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Germany agrees USD107B fund to modernise military in face of Russia threat

BERLIN (AFP) – Germany’s government and conservative opposition have agreed a deal that will release EUR100 billion (USD107 billion) to modernise the army in the face of the Russian threat.

An agreement was reached late on Sunday to create a special fund for military procurement that will also allow Berlin to achieve NATO’s target of spending two per cent of gross domestic product (GDP) on defence.

The deal, which involves amending budgetary rules in the national constitution, was struck after weeks of difficult negotiations between the parties in the governing coalition and the conservatives of former chancellor Angela Merkel, representatives of these groups told AFP.

Three days after the Russian invasion of Ukraine in February, Chancellor Olaf Scholz pledged a special budget of EUR100 billion to rearm the German military and modernise its outdated equipment over the next few years. But critics have since accused Scholz of timidity in his support for Kyiv and failing to take enough concrete action in terms of arms deliveries.

The agreement will allow Berlin to achieve NATO’s target of spending two per cent of GDP on defence “on average over several years”, according to the text of the agreement obtained by AFP.

The exceptional fund will be financed by additional debt.

For that it was necessary to circumvent the “debt brake” rule enshrined in the constitution, which caps government borrowing.