Stopping Ukraine aid would cost Berlin 10-20 times more than current support, think tank says

Kiel Institute's research shows German economy would suffer 1-2% GDP loss annually, compared to current 0.1% GDP assistance, due to increased defense spending and refugees.

Nov 3, 2024 - 21:00

stopping ukraine aid would cost berlin 10-20 times more than current support think tank says ukrainian army's german-supplied leopard 2a5 militarnyi 2

A new analysis by the Kiel Institute for the World Economy suggests that stopping military aid to Ukraine would cost Germany’s economy “significantly more” than maintaining current support levels.

Germany is the second-largest supporter of Ukraine globally, after the US, in terms of the military aid volumes. Pro-Russian far-left and far-right parties consistently oppose aid, and even the ruling coalition has previously considered cuts due to budget constraints.

According to the policy brief by Johannes Binder and Moritz Schularick released in November 2024, Germany’s average annual military support for Ukraine since the beginning of Russia’s invasion amounts to only 0.1% of its GDP, while ending this support could result in costs of 1-2% of GDP annually.

“The economic costs of a Russian victory far exceed the current modest contributions to strengthening the defense of Ukraine,” the authors note in their analysis.

The researchers estimate that ending support would lead to substantially higher costs for Germany through three main channels: increased military spending, additional refugee influx, and loss of trade and investment with Ukraine.

The study points out that Germany’s current military assistance is relatively as a percentage of its GDP compared to other countries.

“Several European countries, including Denmark (0.65%), Estonia (0.57%), and Latvia (0.43%), have committed a substantially larger share of their economic output to military support for Ukraine,” the study states.

For comparison, during the First Gulf War, Germany provided six times more support – 0.6% of its GDP or about 4% of the federal budget – in a single year, according to the study.

The authors calculate that in case of Russian victory, Germany would need to increase its military spending by 0.5-1% of GDP annually. Additionally, the country could face an influx of 1.9-3.8 million additional refugees, resulting in costs of up to 24 billion euros per year in the base scenario or 49 billion in the negative scenario.

The research also highlights that Europe’s economic capacity far exceeds Russia’s.

“The European Union’s economic output is nine times larger than Russia’s, and its industrial production is five times larger,” the study notes.

The authors conclude:

“The path to peace opens up when the aggressor, Russia, recognizes that the war cannot be won by military means and the continued pursuit of military victory becomes too costly for the regime.”

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