German rearmament will add 0.75 per cent to EU GDP

Brussels – Defence as a driver of growth? Not quite as one might think, but much depends on where investments can be made. The European Commission is starting in Germany to consider scenarios for positive spillover effects linked to expanded production in the defence sector. The figures and numbers are still very preliminary, estimates of estimates, which are needed by EU officials to get an initial idea of what to expect. Why is this? Because at the moment it is still too early to understand how much Member States will spend in terms of public resources, so an initial assessment is being made, at least in Germany and its intention to increase GDP spending on the sector to 5 per cent.

Early projections circulating in Brussels suggest that Germany will see GDP growth of between 0.3 and 0.6 per cent between 2028 and 2035 for defence alone, i.e. the production of defence equipment and systems. Meanwhile, a separate simulation indicates that growth in investment in infrastructure could be worth +1.25 per cent by 2028, rising to +2.5 per cent by 2035.

However, the knock-on effect for the European Union is likely to be limited. The spring economic forecasts, in the section dedicated to this topic (on page 36 of the document), assume a positive impact on the EU’s overall GDP of around three-quarters of a percentage point (0.75 per cent) by 2035.