The amendments relax Germany's strict budget rules, commonly called the "debt brake." This change will enable the incoming German government to incur significantly higher debt levels. The vote resulted from an agreement negotiated by the likely next chancellor, Friedrich Merz of the Christian Democrats, in collaboration with the Social Democrats and the Greens.

The recent vote was significant because German lawmakers convened after the nationwide elections in February but before the newly elected members of the next Bundestag were sworn in. This timing is important because the three ruling parties will not have the required two-thirds majority in the upcoming Bundestag due to the electoral gains made by the far-right Alternative for Germany (AfD) and the left-wing party, The Left.

On Tuesday, March 18, 2025, 720 lawmakers participated in the Bundestag's voting process. Of these, 513 parliamentarians voted in favour of the motion, surpassing the necessary threshold of 489 votes. There were no abstentions, but 207 MPs voted against the motion.

Merz said, before the vote: "We have for a decade felt a wrong sense of security."

He claimed that Russia's threat necessitates increased spending, particularly on defence. He also stated that Germany and Europe must become much less dependent on the United States for defence.

He said: "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."

The measures include reforming the debt brake rule, which will exempt defence spending exceeding 1% of GDP from the budget calculations related to the rule. Additionally, aid for Ukraine will be exempt due to concessions negotiated by the Greens in a last-minute agreement with Merz and the Social Democrats last week.

Furthermore, the agreement will establish a €500 billion off-budget special fund designated for infrastructure investments, with €100 billion explicitly allocated to support net-zero targets.

The debt brake rules typically 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”.

Following the vote, the new government in traditionally frugal Germany is poised to have enough room to increase spending in areas such as defence and infrastructure. This move aims to invigorate the European Union’s most significant, albeit struggling, economy and military.

The upcoming government is anticipated to be a coalition led by Merz's Christian Democrats, with the outgoing Chancellor Olaf Scholz's Social Democrats serving as junior partners.

This spending package will also require approval from the Bundesrat, the upper chamber of Germany’s parliament, which consists of representatives from the 16 federal states.

The Bundesrat must approve the amendments by Friday, requiring a two-thirds majority.

Starting Thursday, EU leaders will gather in Brussels to discuss the bloc’s next steps in defence, the situation in Ukraine, and the EU's economic competitiveness.

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 rejected emergency appeals against the proposed amendments by lawmakers of the AfD, the Free Democrats, and the Left.

Lawmakers cited worries about the outgoing Bundestag deciding this magnitude after a new parliament has already been elected and concerns about the consultation period being too short for MPs to make informed decisions.

Source

Adapted from: euractiv.com/section/politics/news/german-parliament-passes-historic-debt-backed-defence-and-infrastructure-package/