Germany parties agree plan for spending boost, debt brake overhaul

Friedrich Merz, Germany’s most likely successor chancellor, has made a deal to significantly alter the nation’s debt regulations in order to encourage a boom in defense and security spending and $545 billion in infrastructure investment over the next 12 years.

Merz’s conservatives and their potential Social Democratic coalition partners reached a deal with the Greens on Friday that would exempt spending on defense and security, including “aid to nations under illegal attack,” and civil protection and “aid to countries under illegal attack” from the country’s constitutional debt cap.

Germany is back, according to Merz, adding that the agreement showed Berlin’s willingness to fight back against allies and adversaries.

Berlin’s fiscal policy has been characterized by the debt brake, which was established by former German chancellor Angela Merkel in 2009 and limited new borrowing to 0.35 percent of GDP.

Germans have long been urged by economists and investors to reform their debt ceiling in order to boost investment and boost a depressed economy.

In the midst of tensions between Washington and the European Union, US President Donald Trump has to step down from supporting Ukraine in its fight against Russian invasion. In response to concerns about the direction of US foreign policy, Germany, which has long relied on US security as a security force, is being asked to increase its military support as quickly as Russian aggression grows.

During a Thursday parliamentary debate, Merz said, “Any further delay” in raising [defence] spending would be irresponsible.

Far-reaching decisions cannot be put off any longer, he told lawmakers in response to the alarming security situation in Europe and the country’s growing economic challenges.

However, Friday’s agreement comes after several days of contentious discussion where Greens supporters have threatened to withdraw their support, citing lack of environmental action in the plan.

To modify the debt brake, the German parliament needed to have a two-thirds majority of its members’ votes.

After discussions with the Greens, Merz claimed that 100 billion euros ($108bn) of the infrastructure fund would be allocated to climate protection measures. His conservatives placed first in the February elections.

Before the newly elected parliament convenes at the end of March, his incoming government is eager to pass the spending plans.

The far-right Alternative for Germany and the far-left Left, which are opposed to the plans, would have the numbers needed to halt the measures in the new chamber.