Following Germany's recent elections, CDU leader Friedrich Merz announced plans for substantial borrowing to enhance defense spending and infrastructure investment. This policy shift, reached in negotiations with the SPD, signifies a departure from strict fiscal rules, essential due to economic recession threats. The plan includes creating a special fund for infrastructure while proposing exemptions to the debt brake for military spending exceeding 1% of GDP. This may lead to increased fiscal flexibility, marking a pivotal change in Germany's economic policy approach in response to urgent national needs.
In a press conference on Tuesday evening, CDU leader Friedrich Merz set out plans to borrow hundreds of billions to boost defence spending and invest in infrastructure.
The new financial packet was agreed in a lightning round of negotiations with the centre-left SPD, who look set to be the junior partner in a future coalition.
Experts say the economy is being hobbled by its creaking infrastructure, which is desperately in need of an upgrade.
To get around Germany's debt brake, the SPD and Union want to make some changes to the rules, including a key carve-out for defence spending.
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