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ifo Institute: Credibility Problem with International Treaties – Pledges Must be Honoured

Summary:
When it comes to international treaty pledges like the NATO 2 percent target, for example, national governments have a credibility problem. They can hardly make pledges as to their country’s future policies because they may be voted out of office shortly afterwards. “Nobody can say whether subsequent governments will respect international treaties,” notes Niklas Potrafke, Director of the ifo Center for Public Finance and Political Economy. Credibility, however, is important when it comes to honouring international agreements, especially if countries work together in other policy areas and need partners they can rely on. This applies both to NATO’s two percent goal and the convergence criteria laid out in the Maastricht Treaty. A new study by the

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When it comes to international treaty pledges like the NATO 2 percent target, for example, national governments have a credibility problem. They can hardly make pledges as to their country’s future policies because they may be voted out of office shortly afterwards. “Nobody can say whether subsequent governments will respect international treaties,” notes Niklas Potrafke, Director of the ifo Center for Public Finance and Political Economy. Credibility, however, is important when it comes to honouring international agreements, especially if countries work together in other policy areas and need partners they can rely on. This applies both to NATO’s two percent goal and the convergence criteria laid out in the Maastricht Treaty.

A new study by the ifo Institute shows that countries that have failed to meet the 2 percent target set at the NATO Summit of 2014 to date moved more slowly towards doing so if there was subsequently a clear change in government. “This does not mean that all countries in which there has been no change in government have conscientiously honoured their commitments,” explains Potrafke. Germany is a good example of a country that pledged to meet the 2 percent target, but is far from achieving this goal, despite the fact that it is still governed by a grand coalition.

Germany plans to spend a good 42 billion euros, or around 1.3 percent of its gross domestic product, on defence in 2019. There are no plans for notable increases in its defence budget. “Germany is neglecting one of the core tasks of any state,” warns Potrafke. “These core tasks include ensuring internal and external security. Germany should further increase its defence spending and deliver on the promises it made in 2014.”

Clemens Fuest
Clemens Fuest took over from Hans Werner Sinn as chairman of the IFO Institute in April 2016. He is professor at the Faculty of Economics of the University of Munich.

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