【By Observer Net, Chen Sijia】In March this year, the German government passed an amendment to the Basic Law, easing the "debt brake" restrictions, allowing the government to take on large-scale debt for investments in defense and infrastructure. On August 31 local time, German Chancellor Merkel told Germany's Channel Two that this decision "saved NATO," preventing it from "dissolving."

Merkel said: "I attended the NATO summit in The Hague. If we had not amended the Basic Law at that time, if Germany had not prepared to increase defense spending to 3.5% of GDP, and another 1.5% for necessary infrastructure construction, NATO would have likely collapsed that day. We prevented this from happening."

During the German election, Merkel had promised to adhere to the "debt brake," but she ultimately changed her position and agreed to reform the mechanism. For this, Merkel on August 31 defended her decision to break her campaign promise by citing "a fundamental change in the situation." However, Merkel admitted that Germany is facing increased debt burdens.

The "debt brake" is a fiscal regulation established by Germany to prevent rapid debt growth, requiring the federal government to add no more than 0.35% of GDP in structural new debt annually. German media reported that easing the restrictions will allow Germany to invest an additional hundreds of billions of euros in defense, infrastructure, and climate areas.

Video screenshot of German Chancellor Merkel

However, some economists have warned that this move will have a significant impact on European financial markets. Professor Veronika Grimm from the University of Nuremberg said that if German government bond interest rates rise, it could lead to interest rates in high-debt countries like Italy and Spain rising to "unbearable levels," making the eurozone more vulnerable.

In June, at the NATO summit in The Hague, NATO leaders reached an agreement on future military spending targets, deciding to increase annual defense spending to 5% of GDP by 2035, with 3.5% allocated for core military spending, and 1.5% for critical infrastructure protection and cybersecurity.

Reuters reported that according to data published by NATO on August 28, all NATO member states will achieve the target of increasing defense spending to 2% of GDP set in 2014 this year, but only Poland, Lithuania, and Latvia are expected to meet the new target agreed upon by NATO.

The German government has committed to increasing military spending. German Finance Minister Lars Klingbeil said on June 24 that the country's defense spending is expected to reach 2.4% of GDP this year, "we will gradually increase defense spending, aiming to reach 3.5% by 2029."

However, CNN pointed out that significantly increasing military spending will add economic pressure to European countries. A report by S&P Global Ratings showed that under other unchanged conditions, achieving a 3.5% core military spending target by 2035 would increase the total government debt of NATO European member states by about $2 trillion.

Frank Gill, an analyst at S&P Global Ratings, said that this goal requires European countries to borrow large amounts of money or cut spending in other areas. He noted, "Many European governments are facing other fiscal pressures, especially an aging population, which fundamentally increases pension expenditures. Politically, cutting spending is very challenging."

Marcel Fratzscher, director of the German Institute for Economic Research, believes that the "only sustainable way" to achieve NATO's new goals is to increase taxes. "However, there is neither political will nor public support for the government to invest and accept the consequences in such a drastic manner," he said.

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Original: https://www.toutiao.com/article/7545083799114220074/

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