Germany is expected to avoid formal penalties from the European Union even if its budget deficit exceeds the 3% limit in 2024.
Projected Deficit Forecast for Germany
According to Valdis Dombrovskis, the European Commission's Executive Vice-President for the Economy, Germany's projected deficit of 3.3% of GDP is unlikely to trigger the EU's excessive deficit procedure. He described the overshoot as 'marginal', noting that the breach is primarily driven by increased defense spending.
Defense Spending and EU Compliance
Much of Germany’s additional spending stems from its pledge to strengthen its military and security infrastructure. Germany has pledged to modernize its armed forces since the war in Ukraine, committing €100 billion to a special defense fund in 2022. The defense budget has consistently remained a top priority amid rising geopolitical tensions. Officials from the EU state that the slight excess in this year’s deficit, 0.3 percentage points above the EU’s limit, is entirely related to this defense spending.
Future Assessment of Germany's Deficit
Despite the conciliatory tone, the European Commission has not yet concluded. Dombrovskis stated that a formal evaluation would be done in spring 2025 once full-year budget data becomes available. He added that if everything goes as planned, there would be no need to trigger the excessive deficit procedure.
Currently, Germany, as one of the EU's economic heavyweights, may escape the scrutiny associated with a budget deficit breach. However, the European Commission will continue to monitor its fiscal discipline closely.
