Germany’s conservative chancellor-in-waiting, Friedrich Merz, has said he has secured the support of the Green party for his radical plan to increase spending on defence and infrastructure after marathon talks that went through the night, paving the way for its approval in parliament.
“Germany is back,” Merz said in Berlin on Friday. “Germany is making its large contribution to the defence of freedom and peace in Europe.”
The conservative CDU/CSU bloc, which won last month’s election, and the Social Democrats, who are in talks to form a new government, put forward a deal that will relax Germany’s strict debt brake, allowing an increase in defence spending and a €500bn (£420bn) “special fund” dedicated to infrastructure reforms.
Merz, who is on the verge of becoming Germany’s new leader, wants to seal the funding deal before parliament convenes in less than two weeks. The backing of the Green party, which would give Merz the necessary two-thirds majority for a constitutional change, is tantamount to him getting the deal through.
An expanded group of far right and far left MPs in the new Bundestag could oppose the spending plan as a “blocking minority”, something Merz is keen to avoid.
The Greens had previously criticised Merz’s funding proposals for being too vague, as well as lacking climate protection commitments.
The controversial but ambitious plans put forward with Merz’s potential coalition partners, the Social Democrats (SPD), are necessary, he says, for Germany to become independent of Washington in terms of its security and that of Europe. The proposals envisage defence spending being exempt from the constitutionally protected debt brake when it exceeds 1% of GDP.
The debt brake was introduced in 2009 after the global financial crisis, with the aim of limiting Germany’s borrowing capacity in order to protect future generations from the burden of excessive debt. But in recent years, especially after crises such as the pandemic and the war in Ukraine, the brake has increasingly been seen as an impediment and an obstacle to economic growth.
In a debate during the first reading of the legislation in parliament on Thursday, Merz stressed the urgency of investing in security. Germany must “do something now … anything else would be irresponsible,” he said.
He appeared to make concessions to the Greens, saying he would dedicate “up to €50bn” of the special fund to climate protection, as well as offering to expand the scope of defence spending to include civil defence and intelligence, asking: “What more do you actually want from us?”
The Greens, part of the existing government but due to go into opposition, have been furious at the extent of the conservative bloc’s criticism of the party, blaming the Greens’ climate policies for Germany’s economic woes and ridiculing the party repeatedly in public.
Markets reacted positively to the news on Friday, with the euro, German government bond yields and equities all rising on the back of reports that the much-anticipated deal had been reached.
Analysts said it sent a signal that Germany was capable of decisiveness and raising its commitment to defence at a time of global uncertainty.
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The SPD leader, Lars Klingbeil, one of the first to react to the news, called the package “a powerful boost for Germany”. He said it “laid the foundation for Germany to get back on its feet and protect itself”.
Merz called the package “a clear message to our partners … but also to the enemies of our freedom: we are capable of defending ourselves”.
Europe’s biggest economy has suffered two consecutive years of negative growth. Economists say the funding plans could help to pull it out of the economic doldrums.
The Greens and the conservatives have announced press conferences to take place this afternoon. The Greens have called for guarantees that investment should finance new projects, not existing ones, as well as requesting more money for climate protection.
The outgoing Bundestag, the lower house of parliament, is scheduled to hear the second and third readings of the legislation on Tuesday morning before voting on the deal. After that, it will go to the upper house of parliament, the Bundesrat, where a two-thirds majority is also required. Germany’s new parliament is due to convene on 25 March.
