Germany’s likely next chancellor is to face a key vote on plans to unlock a record level of state borrowing, which he argues is necessary to boost the country’s military spending and inject growth into its ailing economy.
Ahead of the crucial Bundestag vote on Tuesday, Friedrich Merz has faced a barrage of complaints from the opposition and from within his own ranks that he is not coupling the historic levels of spending planned – as much as €1tn (£840bn) – to demands for reform.
Merz intends to release a €500bn infrastructure fund and relax debt rules – currently protected by the constitution – via the outgoing parliament, where parties in favour of the proposals – his conservatives, the Social Democrats (SPD) and the Greens – have the necessary two-thirds majority.
Merz, whose conservative CDU/CSU alliance won last month’s federal election, managed to get the Greens onboard last week in a nailbiting race ahead of the new parliament convening on 25 March, when any such legislation could be barred by the so-called blocking minority of the far-left Die Linke and far-right AfD.
The parliamentary budgetary committee gave the green light to the plans on Sunday. Merz, however, needs the support of almost all the MPs who have signalled their willingness to back the scheme as he also reckons with some dissenters, including a former CDU general secretary who Merz sacked in 2023.
At current reckoning he has about 30 votes above the two-thirds majority in the current 736-member chamber needed to relax constitutionally enshrined German debt rules.
Stragglers or undecideds from both the conservatives and the SPD are being approached by party faithful in the final hours before the vote. The Greens – having been reluctant backers of the measures until Merz gave them reassurances last week that €100bn of the special fund would be dedicated to climate and economic transformation measures – have said there is unity in their ranks in favour of the legislation.
The conservatives and SPD have been hammering out their plans to form a new government, amid huge pressure domestically and internationally on Germany to quickly form a coalition. The new constellation is being referred to as a “baby grand”, due to the parties not having anything like the strength of previous partnerships between the two, which were referred to as grand coalitions.
Financial markets have followed the developments closely, reacting positively to the news last week that Merz had secured the Greens’ support. Experts have said the fiscal injection has the power to lift Germany’s economic fortunes after two years of negative growth, but some have warned that they must be accompanied by robust reform proposals.
The economic thinktank Ifo on Monday voiced its concerns that the plans could fuel inflation and urged the new government to make urgent improvements to help productive capacity, such as reducing high energy costs, which it said had forced some companies to move abroad, and persuading employees to work longer.
Ursula Münch, a professor of political science at the Academy for Political Education, described the scale of the package on which the Bundestag would vote as “gargantuan” and “radical”.
Many Germans, she told the Foreign Press Association on Monday, were ambivalent about it. “They have two hearts beating in one breast. They recognise on the one hand the need to relax the strict debt rules, but on the other, are irritated by the sheer scale of the monies which will be unleashed as a result.
“I can understand those for whom this is currently causing a stomach ache.”
