A deal for a 500 billion euro ($545 billion) defense spending plan will advance after Germany’s chancellor-in-waiting Friedrich Merz offered net zero concessions to the Greens.
The leader of the Christian Democratic Union and the winner of last month’s federal elections had been rallying support for a huge half-a-trillion euro spend aimed at modernizing the military and stimulating economic growth.
Merz said on Friday that he had secured the crucial backing of the Greens.
He had to rely on those votes to push through the constitutional changes to allow for such a debt.
The left-wing environmentalist party said that they would only back the loosening of debt rules if there was genuine support for climate policies.
Initially, Merz said he could allocate up to 50 billion euros ($54 billion) from the infrastructure fund for climate policies to attempt to lift opposition to his plan.
Posting on X, the leader of the right-wing AFD party leader Alice Weidel said that the amount pledged from net zero policies is now 100 billion euros ($109 billion).
The parties seeking to form Germany’s next government, the CDU and the Social Democratic Party (SPD), want to loosen fiscal constraints to exempt defense spending from the country’s constitutionally enshrined debt brake.
The deal paves the way for the package to be adopted by parliament next week.
Merz was confident that he could secure the funds before a new parliament convenes on March 25.
In Germany, there is rarely a legislative majority, so parties have to try to govern through a minority government, relying on ad hoc parliamentary coalitions.
Coalition negotiations could always collapse, leaving Merz with having to form a weaker minority government with more left-wing partners like the Greens, which received over 11 percent of the vote.
The AfD has accused Merz of ignoring the democratic will of the people.
It came in second with 20.8 percent of the vote in the general election. However, Merz has ruled out forming a government with the party, even though this would ensure a stable majority.
The democratic socialist party Die Linke, or The Left, which won 8.8 percent of the vote, opposes military spending but wants to scrap the debt brake if the money is spent on welfare rather than defense.
Schoellhammer said that people will vote for Merz because they want a center-right government, but they’re probably going to end up “getting a slightly left-of-center government because he’s standing alone.”
He said Merz has “completely destroyed negotiations” by stating that he would never govern with the AfD.
Debt Brake
The CDU and SPD have agreed to exempt defense spending above 1 percent of GDP from Germany’s strict constitutional borrowing limit known as the debt brake.It caps the federal government’s structural net borrowing at 0.35 percent of gross domestic product, adjusted for the economic cycle.
About 60 percent of Germans are in favor of keeping the debt brake.
Merz has been urged to loosen it to increase spending, although such a reform would require two-thirds support in Parliament.
The move to create an infrastructure fund and overhaul borrowing rules marks a major break from Angela Merkel-era fiscal rectitude.
This would be significantly higher than the 63 percent ratio at the end of 2024 but still below the previous high of 80 percent in 2010 following the global financial crisis.
