Germany’s likely next chancellor Friedrich Merz said Tuesday that his centre-right CDU/CSU and the centre-left Social Democrats (SPD) would propose an unprecedented package of billions of euros in extra spending on defence and infrastructure.
The two parties are in talks on forming a coalition government after last month’s general election, which have been given new urgency by US President Donald Trump’s clash with Ukrainian President Volodymyr Zelensky and the freezing of American military aid to Kyiv.
Merz said at a press conference that the two parties would bring proposals to parliament within the next week to exempt more defence spending from Germany’s constitutionally enshrined “debt brake”.
He vowed to do “whatever it takes” when it comes to defence “in light of threats to our freedom and peace on our continent”.
It would be a dramatic departure for a country that has spent decades under the American security umbrella.
The proposals would also mark a “sea change” and “a major loosening of Germany’s fiscal straitjacket”, said Berenberg bank economist Holger Schmieding, noting the country’s long-standing avoidance of large public debts.
Merz’s plans would see defence spending exempted from the country’s debt brake when it exceeds one percent of GDP — or 45 billion euros ($47.7 billion) when applied to the current size of Germany’s economy.
Merz also said the two parties wanted to bring in “a special fund of 500 billion euros for the next 10 years” for investment in infrastructure, something the SPD has been pushing for.
The fund would be aimed at kick-starting Germany’s moribund economy, which is threatened with a third straight year of recession.
The proposals would also mean that Germany’s federal states, which are currently not allowed to run budget deficits, could take out debt equivalent to 0.35 percent of GDP.
Merz also said he wanted to get immediate approval for a three-billion-euro aid package for Ukraine that has been held up for weeks.
He said he would meet outgoing Chancellor Olaf Scholz on Wednesday “to speak about the urgent help needed for Ukraine, around 3.0 or 3.5 billion euros, which… can be approved now as off-budget expenditure”.
Speaking alongside Merz, CSU leader Markus Soeder said the parties were “sending a message to our enemies and our friends: Germany is here and is not pulling back”.
He said “old certainties had been recast” in recent weeks and “many of us have had our basic trust in America deeply shaken”, even those like himself who had “believed in the US’s moral leadership role since I was a child”.
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