Historic agreement in Germany to increase spending on defense and infrastructure

BerlinGerman Conservatives and Social Democrats have reached a historic agreement with the Greens this Friday to reform the Constitution in order to increase defense spending and allow multi-million-dollar investments in infrastructure, after days of negotiations with environmentalists. Germany's future chancellor, 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. "Germany is back," Merz said at a press conference. SPD co-leader Lars Klingbeil agreed: "We have laid the foundations for Germany to recover and protect itself."

In exchange for this support, the environmentalists have agreed that €100 billion of the €500 billion infrastructure fund to be financed with debt will be allocated to climate protection and the transformation of the economy to make it environmentally friendly. The Greens' support was necessary to achieve a two-thirds majority in the Bundestag, the lower house of the German Parliament, next Tuesday, which would allow for a constitutional reform to relax the debt brake. Germany will thus break with years of austerity.

The CDU-CSU, winner of the February 23 elections, and the SPD had previously reached an agreement to relax the debt brake, anchored in the German Constitution, to increase defense spending and create a €500 billion fund for investments in infrastructure. But for this to become a reality, the future coalition partners needed the support of the Greens, who would balk if they received nothing in return.

The Conservatives and Social Democrats were under pressure to reach an agreement with the Greens before March 25, when the new Bundestag is constituted. In the new lower house, the CDU-CSU, the SPD, and the Greens will no longer have the two-thirds majority needed to pass the constitutional reform.

Government coalition

The conservatives and the social democrats are finalizing negotiations to form a government coalition of the two major traditional parties, excluding the far-right Alternative for Germany (AfD), which came second in the legislative elections. However, the CDU and SPD do not have enough weight in Parliament to push through constitutional reform—it requires a two-thirds majority—and have therefore sought the support of the Greens, who have secured climate investments in addition to those in defense and infrastructure. The constitutional reform will also exempt from the debt ceiling all investments made "to achieve climate neutrality."