Germany Merz Strikes debt on financing protection and infrastructure

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Friedrich Merz, the German Chancellor, in anticipation, agreed with an agreement with its likely coalition partner to bring hundreds of billions of additional financing to the country’s military and infrastructure, noting the “sea change” in the conservative approach to the country’s borrowing.

In a statement, which took place just over a week after he won the federal election, Merz said his Christian Democratic Union (CDU), his Bavarian sister Party and the rival Social Democrats (SPD) will jointly submit a bill in the parliament next week to relax the borrowed brake.

The provision exempts protection costs above 1 percent of GDP from debt rules, which allows Germany to increase its armed forces at an unlimited amount when Europe faces the prospect of losing US guarantees, as Donald Trump has started its second term.

Future coalition partners will introduce another amendment to the Constitution to create a 500 billion euro fund for infrastructure that will run for 10 years. They also plan to weaken the debt rules for the states.

“I want to say that, given the threats to our freedom and peace on our continent, our defense must be applied (position):” Whatever it is, “said Merz, standing near the party leaders with SPD and Bavarian Christian Social Union at a press conference on Tuesday.

He added: “Additional protection costs can only be handled if our economy returns to stable growth in a very short period of time.. This requires rapid and sustainable investment in our infrastructure.”

The bills need two-thirds in the parliament, which means that the Merz will have to restore the outgoing Bundestag, which was selected in 2021-and provide support for greenery.

The plan means a stunning shift in the traditionally conservative approach of Germany to public borrowing. In 2009, Berlin secured debt in his constitution, which limits the government’s borrowing and retains a structure deficit of 0.35 percent of GDP.

Economists and defense professionals welcomed a decisive step.

“This is the fiscal change of the sea for Germany,” said Holger Schmiding, Chief Economist Berenberg. “Merz and his coalition rise to this.”

Gian Puglugierin, a senior employee of the European Foreign Affairs Council, said that Merz “acknowledged how an emergency is.”

She added: “He intensified the pace, demonstrated enough flexibility to come on board and laid the basics for a coalition capable of taking action.”

Jensa Sudekum, Professor of the International Economy at the University of Henry Geine Düsseldorf, who urged Merz to reform the debt, called the statement “a common change of games”.

Merz whose conservative Cdu/CSU has campaigned on the position of opposing debt reforms as a result of elections on February 23, accelerated the coalition talks with SPD since Trump has publicly called on the President of Ukraine Volodimir Zelensky In the White House last week.

The previous transaction opens the way to a broader coalition agreement with the SPD. The next German Chancellor wants to use the superpowers of the parliament that comes out to accept the amendments to the Constitution because its government is likely to be blocked in the next Parliament Alternative for Germany And far the left die Linke.

The current parliament can be convened by March 25 before new MPs can take their places.

The transaction with the SPD occurred when a European Commission was set out on Tuesday by a joint loan tool that would allow the member states to finance the purchase of military equipment.