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Germany is back, says Merz after historic spending deal

 


Germany's conservative leader, Friedrich Merz, has clinched an enormous financial package to revamp defence and infrastructure, ahead of a crunch vote in parliament next Tuesday.

Merz, who aims to lead a government with the Social Democrats in the coming weeks, is in a rush to push through a big boost in spending on defence and creaking infrastructure.

After winning elections last month, he said it was his absolute priority to strengthen Europe because President Donald Trump appeared indifferent to its fate.

After 10 hours of talks with the Greens, he said the deal sent a clear message to his country's allies: "Germany is back."

 

He added: "Germany is making its major contribution to defending freedom and peace in Europe."

Merz, who is expected to become Germany's next chancellor, is bidding to get his debt and spending reforms through the outgoing parliament before the newly elected MPs are able to take their seats in the Bundestag on 25 March.

The far-right Alternative for Germany (AfD) party doubled its number of MPs in the election and could jeopardise Merz's spending push if it fails to go through in time. The Left party also objects to the reforms.

Under Germany's constitution, Merz needs a two-thirds majority to get the changes passed. With the support of the Greens and Social Democrats, he should succeed.

Urgent motions by both the AfD and the Left to challenge next week's sessions of the outgoing parliament failed at the constitutional court on Friday, enabling the vote to go ahead.

The conservative Christian Democrat leader said the three-party plan agreed by his party, the Social Democrats and Greens involved:

  • A big boost in spending on defence, civil protection and intelligence - with spending over 1% of GDP (economic output) exempt from debt restrictions
  • A special €500bn (£420bn) infrastructure fund for additional investments over 10 years, including €100bn to cover climate-protection initiatives
  • Germany's 16 states will be allowed to borrow up to 0.35% of GDP above the debt limit.

The defence plans also allow spending on aid for states "attacked in violation of international law" to be exempt from the so-called debt-brake.

That would enable outgoing chancellor Olaf Scholz to release €3bn in aid to Ukraine as early as next week.

Germany's last government collapsed late in 2024 because of disagreements over loosening debt restrictions brought in by Chancellor Angela Merkel's government during the financial crisis in 2009.


It meant that the government could not borrow more than 0.35% of Germany's gross economic output, while the country's rail and bridge infrastructure creaked from years of underinvestment and ministers tried to boost military spending.

Social Democrat chairman Lars Klingbeil said Friday's agreement sent a "historical signal" for Germany that would make the country stronger and "strengthen Germany's role in Europe too".

Although the Greens were in the old government, they will not be part of Merz's coalition. However, the party was delighted that the €100bn secured for climate funding would go "in the right direction".

Outgoing Greens Foreign Minister Annalena Baerbock also hailed the defence package as not just making Germany safer but sending "a clear signal to Ukraine, Europe and the world".

Germany was taking responsibility in turbulent times, she added.

AfD co-leader Alice Weidel was less impressed, and accused Merz of bending the constitution and loading future generations with a "gigantic burden".

"This is nothing less than a financial coup," she complained.

 

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