Germany’s Bundesrat upper house of parliament on Friday approved a 500 billion euro ($546 billion) spending package aimed at reviving growth in Europe’s largest economy, scaling up the military, and easing strict borrowing rules. The legislation marks a significant shift from decades of fiscal conservatism and will likely take time to feel the full impact.
The package includes funding for infrastructure projects and eases the debt brake reform imposed after the 2008 global financial crisis. Critics argue that the policy shift is necessary to address Germany’s underdeveloped infrastructure and the consequences of its “debt brake” measures, which have limited the country’s ability to spend during economic downturns.
Chancellor-in-waiting Friedrich Merz defended the tight timetable for implementing the package, citing concerns over a rapidly changing geopolitical situation in Europe. European leaders fear shifts in US policy under President Donald Trump could leave the continent exposed to an increasingly hostile Russia and assertive China.
Merz has promised to conclude coalition talks with the SPD by Easter, despite criticism that he misled voters on his spending plans during the election campaign. The next government will need to address issues such as migration policy, which could be a sticking point given the conservatives’ desire for stricter rules.
Economists warn that it may take until the middle of the year before the stimulus kicks in and starts boosting the economy, which has contracted for two consecutive years. Bureaucratic procedures and labor shortages are also expected to delay the positive impact of new spending initiatives.
Source: https://www.reuters.com/world/europe/german-upper-house-parliament-expected-clear-huge-spending-package-2025-03-21