Germany’s upper house of parliament has given its final approval to a significant defense and borrowing package, clearing the way for higher defense spending and a vast infrastructure fund.
The package, which aims to strengthen Germany’s military and revitalize its economy, was passed on Friday after receiving the required two-thirds majority from the Bundesrat, the chamber representing Germany’s 16 state governments.
The measure, proposed by conservative leader Friedrich Merz, who is set to become the next chancellor, also garnered approval from the lower house on Tuesday. Merz and his prospective coalition partners, including center-left allies, say the urgency of enhancing Germany’s military has increased, particularly amid growing concerns about the United States’ commitment to the trans-Atlantic alliance.
The package involves modifications to Germany’s strict fiscal rules, specifically the “debt brake,” which typically limits new borrowing to 0.35% of annual GDP. To bypass this, the proposed package excludes defense spending, intelligence activities, and aid to Ukraine from the debt limits if they exceed 1% of GDP. Additionally, it establishes a 500 billion-euro ($544 billion) fund to upgrade Germany’s aging infrastructure over the next 12 years, aiming to boost the economy’s growth.
At the insistence of the Green Party, a portion of the fund—100 billion euros—will be allocated for climate-related initiatives. The package also grants more borrowing freedom to state governments.
Merz’s coalition partners control 41 of the 69 votes in the Bundesrat, with additional votes from other state governments giving the package the necessary backing. However, four states with opposing parties abstained from voting.
This vote marks an early success for Merz, who now faces the challenge of forming a stable coalition with his Union bloc and the center-left Social Democrats of outgoing Chancellor Olaf Scholz.
