German parliament approves debt reform, spending package

(Sharecast News) - Germany's parliament has approved an historic package of spending and debt limit reforms, potentially clearing the way for ma massive boost in defence and infrastructure spending.

The Bundestag passed the measures with 513 votes in favour, above the 489 required for a two-thirds majority. There were 207 votes were against.

Chancellor-in-waiting Friedrich Merz had argued ahead of the vote that the changes were needed to boost the country's troubled economy and lift defence spending in the face of a growing threat from Russia. He faced criticism that he was linking what could be up to €1trn in extra stimulus to demands for reform.

Merz, leader of the conservative CDU/CSU alliance which won the largest share of the vote at the recent federal election, put the plan together with the Social Democrats and also won crucial support from the Green Party in return for a €100m environmental and climate-related fund.

The move is a response to US President Donald Trump's pivot towards Moscow over the war on Ukraine and ultimatums that Europe should raise defence spending.

Under the German proposal, defence spending above 1% of GDP would be exempt from the debt brake rules - which limit new borrowing to 0.35% - effectively writing a blank cheque on weapons purchases. The restrictions were enshrined in law after the global banking industry caused the financial crash of 2008.

The future coalition partners also proposed another constitutional amendment to set up a €500bn fund for infrastructure, which would run over 10 years. They are also planning to loosen debt rules for states bringing them to the federal level.

"In view of the threats to our freedom and peace, the following must now also apply to our defense: 'Whatever it takes'," Merz told reporters said alongside the CSU and SPD leaders when he unveiled his plans last week.

"Europe must now grow up and Europe must be able to defend itself, and we want to rapidly make progress on this path, step by step. The additional spending on defence can only be coped with if our economy returns to stable growth within a very short period of time . . . this requires rapid and sustainable investments in our infrastructure."

Reporting by Frank Prenesti for Sharecast.com