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Germany’s chancellor-in-waiting, Friedrich Merz, is facing a barrage of criticism from opposition politicians over his radical proposals to loosen rules on running up debt to allow for higher defence spending and boost the economy.
The CDU/CSU leader’s proposals for a multibillion-euro package, agreed with his potential coalition partners the Social Democrats, have been described as everything from a “bazooka” to “an extremely risky bet” by economists. He himself has called them vital “in light of the threats to our freedom and peace on our continent”.
Merz is expected to be the next chancellor after his party came in first in national elections on 23 February, and he is in coalition negotiations to form the new government, a process expected to run until Easter.
He will seek parliament’s approval next week for the plans, which would give the go-ahead to the relaxation of tight constraints on defence spending currently governed by a constitutionally protected “debt brake” according to which outgoings cannot exceed 1% of GDP – currently €45bn.
This would allow Germany to raise a potentially unlimited level of debt in order to finance its military and to continue to provide the necessary assistance to Ukraine.
Under his proposals, an additional €500bn, decade-long fund for infrastructure would also be introduced.
Merz’s efforts to squeeze the plans through the existing parliament, where the conservatives and SPD currently have the necessary two-thirds majority together with the Greens – but which they will lose once the new parliament is in place at the end of March – have been described as a race against time.
He has been confronted with myriad accusations from opposition parties, everything from committing voter fraud to endangering the democratic process by rushing his plans through parliament.
The Greens, not part of negotiations for a new government but keen supporters of Ukraine as well as for a spending increase on Germany’s ailing infrastructure, have indicated their support. However, their joint parliamentary leader Britta Haßelmann accused Merz of breaking his promise to not take on more debt.
“You promised the citizens of this country that there would be no more debt,” she said, lamenting also Merz’s lack of commitment to fiscal reform. “From one day to the next you’ve broken this election promise.”
Die Linke, which has 64 seats in the new parliament, questioned the legality of the financial plans, and accused Merz of circumnavigating the distribution of seats in the new parliament. “We question whether the decision on several hundreds of billions of euros by an old parliament that has just been voted out is at all constitutional,” it said in a statement.
The party said it was in favour of relaxing the debt brake to finance investments in infrastructure, but not of a “blank cheque” for defence spending. Merz, it added, had “flouted the will of voters”.
The AfD, which will have 152 seats in the new parliament, having come second in the election, said Merz had “shown the middle finger” to voters. Its parliamentary leader, Bernd Baumann, said the party was taking legal advice over whether it was possible to block the legislation.
The pro-business FDP, which will have no seats in the new parliament, but whose opposition to the outgoing government’s wish to boost spending by taking on more debt led to the administration’s collapse last November, accused Merz of participating in a “debt orgy”. The party’s parliamentary group leader, Christian Dürr, criticised Merz for “already shying away from real reforms before he’s even chancellor”.
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Some of the biggest concerns over Merz’s plans have come from Veronika Grimm, a member of the German Council of Economic Experts, an independent body similar to the UK’s Office for Budget Responsibility, who described them as an “extremely risky bet”.
“While we certainly need a quick increase in the defence budget, without reforms this is a path to falling into an abyss,” she told the Neuen Osnabrücker newspaper.
“Owing to rising social welfare expenditure and against the background of demographic change, it is an extremely risky bet to repeatedly defer reforms by taking on more debt.” Sustainable defence spending should only come out of the main budget, she said, adding: “The chances of this going well do not look good”.
The debt brake was introduced in 2009 after the global financial crisis under Angela Merkel, with the aim of limiting the state’s new borrowing capacity. The intention was to protect future generations from the burden of excessive debt, but in more recent years, especially after crises such as the pandemic and the war in Ukraine, it has increasingly been seen as too much an impediment and an obstacle to economic growth.
Announcing his plans on Tuesday evening, Merz said he would do “whatever it takes”. He said the urgency of the situation Europe found itself in had changed even in the less than two weeks since his conservatives came first at the general election, after the collision between the US president, Donald Trump, and the Ukrainian president, Volodymyr Zelenskyy, and Washington’s blocking of military aid to Kyiv.
Holger Schmieding, an economist at Berenberg bank, called the plans “a really big bazooka”, a nod to when the phrase was used to describe unprecedented interventions made by the European Central Bank to contend with the sovereign debt crisis 13 years ago.
The Dax, Germany’s stock market index on the performance of major companies, soared on the news on Wednesday, cancelling losses triggered the previous day over fears that Europe would imminently be hit by US tariffs.
