German Mertz said CDU/CSU and SPD will file claims in the House of Representatives next week.
The parties wishing to establish the next German government have agreed to create an infrastructure fund of 500 million euros ($53.69 billion) and overhaul borrowing rules, a change in structural expenditures in Europe’s biggest economy.
Friedrich Merz’s conservatives and the Social Democrats (SPD) are negotiating to form a coalition after last month’s national election, and will propose their proposal to the German parliament next week.
Germany’s next prime minister, Mertz, is hoping for change after Donald Trump cast the Transatlantic Alliance into chaos after he returned to the White House, highlighting the urgency for Europe to strengthen its own defense.
Trump has frozen military aid to Ukraine after a fierce clash with President Voldimia Zelenkiti last week, reinforcing fears that he could launch deals with Russia to end the war in Ukraine while the US is away from Europe.
Economists and investors have long urged Germany to reform the constitutional national borrowing limits known as the “debt brake” to free up investments and support the economy that has been contracted for the past two years.
The reform marked a rollback of borrowing rules imposed after the global financial crisis of 2008, and now many are outdated and keeping Germany in financial constraints.
Amendments to the Constitution
Merz said that CDU/CSU and SPD will file a motion to the Bundestag Lower House of House next week to amend the constitution to amend the constitution, so defence spending more than 1% of economic output will be exempt from the debt brake.
He pledged to do “anything that it takes” in regards to defense “in light of the threat to freedom and peace on our continent.”
The expert committee will individually develop proposals to modernize the debt brakes to promote permanent investment.
According to an INSA poll, 49% of Germans support loosening the debt brake, while only 28% oppose it. However, both require a two-thirds majority in Congress to change debt rules and create special funds.
The conservatives and the SPD are rushing to pass the move in the resignation parliament, given the far-right and far-reaching political parties will have minorities in the next legislature after scoring strong in last month’s election.
The leftist party threatens legal challenges if Germany assumes new debt to fund its defence spending.
The Greens Party said support is needed to reform debt reforms across the line, but they said they will negotiate vigorously before giving their support.
“Whether or not we will ultimately approve these constitutional amendments will remain open,” Doroge told reporters. “We have a lot of questions, but you know that we have our own attitude about what we need right now.”
The market recovered after the announcement, but some voices of skepticism were also raised.
Cyrill Alexander Schwartz, a constitutional lawyer at the University of Werzburg, said it was “very problematic” for Parliament to make such a highly binding decision.
German newspapers said Merz had broken the promise of a campaign of financial tolerance just 10 days after the election.
“Mr. Meltz, that’s a voter’s consensus!” warned the top-selling paperbuild. “Meltz performed 180 U-turns at a record time,” writes Handelsblatt.
The left-leaning paper was even more luxurious. “It’s good that Meltz breaks his campaign promises,” writes Suedscher Seitzn.
Friedrich Heinemann of Zew Economic Research Institute said Germany’s debt-to-GDP ratio could exceed 100% by 2034. It is now far below other major industrialized countries such as the US, France and Japan.
The US has repeatedly pressured Germany to review its troops that it felt ignored since the end of the Cold War, and to increase its defense spending to review its troops that distract arms to support Ukraine in the war with Russia.
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