The right-wing Alternative for Germany (AfD) and the Left Party have secured enough seats in the Bundestag to form a blocking minority, potentially obstructing key legislative efforts, including proposals to relax Germany’s debt brake.
The debt brake, which limits Germany’s budget deficit to 0.35% of GDP, has become a point of contention. While the Left Party supports reforming it, party leaders insist they will not back changes that result in increased defense spending.
“We need to invest in social infrastructure, and if that doesn’t happen, we won’t vote for it. We will not vote for rearmament,” said co-chair Ines Schwerdtner.
Financial experts warn that the new coalition could face significant challenges balancing fiscal priorities. Holger Schmieding, chief economist at Berenberg Bank, noted that finding financial flexibility for both defense spending and tax relief may prove difficult.
“The Left would like to get rid of the debt brake. However, their agenda—taxing the rich, spending more on social welfare, and reducing defense expenditure—is the exact opposite of Merz’s agenda,” said Carsten Brzeski, head of macroeconomics at ING.
Increasing defense spending from 2% to 4% of GDP, for example, would require cutting non-defense expenditures by a quarter unless new debt is issued.
A government led by incoming Chancellor Friedrich Merz may ultimately need to bypass opposition by invoking an “emergency situation,” which would allow the debt brake to be suspended with a simple parliamentary majority.
