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2mo ago

Germany Reaches Landmark Debt Deal to Boost Defense, Infrastructure, and Climate Spending

The agreement exempts defense spending from debt limits and establishes a €500 billion fund for infrastructure and climate initiatives, pending parliamentary votes next week.

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Britta Hasselmann and Katharina Droege, co-chairs of the Greens parliamentary group, address the media after the Greens agreed on a massive increase in state borrowing just days ahead of a parliamentary vote next week, in Berlin, Germany, March 14, 2025. REUTERS/Axel Schmidt
Katharina Droege, co-chair of the Greens parliamentary group, addresses the media after the Greens agreed on a massive increase in state borrowing just days ahead of a parliamentary vote next week, in Berlin, Germany, March 14, 2025. REUTERS/Axel Schmidt
German Chancellor-in-waiting Friedrich Merz speaks to the media after he reached an agreement with the Greens on a massive increase in state borrowing just days ahead of a parliamentary vote next week, in Berlin, Germany, March 14, 2025. REUTERS/Axel Schmidt

Overview

  • Germany's CDU, SPD, and Greens have agreed to exempt defense spending above 1% of GDP from the constitutional debt brake, enabling increased military investment.
  • The deal includes a €500 billion infrastructure fund over 12 years, with €100 billion allocated to climate and economic transformation projects as part of Green Party concessions.
  • A €3 billion military aid package for Ukraine is expected to be approved as part of the broader spending plan.
  • The agreement aims to address Germany's economic stagnation, strengthen European defense, and reduce reliance on U.S. security guarantees.
  • The package faces final votes in the Bundestag and Bundesrat next week, with challenges anticipated from far-right and far-left parties.