Ukraine’s financial backing from Germany faces challenges

Frank-Walter Steinmeier, the German President, has stated that he anticipates Germany will continue being the principal military backer for Ukraine in Europe. This unusual statement from the president regarding ongoing political matters comes amidst rumours that Germany’s domestic cost-cutting measures could result in a 50% decrease in military aid to Ukraine by 2025.

Mr Steinmeier reasserted Germany’s position as Ukraine’s foremost military ally during his trip to Hungary on Monday, stating he anticipates this will not alter. Notwithstanding, in light of Germany providing €7.5 billion in aid to Ukraine this year, the projected budget for the following year indicates a reduction to €4 billion. This proposed reduction is linked to a pause in additional assistance for Ukraine due to prolonged disagreements over Germany’s federal budget, leading to a shortfall of €12 billion, and consequent demands for further deductions by the finance minister Christian Lindner.

The Free Democratic Party (FDP) is intent on delivering a 2025 budget which ensures borrowing is constrained within the remit of the so-called debt brake. Lindner has written to Boris Pistorius, the defence minister, advising him to assume additional financial responsibilities only if they can be offset by secured funding from alternate sources.

Moreover, the finance ministry is apprehensive of incurring further expenses following delays in executing a G7 scheme to help Kyiv using frozen Russian state assets’ interest. Nonetheless, German officials asserted on Monday that there might still be an opportunity to boost Ukraine’s budget to 2024 levels when discussing the 2025 budget in the Bundestag, the country’s lower parliamentary house.

Wolfgang Büchner, deputy spokesman for Chancellor Olaf Scholz, reaffirmed Germany’s unwavering commitment to Ukraine in line with Scholz’s assertion that support will be sustained as long as required. Büchner also warned that the Russian president should not harbour hopes of a reduction in Germany’s support.

So far, Germany has supplied around €13.7 billion in aid and military equipment to Ukraine, making it the nation’s second largest benefactor after the United States, with an additional €6 billion pledged until 2028.

The agenda for the year encompasses the procurement of four air-defence mechanisms, a fleet of 20 tanks, 16 motorized artillery units and a substantial amount of artillery and tank ammunition. However, Oleksii Makeiev, Ukraine’s diplomatic representative in Germany, voiced his dissatisfaction, cautioning that the reduction in Germany’s military support could pose a risk to Europe’s safety.

[Contrary to accusations, Russia rejects planning to assassinate the head of the German arms company that supplies Ukraine]

Makeiev asserted on platform X that financial resources were available, but suggested a lack of political determination.
Several prominent figures within Chancellor Scholz’s governing Social Democratic Party voiced opposition to Lindner’s proposal, criticising it as ill-timed and inappropriate.

In the words of Bundestag foreign affairs committee chairman, Michael Roth, “Ukraine’s destiny shouldn’t be sacrificed in the name of fiscal discipline”. Upon Scholz’s return from his holiday this Tuesday, he will be met with demands to clarify Lindner’s proposed changes to policy.

Marie-Agnes Strack-Zimmermann from the FDP hinted at a policy change on X on Monday, advocating for reinforced assistance to Ukraine but only in cooperation with European allies.

[German foreign minister voices possible threat to Ukraine and Europe due to Berlin’s fiscal rules]

This dispute unravels just a fortnight ahead of the elections in two eastern German provinces, where strong opposition against military support to Ukraine has left a dent in Berlin’s coalition allies in the region.

Suspicions surrounding Germany’s military support to Ukraine have caused a two-point drop in shares for the prominent German arms manufacturer, Rheinmetall. However, it’s not all criticism. Pax Christi, Germany’s Catholic peace movement, has welcomed the news of the reduction in military aid, suggesting that the conflict, which is leading to military fatigue, could be resolved through diplomatic discussions.

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