Overview

• CDU and SPD leaders have agreed on a plan to exempt all defense spending above 1% of GDP from Germany's debt brake, removing any upper limit on military funding.
• The proposal includes a 500-billion-euro, decade-long infrastructure fund, with 100 billion euros allocated to states and municipalities for projects like transportation, energy, and education.
• The plan represents a major shift in German fiscal policy, moving away from strict budget discipline toward substantial new borrowing.
• Constitutional changes will be required to implement the plan, necessitating a two-thirds majority in both the Bundestag and Bundesrat, with support needed from the Greens or FDP.
• Critics within the CDU and FDP have raised concerns about the long-term financial implications and the potential inflationary effects of the proposed debt increases.