Germany’s Green Party, a key player in the potential next government, has announced that they will not support the current plans to relax debt regulations for defense spending and establish a significant infrastructure investment fund. This decision comes as Conservative leader Friedrich Merz, the winner of last month’s German election, seeks to form a coalition government with the center-left Social Democrats led by outgoing Chancellor Olaf Scholz. The proposed changes include exempting certain defense expenditures from Germany’s strict self-imposed debt limitations and creating a 500 billion euro ($533 billion) fund for infrastructure improvements over the next decade.
To implement these plans, a two-thirds majority in parliament is required due to the country’s constitutional “debt brake” which restricts new borrowing to 0.35% of annual GDP. The current parliament is being targeted for approval as the newly elected chamber is less likely to support the initiatives. As Merz’s Union bloc and the Social Democrats lack sufficient seats to pass the measures independently, they are relying on the support of the Green Party.
However, the Greens’ parliamentary leadership has recommended rejecting the proposals, citing long-standing calls for reforms to the debt regulations to enable investments in the economy and climate change mitigation. They raise concerns that the infrastructure fund may not prioritize beneficial investments and could instead be used for measures like tax cuts. Despite this stance, discussions are set to take place between the parties to explore potential compromises and reach a consensus.
