BERLIN — In a significant move to enhance its defense capabilities, Germany is preparing to revise its constitutional fiscal rules. Friedrich Merz, chancellor-in-waiting, has announced a strategy aimed at partially exempting defense spending from these restrictions. This initiative comes amid growing concerns over security threats in Europe.
“In view of the threats to our freedom and peace on our continent,” Merz emphasized, “the motto ‘whatever it takes’ must now apply to the country’s defense.”
The announcement arrives at a time when European leaders are increasingly worried about the changing dynamics within the NATO alliance, particularly influenced by the Trump administration’s stance on the U.S. involvement in Ukraine. Ahead of a critical EU summit set for Thursday, Merz is advocating for a more assertive approach to defense funding.
Proposals for new spending limits
Merz has suggested that any defense expenditure exceeding 1 percent of Germany’s gross domestic product (GDP) should be exempt from the constitutional debt brake, which currently restricts the structural budget deficit to 0.35 percent of GDP except in emergencies. While details on how this additional funding would be allocated remain scarce, the intent is clear.
During discussions with the leaders of the Social Democratic Party (SPD), with whom Merz’s conservatives are negotiating to form a coalition, the importance of enhancing defense capabilities was underscored. Lars Klingbeil, SPD co-leader, remarked that investing in a robust and secure Europe is “perhaps the most important task of my political generation.” He further noted the urgency for increased funding for both defense and security in light of recent global events.
Challenges ahead for legislative approval
Klingbeil also hinted at a broader reform of the debt brake, aiming for completion by the end of 2025, which would facilitate additional investments. This comes as Germany’s Bundesbank has proposed raising the annual net borrowing cap to 1.4 percent of GDP. Such changes could potentially free up approximately €220 billion for increased spending by the end of the decade.
Moreover, the conservative and SPD leaders have introduced a proposal for a €500 billion special fund dedicated to infrastructure projects, structured to attract support from left-leaning lawmakers who may resist purely defense spending initiatives.
Despite these proposals, achieving legislative approval is not guaranteed. Merz will require a two-thirds majority in parliament to implement the proposed exemptions and special fund, amid anticipated resistance from the far-right Alternative for Germany (AfD) and leftist parties opposed to military expenditure.
Given these dynamics, the urgency to act is palpable, especially as the newly elected parliament convenes by March 25. To secure the necessary votes, the conservatives and the SPD will likely need cooperation from the Greens, a party that has indicated a willingness to carefully review the proposals before committing.
Felix Banaszak, co-leader of the Greens, remarked, “What they conveniently forgot to mention is that they can’t push through any of their plans on their own — they need the Greens’ votes.” He emphasized that a thorough reform of the debt brake is crucial, not only to ensure security but also for investments in climate protection and infrastructure development.
This significant policy shift reflects Germany’s commitment to adapt its fiscal strategies in response to evolving global challenges while navigating complex political negotiations.