The German Bundestag approves historic government spending package
German lawmakers approved a historic spending package, taking a major step toward unlocking hundreds of billions of Euros in debt financing for defense and infrastructure, heralding an end to decades of budget austerity.
The controversial legislation, pushed by incoming conservative Chancellor Friedrich Merz, was approved Tuesday in the German Bundestag by a majority of 513 votes out of 733, exceeding the two-thirds threshold required for constitutional amendments.
The bill would significantly exempt defense spending from debt restrictions, freeing up unlimited financial resources for rearmament to deter Russia.
It would also create a €500 billion ($546 billion) fund to invest in the country’s aging infrastructure.
“This is probably the largest spending package in the history of our country. Germany must assume its leadership role in Europe,” Lars Klingbeil, co-leader of the Social Democratic Party (SPD) and a potential candidate for a cabinet seat in the next ruling coalition, said during the debate in Berlin.
Germany’s shift toward expansionary fiscal policy promises to revive Europe’s largest economy after two years of contraction due to structural problems including high energy costs, slowing manufacturing, and bureaucratic stagnation.
This historic decision, which is also expected to boost growth across the region, was prompted by Donald Trump’s decision to abandon the transatlantic alliance.
Following approval by the House of Representatives, the legislation will be put to a vote on Friday in the Bundesrat, the Federal Council, where Germany’s 16 federal states are represented.
If approved there—a likely outcome given the pledges of billions of euros from local governments—it will be signed into law by President Frank-Walter Steinmeier.
The timing is crucial, as Merz, the conservative leader, sought to pass the measure before the new parliament convenes next week.
Constitutional amendments will become more difficult after support for the far-right Alternative for Germany (AfD) party and the anti-capitalist Left surged in the February 23 elections.
Both parties opposed the spending plan and have seen their popularity increase in recent polls.
For Merz, this decision represents a success, even if its credibility has been under attack following its election campaign on budget consolidation.
The funding plan will facilitate coalition talks with outgoing Chancellor Olaf Scholz’s Social Democrats, who fell to third place in last month’s national elections, as Merz aims to form a government by mid-April.
After early setbacks, the bloc led by Merz’s Christian Democrats and the Social Democrats secured support for the spending bill on Friday from the Greens, who had rejected the initial proposal.
They promised changes, including allocating more funds to combat climate change and ensuring that resources are used only for new projects.
During the Bundestag debates, the three centrist parties joined forces, in stark contrast to the contentious battles over immigration.
In late January, Merz’s rift with the Social Democratic Party (SPD) and the Greens deepened with a failed attempt to impose a crackdown on illegal entry into the country, with the support of the AfD.
Emphasizing solidarity, Friedrich Merz, (69), stressed that Germany’s move to spend billions on military spending should be seen as a great first step toward creating a broader European defense community that includes non-EU countries such as the United Kingdom and Norway.
In Scholz’s participation from the government benches, Merz spoke of Germany’s need to rebuild its defense capabilities after years of neglect and a false sense of security, and called for awarding contracts to European manufacturers.
Defense contractors—from ThyssenKrupp to BAE Systems and smaller drone makers—are expected to benefit most from German defense spending, “Our allies in the European Union and NATO are looking to us today, just as our adversaries and enemies of our democratic, rules-based order are,” Merz said.
