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Germany Reaches Landmark Deal on Defense, Infrastructure, and Climate Spending

The agreement exempts defense spending from debt limits and establishes a €500 billion fund for infrastructure and climate projects.

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Britta Hasselmann and Katharina Droege, co-chairs of the Greens parliamentary group, address the media after the Greens agreed on a massive increase in state borrowing just days ahead of a parliamentary vote next week, in Berlin, Germany, March 14, 2025. REUTERS/Axel Schmidt
Katharina Droege, co-chair of the Greens parliamentary group, addresses the media after the Greens agreed on a massive increase in state borrowing just days ahead of a parliamentary vote next week, in Berlin, Germany, March 14, 2025. REUTERS/Axel Schmidt
German Chancellor-in-waiting Friedrich Merz speaks to the media after he reached an agreement with the Greens on a massive increase in state borrowing just days ahead of a parliamentary vote next week, in Berlin, Germany, March 14, 2025. REUTERS/Axel Schmidt

Overview

  • Chancellor-in-waiting Friedrich Merz and the Green Party agreed to a debt-funded spending package that includes €200 billion for defense and €500 billion for infrastructure over the next decade.
  • The deal allocates €100 billion to a climate and economic transformation fund, a key demand from the Greens during negotiations.
  • Germany’s constitutional 'debt brake' will be reformed to allow defense spending above 1% of GDP to bypass borrowing limits.
  • The package includes €3 billion in military aid for Ukraine, pending parliamentary approval next week.
  • Economic analysts project the infrastructure investments could boost Germany’s GDP growth by 2% annually over the next decade.