Germany’s lower house of parliament, the Bundestag, convened a special session on Thursday to debate a landmark €500 billion fund, Reuters informed.
The fund aimed at bolstering infrastructure and defence spending, alongside sweeping changes to the country’s borrowing rules. The proposed measures, which mark a significant shift for Europe’s largest economy, are being pushed by Friedrich Merz, the winner of last month’s election, who aims to secure the funds before a new parliament convenes on 25 March.
The urgency stems from concerns that lawmakers in the new parliament could block the proposals. The plan has already stirred financial markets, contributing to the euro’s rise to a five-month high against the dollar.
However, the package is far from guaranteed, as Merz’s conservatives and their likely coalition partner, the Social Democrats (SPD), must secure support from the Greens to achieve the two-thirds majority needed to amend the constitution.
The Greens expressed skepticism about the proposals, with senior officials criticising the lack of progress in negotiations and warning of “serious gaps and errors” in the plan, particularly regarding climate change. Katharina Dröge, a prominent Greens leader, confirmed that her party would vote against Merz’s proposals unless their concerns are addressed.
Her party is demanding assurances that the infrastructure fund will not be used to finance policies that cater to the conservative and SPD voter base. Merz has dismissed the accusations, but the Greens’ opposition remains a significant obstacle.
Constitutional challenges
The plan also faces potential legal hurdles. Germany’s Constitutional Court could rule as early as Thursday on challenges filed by the Alternative for Germany (AfD) and the Left Party.
Merz has argued that boosting defence spending is critical, particularly in light of the United States’ potential disengagement from Europe under President Donald Trump. Analysts suggest that Merz’s decisive approach to securing the funding deal with the SPD signals a shift toward more assertive leadership in Germany, despite his lack of prior government experience.
The proposed fiscal expansion has already prompted Germany’s IfW economic institute to revise its growth forecast for 2026, anticipating a 1.5% increase in GDP, up from the previous estimate of 0.9%. Michael Pfister, a foreign exchange analyst at Commerzbank, noted that the outcome of the debate could have significant implications for both Germany and the broader eurozone economy.
Deutsche Bank analysts predict that the reforms will ultimately pass with a two-thirds majority, though the process is unlikely to be smooth. If approved, the measures would represent the largest fiscal expansion in Germany since reunification, marking a historic shift in the country’s approach to public spending and debt.
