 "'Whatever it takes': Germany seeks to boost defense spending, infrastructure funding")
The prospective partners in Germany’s next government said Tuesday they will seek to loosen the nation’s rules on running up debt to allow for higher defense spending, an issue of growing urgency as doubts increase about the United States’ commitment to European allies.
They also said they will seek to set up a 500 billion euro ($533 billion) fund to finance spending on Germany’s often-creaking infrastructure over the next 10 years to restore the economy — Europe’s biggest, which has shrunk for the last two years — to “a stable growth course.”
‘Whatever it takes’: Strengthening defense
Center-right election winner Friedrich Merz, who is trying to form a coalition government with the center-left Social Democrats of outgoing Chancellor Olaf Scholz, said the two sides will propose exempting the spending of more than 1% of gross domestic product on defense from rules that limit the government’s ability to borrow money.
He said they will bring the proposals for that and the infrastructure package, which will be financed by loans, to Germany’s outgoing parliament next week. Recent weeks have brought new urgency to efforts to further strengthen the country’s long-neglected military.
“In view of the increasing threat situation, it is clear to us that Europe — and with Europe, the Federal Republic of Germany — must now very quickly make very big efforts, very quickly, to strengthen the defense capability of our country and the European continent,” Merz told reporters.
“We are counting on the United States of America standing by our mutual alliance commitments in the future as well,” he said in a reference to NATO. “But we also know that the funding for the defense of our country and alliance must now be expanded significantly.”
Impact Shorts
More ShortsMerz cited “the most recent decisions by the American government” as one factor. He didn’t offer specifics, but appeared to be referring to Washington’s dramatically shifting stance on Ukraine.
“‘Whatever it takes’ must also go for our defense now, in view of the threats to our freedom and to peace on our continent,” Merz said.
Merz has long been committed to the trans-Atlantic military and political alliance. After his Union bloc won Germany’s election last month, he said an “absolute priority” would be to strengthen Europe “so that we can really achieve independence from the U.S. step by step.” He said Trump administration comments suggest “the fate of Europe is largely indifferent to the Americans.”
Shortly after Russia launched its full-scale invasion of Ukraine in 2022, Scholz pledged to increase Germany’s defense spending to the current NATO target of 2% of gross domestic product and announced the creation of a 100 billion euro special fund to modernize the military.
Germany met that target thanks to the fund, but it will be used up in 2027.
“We are just as unsettled, and just as concerned, as large parts of our population,” Bavarian governor Markus Söder, a leading conservative ally of Merz, said of the changing U.S. stance.
Germany’s ‘debt brake’
Germany’s “debt brake” allows new borrowing worth only 0.35% of annual gross domestic product, though it can be suspended for emergencies that are out of the state’s control. It was suspended for three years after the COVID-19 pandemic started in 2020.
Both legislative proposals will require a two-thirds majority in parliament as the “debt brake” is anchored in Germany’s constitution.
That could be complicated in the newly elected German parliament, where the far-right Alternative for Germany and the hard-left Left Party have a little over one-third of seats between them. Alternative for Germany portrays itself as a staunch defender of the “debt brake.” The Left Party opposes it but is skeptical about military spending.
But until the new parliament convenes, expected in late March, the old one remains in place. The prospective coalition partners will still need support from at least one of the environmentalist Greens and the pro-business Free Democrats to get their plans approved. The latter swiftly criticized plans to run up more debt.
The Social Democrats’ co-leader, Lars Klingbeil, said his party and Merz’s conservatives also agreed in the longer term “to rework the ‘debt brake’ by the end of 2025 to enable more investment.”
Merz said the parties believe the planned infrastructure package will “also trigger private investment on a large scale.” He said quick improvements to Germany’s competitiveness also will be needed.
The two sides have to reach agreement on many other issues before they can be sure of forming a coalition, but there’s no other politically plausible combination of parties that could form a new government.
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