Debt Brake: A Narrow-Minded Debate in Times of Great Decisions
The discussion about the debt brake has flared up again.
Proponents argue that budgetary discipline is essential to avoid burdening future generations with irresponsible mountains of debt. Opponents, on the other hand, argue that the debt brake blocks necessary investments and thus undermines the future viability of society. However, this debate – as emotional and fundamental as it may seem – falls short.
The real question is not whether we take on debt or not. The central question is for what purpose we take on debt if we do. Debt is not an end in itself, but a tool to address key societal and economic challenges. Whether it is responsible depends on how it is used and what impact it has. It is about ensuring long-term goals such as security, economic competitiveness, and sustainability.
America and China are investing unprecedented amounts in building their industries and developing new technologies, while in small Germany, scholars and politicians are debating whether we should take on debt or not?! This won’t work! To defend the prosperity of everyone in our society, we need a thriving economy and European security. Therefore, the following three areas should be the focus of public investments and subsidies: energy production and infrastructure, defense, and digital sovereignty.
Energy Production and Infrastructure: The Foundation of Economic Resilience
Energy is the backbone of any modern economy. However, Europe suffers from high energy prices that not only burden households but, above all, threaten the competitiveness of industry. Investments in a sustainable and affordable energy supply are therefore indispensable. The goal of expanding energy supply must be to achieve at least a halving of energy prices in the shortest possible time. This includes expanding renewable energies, modernizing energy infrastructure, and developing new storage technologies.
A robust energy grid would not only increase supply security but also reduce dependence on energy imports. This is both an economic and a geopolitical security issue. If we invest in energy projects today, we will lower costs for businesses in the long term and lay the foundation for economic growth.
Defense: A Pan-European Task
The defense of Europe is no longer purely a national matter. Given geopolitical tensions, it is clear that effective defense can only be achieved together. Europe needs a comprehensive defense program that includes both the development of its own state-of-the-art weapons systems and the establishment of a European army. Both must be consistently invested in, supported by a clear “Europe first” agenda that puts Europe’s security and independence at the forefront.
Data and Computing Sovereignty: Securing Digital Independence
In an increasingly digitalized world, control over data and digital infrastructures is a key factor for sovereignty. Currently, a few US technology companies dominate the global market for data and cloud services. This dependence carries immense risks, economically, financially, and in terms of security policy.
Europe urgently needs its own digital capacities and a thriving digital economy. Investments in data centers, data infrastructures, and artificial intelligence are urgently required to secure competitiveness and achieve independence. An EU-wide initiative for digital sovereignty is not only sensible but essential to keep up with global technology powers.
Instead of a Debt Brake: Joint Debt Issuance for Defense, Energy Supply, and Data Sovereignty!
An integrative approach to joint European debt issuance could pave the way to tackle key challenges simultaneously. Germany should not only abandon its blockade against Eurobonds but actively advocate for a capital markets union that links defense, energy supply, and digital sovereignty. As my institute, Themis Foresight, outlined in a study on the future of the European capital market, the benefits are obvious: For all three concerns – energy, defense, and digitalization – there is sufficient capital in the market, but it flows too slowly to implement the urgently needed measures. To quickly channel capital into reducing energy costs and building digital and defense capacities, we need a capital markets union, a common energy market, and, if necessary, joint European debt issuance.
Following the Example of the Marshall Plan
After World War II, US national debt stood at 113%. Although this was gradually reduced, the US government took on significant debt to finance the Marshall Plan. This amounted to about 5% of the then US gross domestic product – 14 times the debt limit imposed by Germany’s debt brake today. With this program, the United States supported Europe’s reconstruction and laid the foundation for the continent’s economic recovery. These investments paid off in the long term: Europe became a stable trading partner, which in turn benefited the US economy.
Europe could adopt a similar approach today. Targeted debt issuance for long-term investments in economic modernization – energy, defense, digitalization – not only offers the prospect of sustainable economic recovery but also direct financial returns. As these investments strengthen the economy, they will be repaid to states with interest. The state would not be incurring debt but generating profits.
Efficiency Instead of Waste
Critics of debt issuance, however, raise entirely justified concerns. It is economically nonsensical to finance short-term consumer spending with debt, promote inefficient subsidies without clear goals, or expand administrative structures that do not deliver sustainable results. Digital technologies must make administration more efficient and halve costs. The expenses for inefficient bureaucratic expansion can be saved immediately. Social spending should be designed in a way that maximizes societal benefit without jeopardizing long-term future investments.
Courage for the Future Instead of Clinging to the Past
True responsibility toward future generations does not lie in strictly adhering to an outdated rule like the debt brake. The impact of this investment freeze on economic stagnation has been detailed in the Draghi report. The real responsibility lies in developing a clear vision for the future and providing the necessary resources to achieve it. Debt is not a problem if used wisely. The real problem is inaction, fueled by misguided debates.
The future belongs to those who are willing to invest today. Investments in energy, defense, and digitalization are not costs but insurance for Europe’s stability and competitiveness. Instead of getting lost in debates, we should have the courage to set the course for a resilient, innovative, and sustainable society.
Jan Berger is the founder of the think tank Themis Foresight. As a futurist, he deals with possible future scenarios for the economy, politics, global trade, and society.
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