In a landmark decision, Germany’s outgoing Bundestag has approved Chancellor-in-waiting Friedrich Merz’s proposal to boost national investment by up to €1tn. This sweeping plan is designed to revitalize the country’s military capabilities and modernize infrastructure by loosening the borrowing constraints imposed by the constitutional “debt brake” introduced in 2009.
The approved measures include allowing unlimited borrowing for defense spending and establishing a €500bn, 12-year fund dedicated to upgrading hospitals, schools, roads, and energy networks. Merz, who recently called an emergency session of the old Bundestag to fast-track these reforms, emphasized that the plan is critical for restoring Germany’s defense readiness and driving economic modernization.
Merz justified the reform as a necessary response to a deteriorating transatlantic relationship and an escalating security threat from Russia. He stated, “This decision on our country’s defense readiness is no less than the first major step towards a new European defense community.” The plan also seeks to exempt most defense spending from the debt brake, thereby lifting longstanding fiscal restrictions that have hindered substantial public investments.
Critics, however, have raised concerns about burdening future generations with excessive debt. Figures from the far-right Alternative for Germany and far-left Die Linke warned that such expansive borrowing could have long-term fiscal repercussions. Despite these concerns, support from coalition partners and key federal states, including Bavaria, was sufficient to secure the necessary two-thirds majority in the Bundesrat.
Merz’s plan comes at a critical juncture for Germany, as the nation seeks to overhaul its infrastructure and bolster its defense capabilities amid global geopolitical tensions. With plans now moving forward, Germany is poised to reshape its economic landscape, with potential ripple effects across the EU in the realms of defense spending and fiscal policy.
