Germany Approves Historic Fiscal Reforms for Defense and Infrastructure Spending

The Bundesrat's vote clears the way for over €1 trillion in investments, exempting key expenditures from constitutional borrowing limits.

Germany's upper house of parliament, the Bundesrat, finalized a historic spending package that exempts defense spending above 1% of GDP from the constitutional 'debt brake.'
The package includes a €500 billion infrastructure fund and €100 billion for climate-related initiatives, aiming to modernize Germany's economy and infrastructure over the next 12 years.
Germany will provide €3 billion in new military aid for Ukraine, reinforcing its commitment to European defense amid geopolitical uncertainty.
The reforms mark a significant shift from Germany's traditional fiscal conservatism, reflecting the country's response to reduced U.S. NATO engagement and Russian aggression.
While financial markets have reacted positively, bureaucratic hurdles and labor shortages may delay the economic impact of the ambitious plan.