Historic agreement in Germany to increase spending on defense and infrastructure

BerlinGerman conservatives and social democrats reached a historic agreement with the Greens this Friday to reform the Constitution to allow for multi-billion-dollar investments in infrastructure and defense through debt. Germany will thus break the taboo of austerity, a sacred rule of former conservative chancellor Angela Merkel. Germany's future prime minister, Christian Democrat Friedrich Merz, expressed his "great satisfaction" with the agreement.

Currently, the Constitution limits state debt to 0.35% of annual GDP, but under the pact, defense spending exceeding 1% of GDP will be excluded from this rule. The compromise specifies that the exception includes not only the strictly military budget, but also other security-related expenses, such as secret services, civil protection, and financial aid to countries under attack, referring to Ukraine.

The plan also calls for the creation of an extraordinary fund of 500 billion euros for infrastructure investments, to be financed with public debt. In exchange for this support, environmentalists have agreed that 100 billion euros of this fund will be allocated to climate protection and the transformation of the economy to make it environmentally friendly. The 500 billion euros is a "huge sum, but we're talking about a period of twelve years," Merz said in a statement to the press.

The Greens' support was necessary to achieve a two-thirds majority in the Bundestag, Germany's lower house of parliament, next Tuesday, which would allow for a constitutional reform to relax the debt brake. Germany will thus break with years of austerity.

Negotiations against the clock

He conservative CDU-CSU bloc, winner of the February 23 elections, and the Social Democratic Party (SPD) are negotiating a coalition government, excluding the far-right Alternative for Germany (AfD), which came second in the parliamentary elections. Both parties had previously agreed to relax the debt brake, anchored in the German constitution. The constitutional principle, adopted in 2009, only allowed for structural debt of 0.35% of GDP at the federal level.

Relaxing the debt brake was necessary to increase defense spending and create a multi-billion-euro infrastructure investment fund. But for this to become a reality, the future coalition partners needed the support of the Greens, who would resist them if they received nothing in return. Furthermore, the conservatives and Social Democrats were under pressure to reach an agreement with the environmentalists before March 25, when the new Bundestag is constituted, because in the new lower house the three parties will no longer have the two-thirds majority necessary to approve the constitutional reform.

"The Greens make the difference," wrote the party's leader, Robert Habeck, on the X network, satisfied with the improvements achieved by his party. The conservatives and the SPD had previously offered 50 billion euros for the green fund, something the environmentalists considered insufficient.

"Germany is back"

Germany, like the rest of European countries, is pressured to increase defense spending, in the face of growing Russian hostility and the unpredictability of US President Donald Trump. NATO Secretary General Mark Rutte has already said that NATO members will have to increase defense spending above 3% of GDP.

Regarding the increase in defense spending in Germany, Merz said that with this package Berlin is sending a clear message to friends and enemies: "We are capable of defending ourselves and now we are also fully prepared. Germany is back. Germany contributes to freedom in Europe," declared the future German chancellor.

Alternative for Germany and the Left have criticized the agreement. "One hundred billion euros of the debt package will be burned on ideological climate projects," wrote right-wing extremist Alice Weidel on the social network X. "For CDU leader Friedrich Merz to become chancellor, generations will have to pay a high price," she reproached.

On the other hand, the plan has been applauded by environmental organizations because they believe it "sends a clear signal, as it allows for strengthening the security of Germany and Europe, investing in the future, and ensuring social cohesion."

The AfD and the Left had appealed to the Constitutional Court to try to prevent the Bundestag's extraordinary session on Tuesday to approve this extraordinary spending on infrastructure and defense before the new Parliament was constituted. However, the Karlsruhe-based court dismissed both appeals on Friday, deeming them unfounded, so the extraordinary session can now be held.