Bundestag approves historic debt reform
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German parliament voted yesterday in favor of the constitutional reform with 513 votes in favor, 207 against, and no abstentions, achieving the necessary majority – two-thirds of the parliament – to amend constitutional reform regarding the debt brake. The proposal was put forward by future Chancellor Friedrich Merz, who recently reached an agreement with the Green Party to secure crucial votes for the reorm’s approval.
With the new constitutional reform, spending that exceeds 1% of GDP (approximately 44 billion euros) will no longer be subject to limits that restricted structural debt accumulation by the German government to 0.35%. This means that significant investments can be made in the defense sector without the need to offset them with budgetary revenues.
Furthermore, a special fund worth 500 billion euros will be created, to be spread over 12 years, for investment in German infrastructure. At the request of the Greens, part of this fund – 100 billion euros – will be allocated to an existing climate fund to achieve climate neutrality by 2045.
The paradigm shift was made possible by the increasingly marginal role of the United States in European defense, which has led member states to intervene swiftly to increase their military spending. However, the reform still requires approval from the Bundesrat, the chamber of the Länder, which will vote on it on March 21th. Unlike the vote in the Bundestag, Merz doesn’t have the necessary two-thirds majority in the Bundesrat, although he can rely on the Bavarian Free Voters’ support, CSU’s allies in the Land government.
With the new constitutional reform, spending that exceeds 1% of GDP (approximately 44 billion euros) will no longer be subject to limits that restricted structural debt accumulation by the German government to 0.35%. This means that significant investments can be made in the defense sector without the need to offset them with budgetary revenues.
Furthermore, a special fund worth 500 billion euros will be created, to be spread over 12 years, for investment in German infrastructure. At the request of the Greens, part of this fund – 100 billion euros – will be allocated to an existing climate fund to achieve climate neutrality by 2045.
The paradigm shift was made possible by the increasingly marginal role of the United States in European defense, which has led member states to intervene swiftly to increase their military spending. However, the reform still requires approval from the Bundesrat, the chamber of the Länder, which will vote on it on March 21th. Unlike the vote in the Bundestag, Merz doesn’t have the necessary two-thirds majority in the Bundesrat, although he can rely on the Bavarian Free Voters’ support, CSU’s allies in the Land government.