German Parliament Gives Final Approval to Pave Way for Huge Defense and Borrowing

Germany can now amend constitutionally enshrined fiscal rules, allowing a major boost in military spending and a $543 billion special fund for infrastructure.

German Chancellor-in-waiting Friedrich Merz speaks to the media in Berlin on March 14, 2025. Axel Schmidt/Reuters

The German Parliament has given its final approval to pave the way for a huge increase in defense and infrastructure borrowing. 

On March 21, final plans were approved in a move seen as clearing the last hurdle so that the fiscally conservative country can amend strict constitutionally enshrined rules and borrow beyond normal debt limits.

Germany’s outgoing parliament approved legislation on March 18, but it had to go to the Bundesrat, the upper house, which represents the governments of Germany’s 16 federal states.

Lawmakers from the Christian Democratic Union (CDU) and the Social Democratic Party (SPD) expected it to pass.

Politicians foresee a 500 billion euro ($543 billion) fund, financed by borrowing, for infrastructure in Germany over the next 12 years to support its struggling economy.

After the vote, U.S. credit rating agency Fitch Ratings said it expects 900 billion euros to 1 trillion euros ($974 billion to $1.08 trillion) in additional spending from Germany over the next decade.

CDU leader and Chancellor-designate Friedrich Merz, who won last month’s federal election, had been rallying support for the half-trillion-euro spending plan aimed at modernizing the military and stimulating economic growth.

CDU and potential coalition partner, the center-left SPD, passed the legislation before the new parliament was due to convene on March 25 as the new enlarged contingent of new and right-wing lawmakers. Alternative for Germany (AfD) and the Left Party would have blocked it.

To secure the necessary two-thirds majority, they had to incorporate last-minute demands from the Greens into their proposal.

The environmentalist party said it would support loosening debt rules only if there was genuine backing for climate policies.

Merz then dangled allocating 100 billion euros, or 20 percent of the infrastructure fund, for net zero in the infrastructure fund into his plan, which lifted the Greens’ opposition.

A cornerstone of Merz’s campaign was to uphold Germany’s strict constitutional borrowing limit, known as the debt brake, or Schuldenbremse. About 60 percent of Germans are in favor of keeping the debt brake.

The CDU manifesto said: “Now is the time to ... uphold the debt brake enshrined in the German Constitution (Grundgesetz). Today’s debts are tomorrow’s tax increases.”

Regarding energy and the climate, the CDU said, “We will put an end to the ideologically driven policies of the previous government.”

Polling

On Friday, German public-service broadcaster ZDF reported that Merz has been accused of misleading voters after relaxing the debt brake.

The poll, carried out by the Mannheim Election Research Group, showed that 73 percent of those surveyed felt deceived by him, including 44 percent of voters for the conservative CDU/CSU (Christian Social Union) bloc.

Merz said on Friday that the accusations troubled him and that to some extent, he understood them.

Merz has justified the urgent need to push the package through the outgoing parliament with recent shifts in U.S. policy under President Donald Trump. Mertz also believes the spending is needed to fend off Russia.

On March 19, Ralph Schoellhammer, political theorist and head of the Center for Applied History at Mathias Corvinus Collegium, told The Epoch Times: “At the moment, I would say that the Germans have gotten used to nothing ever changing, so I believe that many are not aware of what this debt spree could mean.

“This will have to trickle through, but once it does, I would get ready for pre-revolutionary conditions in Germany.”

Before the election, Schoellhammer said that people voted for CDU because they wanted a center-right government. Still, he predicted they’d probably end up “getting a slightly left-of-center government,” as Merz vowed never to govern with the AfD, which came in second in the general election, even though doing so would ensure a clear majority.

Some economists say they believe it will take time before the stimulus kicks in.

“It will probably still take until the middle of the year before the prospective new government passes a regular budget for 2025,” Salomon Fiedler, economist at Berenberg Bank, said.

“Thus, it would take until later this year before new spending initiatives start coming in.”

Reuters contributed to this report.