Germany’s Bundesrat Approves Historic Spending Plan to Boost Economy and Military

Germany’s Bundesrat, the upper house of parliament, approved sweeping spending measures aimed at stimulating growth in Europe’s largest economy and enhancing military capabilities. This legislation, passed on Friday, marks the end of decades of fiscal conservatism, establishing a €500 billion ($546 billion) fund dedicated to infrastructure improvements and relaxing stringent borrowing regulations to bolster defense spending.

The approval comes as the conservative bloc and the Social Democratic Party (SPD) engage in coalition negotiations following last month’s elections. The outgoing parliament expedited the passage of the package to preempt potential roadblocks from an incoming Bundestag that may feature more far-left and far-right lawmakers, set to convene on March 25.

Chancellor-in-waiting Friedrich Merz defended the swift timeline for the legislation, emphasizing the urgent need to respond to a rapidly evolving geopolitical landscape. “The threat from the East, from Moscow, is still present, while the support from the West is no longer what we were once accustomed to,” Bavarian Premier Markus Soeder noted, reflecting widespread concerns among European leaders about potential shifts in U.S. foreign policy under President Donald Trump.

The reforms represent a significant departure from the ‘debt brake’ established in the aftermath of the 2008 financial crisis, a measure that many have criticized as outdated and restrictive. “Let’s be honest: Germany has, in part, been run into the ground over the course of decades,” remarked Berlin Mayor Kai Wegner, highlighting the urgent need for proactive infrastructure development rather than mere maintenance.

Soeder likened the spending initiative to a “Marshall Plan,” invoking the historical U.S. economic aid that revitalized Europe post-World War II. However, economists caution that the impact of the stimulus will take time to manifest, with Berenberg economist Salomon Fiedler predicting that new spending initiatives may not materialize until later this year due to bureaucratic delays and ongoing labor shortages.

For Merz, the approval of this legislation represents a crucial victory before his official swearing-in as chancellor. Nevertheless, it has not come without political cost. During the election campaign, Merz had promised a cautious approach to spending, leading some supporters to accuse him of misleading voters. A recent poll conducted by broadcaster ZDF revealed that 73% of respondents felt deceived by Merz’s sudden policy shift, including 44% of those from his own conservative CDU/CSU bloc.

Acknowledging these concerns, Merz stated that the geopolitical situation necessitated swift action. “I know that I’ve now drawn heavily on my credibility, including my personal trustworthiness,” he admitted at a Frankfurt event.

As he aims to finalize coalition talks with the SPD by Easter, migration policy looms as a potential point of contention, given his party’s push for stricter regulations. Merz expressed his determination to avoid further empowering the far-right, stating, “If the next government does not tighten migration rules, then it might as well roll out the red carpet for the far-right at the next election in 2029.”

This legislative approval sets the stage for a transformative period in German fiscal policy, one that seeks to address both economic challenges and security concerns amid an uncertain global landscape.