ZEW Economist Friedrich Heinemann on the Fiscal Consequences of the Ukraine War

The EU Member States have agreed on a set of sanctions in response to Russia’s aggression against Ukraine. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on the fiscal consequences of the war in Ukraine:

“24 February 2022 will prove to be a turning point for fiscal policy in Germany and Europe. The fiscal peace dividend resulting from the fall of the Iron Curtain will no longer accrue. In future, defence spending, like investments in climate protection, will once again be indispensable as a contribution to a European public good. EU countries that neglect this task will in future look even more like free riders benefiting from common security interests. This turn of events will exacerbate conflicts over budget allocation. It would be inappropriate to use the inevitable need for higher defence spending as an argument for weakening the Stability Pact or the debt brake. Security is a public good with immediate benefits for the present – its financing cannot be left to future generations.”