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Germany’s parliament has voted in favour of unleashing historic levels of spending to boost the military of Europe’s biggest economy and inject its infrastructure with investments worth hundreds of billions of euros.
The conservatives of Friedrich Merz and the Social Democrats (SPD), who are likely to form a new coalition after last month’s election, led the drive for the creation of a €500bn fund and relaxation of its constitutionally protected debt rules. They secured the last-minute backing of the Greens, which was needed to push the plans through the outgoing parliament.
Hailed by some as a necessary measure to give Germany the fiscal heft it needs to ensure national and European security, and by others as a “highly risky bet” that will be a burden for generations to come, the package received the backing on Tuesday of 513 MPs, with 207 voting against, and no abstentions. The minimum required was 489 votes.
Merz told MPs the package was mainly motivated by “Putin’s war of aggression against Europe”, listing a range of suspected Russian sabotage “taking place every day” against Germany. He said these included attacks on critical infrastructure, arson attacks, spying and disinformation campaigns, as well as broader “attempts to divide and marginalise the European Union”.
Acknowledging that his funding plans were viewed with concern by many who feared the burden of debt, Merz said it was time to acknowledge the new era in which Germany found itself, not least having to be independent from the US.
“We understand the worries, we understand the criticism,” he said, but added: “We have, for at least a decade, felt a false sense of security.” Germany had now to face a “paradigm shift”, which Merz said required “us to rebuild our defence capabilities, in part from scratch”.
Markets rose on Tuesday even before the vote had taken place, in anticipation that the plans would boost growth across Germany and the wider eurozone. The euro reached its highest level in more than five months.
Investors have said the fiscal injection could help Europe’s largest economy emerge from two consecutive years of negative growth. However, they have also warned the package needs to be accompanied by widespread reforms.
Having passed the Bundestag, the lower house of parliament, the legislation will on Friday go to the Bundesrat, the upper house, which represents the governments of Germany’s 16 federal states.
The conservatives and SPD believed they needed to act quickly to pass the legislation, with the Greens, in the outgoing parliament. Because it required changes to the constitution, it needed a majority of at least two-thirds of MPs to back it. In the new Bundestag, due to convene on 25 March, it would have been likely to face opposition from the far-right AfD and far-left Die Linke, who together have a “blocking minority”.
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At the centre of the reforms is Germany’s so-called “debt brake”, imposed under the government of Angela Merkel after the 2008 global financial crisis to ensure debt was controlled for future generations. The rules have long since been criticised by experts who say they are outdated and too rigid particularly in an era of fast-evolving geopolitical circumstances.
Merz faced fierce criticism before and during the four-hour debate, in particular from the Greens, who accused him of lying to voters. Opponents said he had voiced his strong commitment to the debt brake during his election campaign, only to have had his views changed within days of winning on 23 February. Merz has justified this by citing the “rapidly changing situation”.
