year, setting off a round of very public infighting between the Free Democratic Party, the Greens, and the Social Democrats (the three ruling coalition parties) on where and how to make spending reductions.
Germany’s Development Minister Svenja Schulze has vowed to do her best to defend her ministry’s budget, telling the state-run news agency Deutsche Welle,
“I am committed to adequate funding for development policy work in view of growing global challenges such as climate change and the effects of the Russian war of aggression on Ukraine”.
Initially, Finance Minister Christian Lindner set a deadline of June 21 for the 2024 draft budget to be finalized before the parliament (Bundestag) goes into summer recess, but he now admits that that date is unfeasible.
ODA commitments at stake
Germany’s ODA budget had previous coalition support to be increased on a one-to-one basis with military spending. Germany has already committed to spending an additional €100 billion over the next five years on the military, but these funds are drawn from a “special asset” ledger entry that is technically separate from the budget and thus does not need to be matched by equal increases in its development aid (ODA) budget.
In 2021, ahead of parliamentary elections, the three ruling coalition parties agreed to a return to the “debt brake” that is enshrined in the federal constitution (enacted in 2009 after the financial crash), which limits spending to the amount of money that the state earns. But the debt brake has been suspended several times since the elections, including Germany taking out a €60 billion loan for climate protection, borrowing €200 billion to provide financial aid for businesses and individuals to offset high energy costs, and a €100 billion loan taken on last year in order to upgrade the country’s armed forces.
With a current outstanding national debt of €2.5 trillion, interest payments in Germany have increased significantly, rising from €4 billion in 2021 to more than €40 billion this year, and two subsequent fiscal quarters of negative economic growth are not helping the matter. In addition, Germany has taken in a record high of 1.2 million refugees in 2022 alone, and more are expected to arrive in the near future.
Further compounding Germany’s budgetary woes is the Defense Ministry seeking to spend another €10 billion on the armed forces. In response, Development Minister Schulze warned that there was “great concern” amongst developing countries that Germany could abandon its aid to the Global South in order to keep funding Germany’s military commitments.
In previous years, Germany committed itself to dedicating 0.7% of the country’s gross national income (GNI) for Official Development Assistance (ODA) in 2022 so as to meet the UN’s ODA target. In 2022, the country’s ODA accounted for 0.83% of GNI.
