German parliament passes historic debt-backed defence and infrastructure package
For conservative Friedrich Merz, the vote was a first stress test before his potential chancellorship has even started.
The outgoing lower chamber of the German parliament, the Bundestag, voted on Tuesday to amend the country’s constitution and clear the way for a historic debt-funded investment package which could run to €1 trillion or more in higher military spending and investments in the country’s ageing infrastructure.
The changes loosen Germany’s strict budget rules, known as the “debt brake,” that will make it far easier for the incoming German government to take on eye-watering levels of debt. Tuesday’s vote was the result of a deal cut by the likely next chancellor, the Christian Democrats’ Friedrich Merz, with the Social Democrats and the Greens.
The vote was remarkable in part because German lawmakers convened after February’s nationwide vote but before newly elected lawmakers in the next Bundestag are seated. That’s because the three parties won’t hold the necessary two-thirds majority in the next Bundestag because of gains by the far-right Alternative for Germany (AfD) and the left-wing The Left.
On Tuesday, 720 lawmakers cast votes in the Bundestag, with 513 parliamentarians voted in favour, surpassing the necessary 489. While there were no abstentions, while 207 MPs voted against.
“We have for a decade felt a wrong sense of security,” said Merz prior to the vote.
He argued that the threat posed by Russia makes it necessary to increase spending, especially on defence. He also argued that Germany and Europe more broadly must be far less reliant on the United States for defence.
“The decision we are taking today on defence readiness […] can therefore be nothing less than the first major step towards a new European defence community, which also includes countries that are not members of the European Union,” Merz said.
The measures include a reform of the debt brake rule to exempt defence spending worth above 1% of GDP from the budget for purposes of the rule. Aid for Ukraine would also be exempt under concessions won by the Greens in an eleventh’ hour agreement cut with Merz and the Social Democrats last week.
In addition, the deal will also create a €500 billion off-budget special fund earmarked for infrastructure investments, with €100 billion set aside to promote net-zero targets.
The debt brake rules normally limit Germany’s budget deficits to no more than 0.35% of GDP.
Christian Dürr, the parliamentary group leader of the pro-business liberal Free Democrats, said the proposal was “a starting signal for unrestrained debt creation”. He further accused Merz of creating “a debt coalition that is prepared to sacrifice tomorrow’s prosperity for short-term electoral gifts.”
AfD co-leader Tino Chrupalla, meanwhile, said it was a “spectacle” bringing the vote before the out-going parliament and accused Merz of having already squandered his credibility with “these embarrassing actions”.
What happens now?
After the vote, the next government in traditionally frugal Germany is set to have enough headroom to move forward on spending in realms from defence to infrastructure, aiming to boost the European Union’s largest – but ailing – economy and military.
That government is expected to be a coalition led by Merz’s Christian Democrats, with outgoing Chancellor Olaf Scholz’s Social Democrats as the junior partners.
For the package to come into force, approval is also needed in the Bundesrat, the upper chamber of Germany’s parliament which is made up of representatives controlled by the state governments in the country’s 16 federal states.
The Bundesrat must approve the amendments by Friday, and a two-thirds majority is needed there as well.
Beginning on Thursday, EU leaders will meet in Brussels to discuss the bloc’s next steps on defence, developments in Ukraine as well as the EU’s economic competitiveness.
Merz passes stress test
Tuesday’s Bundestag vote has been widely viewed as the first stress test for Merz, who is poised to be Germany’s next chancellor after leading his Christian Democrats to a clear – if somewhat disappointing – first-place finish in the election.
The vote has been fast-tracked through the outgoing parliament to bypass the unfavourable majorities of the newly elected parliament, which is set to convene next week.
Prior to the Tuesday vote, Germany’s Constitutional Court has rejected emergency appeals against the proposed amendments by lawmakers of the AfD, the Free Democrats as well as The Left.
Lawmakers cited worries about the outgoing Bundestag making a decision of this magnitude after a new parliament has already been elected, as well as concerns about the consultation period being too short for MPs to make informed decisions.
[BTS]
