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German Parliament Approves Historic €1 Trillion Fiscal Reform

The Bundestag has passed a constitutional amendment allowing unprecedented borrowing for defense, infrastructure, and climate investments, with final approval pending in the Bundesrat.

Friedrich Merz (C-L), leader of Germany's Christian Democratic Union (CDU), speaks during a session of the Bundestag (lower house of parliament) on March 18, 2025 in Berlin, Germany. German lawmakers will vote on a massive spending boost for defence and infrastructure proposed by chancellor-in-waiting Friedrich Merz amid concern over the United States' commitment to Europe's security. The hastily drawn plans represent a radical departure for a country traditionally reluctant to take on large amounts of debt or to spend heavily on the military, given the horrors of its Nazi past. (Photo by Tobias SCHWARZ / AFP) (Photo by TOBIAS SCHWARZ/AFP via Getty Images)
German opposition leader and Christian Democratic Union party chairman Friedrich Merz, center, delivers his speech during a meeting of the German federal parliament, Bundestag, at the Reichstag building in Berlin, Germany, Thursday, March 13, 2025. (AP Photo/Ebrahim Noroozi)
Friedrich Merz, leader of the Christian Democratic Union, right, and Social Democratic Party leader Lars Klingbeil talk during a meeting of the German federal parliament, Bundestag, at the Reichstag building in Berlin, Germany, Thursday, March 13, 2025. (AP Photo/Ebrahim Noroozi)

Overview

  • The Bundestag approved the fiscal package with 513 votes, surpassing the two-thirds majority required to amend the constitution.
  • The reforms include a €500 billion infrastructure fund, with €100 billion allocated to climate-related projects over 12 years.
  • Defense spending exceeding 1% of GDP will now be exempt from the constitutional debt brake, marking a significant policy shift.
  • The package also includes €5 billion in military aid for Ukraine in 2025, reflecting heightened geopolitical concerns over Russian aggression.
  • The legislation now moves to the Bundesrat for final approval, where it will also require a two-thirds majority to pass.