BERLIN — On Friday, German legislators reached a significant agreement aimed at removing constraints on certain defense expenditures from the country’s strict debt regulations. This action is part of an effort by European leaders to fortify their own defense frameworks amidst uncertainties regarding the United States’ commitment under the Trump administration. Recent shifts in U.S. security policy under President Trump have added urgency to discussions about defense spending in Europe, and have influenced Germany’s current negotiations.
Friedrich Merz, who is poised to be Germany’s next chancellor, announced the agreement. His conservative Union bloc has joined forces with outgoing Chancellor Olaf Scholz’s center-left Social Democrats and the Greens to bring this deal forward to parliament. The proposed plan is designed to relax Germany’s “debt brake,” which currently permits new borrowing only up to 0.35% of the nation’s annual GDP. The intention behind this is to increase defense spending. Furthermore, there are plans to establish a 500 billion euro ($533 billion) investment fund, financed through loans, to rejuvenate Germany’s worn-out infrastructure over the next 12 years, propelling economic growth.
During a press conference, Merz remarked that the defense agreement serves as a definitive message to friends, allies, and enemies alike, reinforcing Germany’s readiness and capacity to defend Europe’s freedom and peace. Supplementing this, 100 billion euros from the proposed investment fund will be allocated towards climate-related initiatives, reflecting a compromise with the Greens and doubling the previous amount discussed just the day before.
Merz highlighted that the defense spending exemption would broaden to cover areas such as civil defense, intelligence, cyber defense, and support for Ukraine. The investment fund aims to ensure new groundbreaking investments rather than merely funding pre-approved projects, a key point stressed by the Greens.
If the proposal passes, it could enable borrowing and spending over 1 trillion euros in the next dozen years. Katharina Dröge, co-leader of the Greens parliamentary group, emphasized at a press briefing that the fund will secure actual investments for the future, contributing to a modern, efficient country and bolstering climate protection. The stipulation that this fund won’t substitute budgetary allocations prevents its application toward tax cuts, which deviates from the intended reform goals.
During a parliamentary debate, the Greens criticized Merz for previously dismissing their suggestions to relax the debt brake for more economic and climate investments. However, securing the Greens’ votes is crucial for Merz and Scholz to achieve the two-thirds parliamentary majority necessary due to the constitutional basis of the debt brake. They aim to secure parliamentary approval before the newly elected members take office.
The outgoing German parliament is scheduled to vote on this measure on Tuesday, ahead of new lawmakers assuming their roles on March 25. Opponents, including the far-right Alternative for Germany party, argue that this discussion should occur after the new parliament convenes to truly reflect voters’ intentions.
Currently, Merz’s Union bloc and Scholz’s Social Democrats are deep in coalition talks to form a new government. The outcome of these discussions and the upcoming vote will significantly influence Germany’s fiscal and defense policies moving forward.
