Germany’s parliament has approved a massive spending surge of €500 billion, marking a significant shift away from fiscal conservatism and towards reviving the country’s economy. The plan includes a fund for infrastructure development and easing strict borrowing rules to allow higher spending on defense.
Conservative leader Friedrich Merz secured a two-thirds majority in favor of the reform, which has been welcomed by European leaders as a “very clear message” that Germany is committed to investing in its military and infrastructure. EU Commission President Ursula von der Leyen described it as an “excellent news” that sends a strong signal about Germany’s intentions.
The approval comes after years of economic contraction in Europe, with Germany facing pressure to strengthen its defenses due to tensions with Russia and shifts in US policy under President Donald Trump. The reforms also roll back the “debt brake” imposed after the 2008 financial crisis, which had been criticized for being outdated and limiting Germany’s ability to invest.
While economists caution that further reforms are needed to ensure sustainable growth, the approval has lifted euro zone yields and European shares, with the DAX index reaching a record high. However, Fitch Ratings agency warned that Germany’s coveted AAA rating could come under pressure if its spending efforts are not offset by consolidation measures or fail to produce lasting economic growth improvements.
Merz had declared “Germany is back” after securing the approval, which marks a significant turning point for the country’s fiscal policy and economic outlook.
Source: https://www.reuters.com/world/europe/german-parliament-vote-historic-spending-surge-2025-03-18