The Economist - UK (2022-03-19)

The Economist March 19th 2022 Leaders 11

G

ermany’s post-war pacifismwasonce comfortingtoits

neighbours and to Germans themselves. Yet,withthepass­

ing  of  the  generations,  attitudes  have  shifted.SensibleEuro­

peans long ago stopped seeing Germany as a threat.Onthecon­

trary, the passivity of its foreign policy has in recentyearsposed

more  of  a  danger,  by  encouraging  aggressors  suchasVladimir

Putin.  At  last  Mr  Putin’s  unprovoked  invasionofUkrainehas

convinced  Germans  to  take  security  seriously.  AsOlafScholz‘s

first budget makes clear, Germany is preparing topullitsweight.

The task for Germany’s new chancellor is to makesurethatthe

effort  is  sustained,  effective  and  encompassesrisk­sharingas

well as just cash­splurging. 

The  budget  presented  to  Germany’s  coalition cabinet on

March 16th was accompanied by a proposed law

creating  a  special  defence  fund  worth  €100bn

($110bn). This will be used to boost German de­

fence  spending  from  around  1.5%  of  gdp to  at

least 2%, the level that nato members are sup­

posed  to  meet  but  Germany  has  consistently

missed.  The  cash  should  be  enough  to  bridge

the gap for the next four or five years if officials

decide  to  spend  it  that  quickly.  It  would  have

been better to increase the regular defence budget, rather than

relying  on  a  one­off  top­up  fund,  so  that  the  change  would  be

harder  to  reverse.  But  still,  Germany  will  for  now  become  the

world’s third­biggest military spender.

Just as significant was the decision, announced on February

26th, two days after the war began, to allow the export of German

weapons to Ukraine. Previously, Germany had not only refused

to  send  arms  into  war  zones,  but  insisted  on  stopping  third­

country buyers of German kit from re­exporting it to such plac­

es, even to help the victims of aggression defend themselves. 

Germany’s boosted defence spending will achieve more if the

money is used shrewdly. But its record is poor in this regard (see

Europe section). Too much goes on fat pensions and plush offic­

es,notenoughonplanesandsubmarines.Onthedaythewarbe­

gan,theheadoftheGermanarmycomplainedthathisarmyhad

beenleft“moreorlessbare”.natoisnotdirectlyengagedinUk­

raine,andrightlyso:if it weretoshootdownRussianplanes,the

warmightspillwellbeyondUkraine.Butthenatocountries

thatborderRussianeedtobedefended,andthistaskshouldnot

fallsoheavilyonAmerica.Europemuststepup,andGermany

shouldplayitspartwithproperlyequippedcombatforces.

RussiaisthebiggestthreattoEuropeandwillbeforyearsto

come.Butthereareothersecuritychallenges.TheBalkansmay

onedayreignite.ToEurope’ssouthisanarcofinstabilityacross

theSahel,inwhichRussianmercenariesnowmeddle.France

andBritainhaveoftensenttroopstohelpstabilisetroublespots,

with mixed success. They would appreciate

morehelp.Givenitssizeandwealth,Germany

shouldplaya leadingrole.

MrScholz’stransformationofGermanfor­

eignpolicygoesbeyonddefence.Thewarin

Ukraine  has  exposed  the  folly  of  the  energy

strategy  he  inherited  from  Angela  Merkel  and

her  predecessor,  Gerhard  Schröder,  who  dis­

gracefully  still  sits  on  the  board  of  Rosneft,

Russia’s state oil giant. By scrapping nuclear power and smiling

on east­west pipelines, they allowed Germany to become depen­

dent on Russian hydrocarbons, and therefore on the goodwill of

Mr Putin. Mr Scholz, with the support of his Green partners, is

hugely increasing the share of renewables in Germany’s energy

mix  and  diversifying  its  supplies  of  gas  away  from  Russia,  in

part  by  building  new  terminals  to  handle  liquefied  natural  gas

from  farther  afield.  The  details,  though,  are  still  lacking.  A

supplementary  budget  is  expected,  and  the  transition  will  be

judged on that.

A new, more assertive Germany is just what Europe needs to

help it face down the menace in Moscow. It is a shame it tooka

war to wake Europe’s sleeping giant. But better late than never.n

The giant attheheartofEuropehaswokenupatlast

German defence spending

% of GDP

2.

1.

1.

0.

0

1614122010 212018

NATO target Estimate

Pacifist no more

Germany

W

henever oiland gas are expensive, politicians’ eyes turn

greedily to the profits of energy firms. Since energy prices

began to surge last year Bulgaria, Italy, Romania and Spain have

introduced  new  taxes  on  the  industry.  On  March  8th  the  Euro­

pean Commission recommended that governments try to “cap­

ture a part of the returns” made by electricity generators. And in

America  12  Democratic  senators  including  Elizabeth  Warren,  a

one­time  presidential  candidate,  have  proposed  a  tax  on  every

barrel of oil big firms produce or import, equal to half the differ­

ence between the current oil price and the 2015­19 average.

The impulse to levy “windfall taxes” is particularly strong to­

day because Russia’s invasion of Ukraine has caused oil and nat­

ural­gas prices to rocket and then to gyrate wildly, giving the per­

ception that firms are profiting from bloodshed (see Finance &

economics  section).  Governments,  having  run  up  enormous

debts during the pandemic, must now find more cash to protect

poor consumers from soaring energy bills and to boost defence

spending. And the typical argument against windfall taxes—that

even when they are retroactive, they risk deterring future invest­

ment—has become less powerful now that most of the world is

trying to phase out the burning of fossil fuels.

Imposing windfall taxes is nevertheless a mistake. Start with

Governments should not seize energy companies’ profits

Tilting at windfalls

Energy markets