Chairman of the Germany's Social Democratic Party (SPD) Lars Klingbeil gives a statement on March 14, 2025 in front of the Reichstag in Berlin. Photo by RALF HIRSCHBERGER / AFP.
Berlin: Germany's conservatives sealed a crucial deal Friday for a historic boost to defence and infrastructure spending, with leader-in-waiting Friedrich Merz declaring "Germany is back" as Europe grapples with the upending of the transatlantic alliance.
The plans, now likely to be voted through parliament on Tuesday, represent a radical departure for a country traditionally reluctant to take on large amounts of debt or spend heavily on the military given the horrors of its Nazi past.
After days of negotiations, Merz's CDU party and the centre-left SPD -- who had proposed the reforms and are in talks to form a coalition -- struck a deal with the Greens, whose votes are needed to get the proposals through the current legislature quickly.
A relieved-looking Merz told reporters that the deal was "a clear message to our partners and friends but also to the enemies of our freedom: we are able to defend ourselves".
"Germany is back," he added, in recognition of how closely the process was being watched in Brussels and other European capitals, which have been desperate for the region's biggest economy to show more leadership in areas such as defence.
The plans involve exempting defence spending above one percent of GDP from the country's constitutionally enshrined "debt brake", that limits borrowing, and also establishing a 500-billion-euro ($545-billion) special fund for infrastructure spending.
'Liberating moment'
Berlin had faced mounting pressure to ramp up spending on its notoriously under-resourced military as worries grow over the US commitment to Europe's security under President Donald Trump.
The infrastructure investments, to inject new life into areas such as Germany's threadbare rail network and crumbling bridges, are viewed as a key route to drag the economy out of stagnation and avoiding a third straight year of recession.
The Greens' votes are needed to reach the two-thirds majority in parliament required to modify the debt brake, but the party had threatened to withhold its support, citing insufficient action on the environment in the spending plan.
Merz -- whose conservatives came first in February elections -- made a key concession by agreeing that 100 billion euros of the infrastructure fund would be dedicated to climate-protection measures.
The Greens said the extra money they had won for climate protection measures would "make a difference", and the whole deal was essential given the turmoil created by Trump's policy shifts.
"We can't deny the fact that we must better equip our army, that we have to do more for our country's whole security architecture," said the party's co-leader in parliament Brita Hasselmann.
Under the modified plans the exemption for defence spending will also apply to spending on intelligence and for help to "states suffering illegal aggression".
The infrastructure fund represents a particular victory for the SPD, who under outgoing Chancellor Olaf Scholz had long advocated extra investment spending.
Arguments over how to finance this and how far to reform the debt brake were instrumental in triggering the collapse of Scholz's unwieldy three-party coalition in November and last month's general election, which the conservative CDU/CSU bloc won.
"If the reform (of the debt brake) passes on Tuesday, it will be a liberating moment" for Germany, said SPD parliamentary leader Lars Klingbeil.
New challenges
The incoming government is keen to get the spending plans approved before the newly elected parliament convenes at the end of this month.
In the new chamber the far-right Alternative for Germany (AfD) and the far-left Die Linke, who both oppose the plans, would have the numbers necessary to block them.
On Friday, the consitutional court rejected an attempt from the two parties to stop Tuesday's vote going ahead.
Merz won't have long to enjoy the good news before confronting a fresh set of challenges, not least speedily wrapping up full coalition talks with the SPD.
The events of the past few weeks have also not been without political cost for him.
Even some of those within the CDU/CSU have baulked at the huge amounts of borrowing he has committed to after giving no indication of this on the campaign trail.
But some analysts have cautioned that the economic package might not be enough.
"These measures alone, impressive as their size might be, will do very little to improve the economy's competitiveness," said ING analyst Carsten Brzeski.
