Parties involved in talks to form a new German government agreed Tuesday to try to ease fiscal rules on defense and federal state spending to create a special fund worth 500 billion euros ($529.95 billion) to boost the country’s infrastructure.
The conservatives (CDU/CSU and Social Democrats) said they would present their plans to the Bundestag next week before the new parliament convenes, and they are rushing to pass the plans as the far-left and far-right parties will have a blocking minority in the new parliament.
They achieved that goal for the first time in 2024 due to a special fund created after the Russia-Ukraine war that is due to run out soon.
Without U.S. support, Germany would need to increase defense spending even more to 140 billion euros from 80 billion, or 3.5% of GDP, a study by the Bruegel think tank and the Kiel Institute for the World Economy showed last month.
The conservatives and the SPD will introduce legislation to speed up planning and procurement for the German military and a priority list of weapons that can be purchased quickly within the first six months of forming a government.
Earlier on Tuesday, the Bundesbank proposed a wide-ranging reform that could give the government up to €220 billion in additional cash for defense and investment this decade.
Under the proposal, the EU’s debt-to-GDP ratio of 60% would become the central criterion for the “debt brake” system.
As for increasing the scope of investment, if the debt ratio is below 60%, the government could commit up to €220 billion in additional debt-financed investments by 2030. If the debt ratio exceeds 60%, this scope would be set at around €100 billion.
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