Shorouk Express
The announcement on possible debt brake changes comes as Germany’s Bundesbank on Tuesday proposed a reform of the debt brake that would lift the cap for annual net borrowing to 1.4 percent of GDP (from 0.35 percent currently), which would create around €220 billion in additional spending room by the end of the decade.
The conservative and SPD leaders also announced a proposed €500 billion special fund to finance infrastructure projects outside of normal budgetary spending over the next decade — a plan that seems designed to appeal to left-leaning lawmakers who otherwise might oppose loosening debt rules to enable defense spending alone.
Still, passage isn’t assured. Merz needs a two-thirds majority in parliament to partially exempt defense spending from constitutional fiscal restraints and to pass the special fund on infrastructure.
Merz and the SPD were under pressure to act fast not only given the rapid deterioration of the transatlantic NATO alliance, but also because the far-right, Russia-friendly Alternative for Germany (AfD) party and The Left, which opposes military spending, will have the strength to potentially block moves to enable more defense spending once Germany’s newly elected parliament convenes by March 25.
For this reason, the conservatives and the SPD intend to bring the proposals up for a vote in the current parliament.
In order to get their required majority, however, they would need the support of the Greens. But many Greens politicians have already suggested they may oppose the proposals unless they come with more fundamental and immediate reform of Germany’s debt brake to allow for greater spending to stimulate the economy and facilitate a clean-energy transition.
