Germany’s outgoing parliament is meeting on Thursday to debate the creation of a €500bn fund for infrastructure investment and radical changes in the country’s borrowing limits in order to boost defence spending.
Friedrich Merz, whose conservatives won last month’s election and who is on the verge of becoming the new chancellor, wants to seal the funding deal before the new parliament convenes in less than two weeks. An expanded group of far-right and far-left MPs could oppose it in the new Bundestag, a so-called “blocking minority” Merz is keen to avoid.
Amid expectations of Germany relaxing a key element of its strict fiscal rules known as the “debt brake”, its allies have responded favourably and markets have rallied. Economic forecasters have said a public spending boost is likely to help the country emerge from two years of economic doldrums.
However, the deal is far from being realised, with Merz’s CDU/CSU alliance and his probable future coalition partner, the Social Democrats (SPD), needing to secure the support of the Greens in order to muster the two-thirds majority required to change the constitution.
Ahead of the debate on Thursday, the Greens signalled that negotiations had reached a stalemate, with senior figures citing “grave flaws” in the legislation, including the lack of prominence it gave to climate change policies.
Merz has faced accusations he intends to use the new money to finance projects which will please the new government’s conservative voter base, and has been called on to provide guarantees, including commitments to much-needed widespread reforms.
The far-right Alternative für Deutschland and the far-left Die Linke have, meanwhile, lodged complaints with the constitutional court, which might deliver its ruling this week.
Merz has argued that raising defence spending has become a matter of urgency due to Russia’s invasion of Ukraine, not just for Germany, but for the whole of Europe. With Donald Trump in the White House, he has argued, the continent must become more independent.
Economists have described Merz’s multibillion-euro package as everything from a “bazooka” to “an extremely risky bet”, while he has called it vital “in light of the threats to our freedom and peace on our continent”.
Parliament will on Thursday hear alternative defence funding plans from the Greens and pro-business FDP, in what is expected to be a tense and lively session.
The second and third readings of the government’s plans will take place next Tuesday. In between now and then, Merz will continue to negotiate with the Greens, according to his party officials.
