Friedrich Merz’s €1tn spending package has cleared its final hurdle in Germany’s outgoing parliament as the conservative chancellor-in-waiting turns to difficult coalition talks with Social Democrats.
On Friday, the constitutional reform secured the support of more than two-thirds of the seats in the Bundesrat, the upper house that represents Germany’s 16 federal states.
The changes, which were approved by the Bundestag earlier this week, loosen the country’s constitutional borrowing restrictions to allow unlimited defence spending and create a special €500bn, 12-year vehicle to modernise the country’s infrastructure.
The package signals Germany’s ambition to accelerate its rearmament and could jolt the Eurozone’s largest economy out of years of stagnation. Its approval caps a month-long race against time to pass it in the outgoing parliament, whose term ends next week.
Merz, whose Christian Democratic Union (CDU) won elections last month, convened the old parliament in emergency sessions to be able to use the mainstream parties’ required supermajority. The far-right Alternative for Germany and the far-left Die Linke, which would have been likely to oppose the package, hold a blocking minority the newly elected Bundestag.
The CDU, SPD and Greens fell short of the two-thirds majority required in the Bundesrat until the CSU, the CDU’s sister party in Bavaria, secured the backing of its state coalition party, the Free Voters, earlier this week.
Economists have estimated the country’s armed forces need more than €400bn in the coming years. Merz’s reform also allows the federal states to take on new debt.
To secure the backing of his likely coalition partners, the SPD, on defence spending, Merz agreed to establish the special fund for infrastructure. The Greens subsequently bargained for more investments to be allocated to green transition in exchange for their support.
The 69-year-old conservative politician is now turning to complicated talks with the SPD to agree a broader coalition agreement, with the aim of forming a government by mid-April.
