Overview
- The proposal keeps the loosened borrowing rules in place through 2029, then phases deficits down between 2030 and 2035 as defense spending is increasingly funded without new debt.
- From 2036, the plan grants the federal government a permanent borrowing allowance of 0.8% of GDP dedicated to physical investment, effectively replacing today’s infrastructure special fund.
- A further flexible borrowing margin would hinge on the debt ratio: 0.35% of GDP each for the federal and state budgets when debt is below 60% of GDP, falling to 0.1% when it is above 60%.
- The Bundesbank projects government debt would approach 90% of GDP by 2040 and exceed 100% thereafter if current rules, including the open-ended defense exemption, remain in place.
- Bundesbank president Joachim Nagel presented the plan to the 15-member reform commission, which issued mixed early reactions, and any constitutional changes would require two‑thirds majorities in both Bundestag and Bundesrat.