BERLIN (AP) — The prospective partners in Germany’s next government said Tuesday that they will seek to loosen the nation’s rules on running up debt to allow for higher defense spending, something that has gained in urgency since the new U.S. administration took office.
They said they also will seek to set up a huge 500 billion euro ($533 billion) fund to finance spending on Germany’s infrastructure over the next 10 years in order to restore the economy — Europe's biggest, which has shrunk for the last two years — to “a stable growth course.”
Center-right election winner Friedrich Merz, who is trying to put together a coalition government with the center-left Social Democrats of outgoing Chancellor Olaf Scholz, said the two sides will propose exempting spending of more than 1% of gross domestic product on defense from rules that limit the government’s ability to borrow money.
“In view of the increasing threat situation, it is clear to us that Europe — and with Europe, the Federal Republic of Germany — must now very quickly make very big efforts very quickly to strengthen the defense capability of our country and the European continent,” Merz told reporters at a hastily convened news conference.
“We are counting on the United States of America standing by our mutual alliance commitments in the future as well,” he said. “But we also know that the funding for the defense of our country and alliance must now be expanded significantly.”
The necessary decisions “no longer tolerate any delay, at the latest since the most recent decisions by the American government,” Merz said.
He added that his Union bloc and the Social Democrats will bring legislation on the exemption for defense spending and the infrastructure package, which wil be financed by loans, to Germany's outgoing parliament next week.
Shortly after Russia launched its full-scale invasion of Ukraine in 2022, Scholz pledged to increase Germany’s defense spending to the current NATO target of 2% of gross domestic product and announced the creation of a 100 billion euro special fund to modernize the military.
But that fund, with which Germany has met the 2% target, will be used up in 2027, and the advent of the new U.S. administration has brought a new sense of urgency to efforts to further beef up the military and defense spending.
Germany's "debt brake,” introduced more than a decade ago, allows new borrowing to the tune of only 0.35% of annual gross domestic product, though it can be suspended for emergencies that are out of the state’s control. It was suspended for three years after the COVID-19 pandemic started in 2020 to allow for large amounts of borrowing to finance various support and stimulus packages.
Both legislative proposals will require a two-thirds majority in parliament as the “debt brake” is anchored in Germany's constitution.
Geir Moulson, The Associated Press
