Germany's Bold Move: Loosening Debt Rules for Defense and Infrastructure

Germany's prospective coalition government aims to loosen debt rules for increased defense spending and a 500 billion euro infrastructure fund. Center-right election winner Friedrich Merz seeks to strengthen Europe's defense capability and achieve independence from the U.S. amidst evolving geopolitical threats.

Germany's potential coalition government is putting forward a proposal to relax the country's strict debt rules, aiming to boost defense spending amid growing international concerns. The initiative, championed by center-right election winner Friedrich Merz, seeks to respond to rising geopolitical tensions and uncertainty over U.S. commitments to Europe.

In an ambitious economic plan, the coalition partners also envision establishing a 500 billion euro fund over the next decade to revitalize Germany's aging infrastructure. The proposal includes exempting defense spending over 1% of the gross domestic product from borrowing limits, a move requiring approval from Germany's outgoing parliament.

Merz and his allies argue that a stronger defense capability is urgent for both Germany and Europe, mirroring recent shifts in the U.S. stance, notably regarding Ukraine. Despite potential legislative hurdles, the coalition hopes to secure support for their plans, with the groundwork being laid to adjust the debt brake by 2025 for greater investment flexibility.

(With inputs from agencies.)