Germany urged to boost aid to Ukraine or face costly fallout

Supporting Ukraine is in Germany’s political and economic interest. The costs of a Russian victory could be 10 times, or perhaps even 20 times higher than the current aid.

Therefore, Germany should maintain or even increase its aid, contributing to credible deterrence against Russia and thereby increasing the likelihood of ending the war.

These conclusions are drawn from the report published on Saturday by the Kiel Institute for the World Economy.

The authors have considered German military aid to Ukraine limited so far. It amounts to 10.6 billion euros, which is equivalent to 0.1 percent of the German GDP. By comparison, during the first Gulf War (1991), Germany spent six times more—0.6 percent of GDP or 4 percent of the annual budget. Current aid amounts to 0.14 percent of GDP annually, including humanitarian aid.

According to the authors—President of the Kiel Institute Moritz Schularick and his colleague Johannes Binder—the cost of interrupting aid would be very high due to the wave of refugees from Ukraine, increased spending on NATO due to the need to defend the Baltic states, and the severance of trade relations with a Russia-conquered Ukraine. A Western defeat would also increase the likelihood of new conflicts worldwide.

Binder and Schularick emphasize that Russia will agree to negotiations and an end to the war only when it concludes that it cannot win militarily, and the West demonstrates a firm commitment to supporting a fighting Ukraine.

Detailing various points of the report, the authors emphasize that German military aid is limited and has amounted to 10.6 billion euros since 2022, which corresponds to 0.1 percent of cumulative GDP. Germany ranks only 16th, surpassed by countries like Denmark (0.65 percent), Estonia (0.57 percent), and Latvia (0.43 percent), as well as Poland.

To illustrate the thesis of limited aid, the authors point out that budget subsidies for company cars with combustion engines cost the budget 13.7 billion euros annually.

Referring to the anticipated consequences of a Russian victory over Ukraine, experts write that German defense spending would have to increase from 0.5 percent to 1 percent of GDP annually. Germany would also have to anticipate a wave of refugees estimated at 2 million to 4 million and face economic losses from halted exports and lost investments in Ukraine.

Binder and Schularick state that only credible deterrence can encourage Russia to end the war. They reject populist slogans that ending arms supplies to Ukraine will lead to peace. They note that the EU's economic strength is nine times greater than Russia's (EU GDP – 19 trillion dollars, Russia – 2 trillion USD), and industrial production is five times greater. Even without US aid, Europe’s potential is sufficient to repel Russian aggression. However, political will is necessary, they emphasize.

By adhering to the principles of consistent deterrence, the West can make Russia realize it will not win the war by military means.

In an interview with the weekly "Die Zeit," Schularick stated that Germany lacks the right attitude toward the new security situation more than money.

Since the end of World War II, we have relied on someone else to defend us—the Americans, NATO, the Western world. (…) The belief that someone else will do it for us is still widespread. (…) We do not want to take on the responsibility. But peace and freedom can't be free, noted the president of the Kiel Institute.

Schularick advocated for increased military spending. He recalled that when Willy Brandt was chancellor (1969-1974), Germany spent 3 percent of GDP on defense. Poland allocates more for the military, and soon it may reach 5 percent; the USA spends 3.5 percent.

"If Germany reaches a level of 3 percent, it would be 120 billion euros, equivalent to the annual subsidy from the central budget for pensions," he emphasized.