German Parliament Passes Historic Debt Reform for Defense Spree

Chancellor-designate Friedrich Merz said the giant shift in spending is ’the first major step towards a new European defence community.’

German Chancellor-designate Friedrich Merz speaks to reporters after he reached an agreement with the Greens on a massive increase in state borrowing just days ahead of a parliamentary vote next week, in Berlin on March 14, 2025. Axel Schmidt/Reuters

Germany’s outgoing parliament approved legislation on March 18 to amend strict fiscal rules, increase government borrowing, and fund a massive surge in defense and infrastructure spending.

The package allows the government to borrow beyond normal debt limits for defense and security spending as well as assistance to Ukraine, worth more than 1 percent of gross domestic product.