Germany Hopeful EU Won’t Prevent Planned Spending Spree

German Finance Minister Lars Klingbeil said he was ‘optimistic’ the European Commission would allow Berlin to proceed with its economic plans.

The flags of the European Union and Germany fly outside a polling station during EU parliamentary elections, in Bayrischzell, Germany, on Jun. 9, 2024. Johannes Simon/Getty Images

Germany’s new government doesn’t expect the European Union to prevent it from increasing its public spending, the country’s vice chancellor and federal minister of finance said on Monday.

“I am very optimistic and confident that we will be able to find a common path with the commission,” Lars Klingbeil said, as he headed to a meeting of EU finance ministers in Brussels.

In March, the Bundestag, Germany’s parliament, green-lit a proposal for a 1 trillion euro ($1.1 trillion) increase in public expenditure. The proposal also excluded defense spending from rules that cap Berlin’s borrowing.

However, there remains an issue over whether or not this planned spending could fall foul of fiscal rules at the European level. The 27-nation bloc has a deficit ceiling of 3 percent of annual GDP.

Klingbeil said the finance ministry was working on a draft of the 2025 budget, which would be ready in June. After that, he said, all queries concerning deficit limits should be cleared up.

In order for Germany to go ahead with its planned spending, Brussels would have to activate the fiscal escape clause that would allow Berlin to boost defense spending by up to 1.5 percent of annual GDP for four years without breaching the bloc’s rules.

The German government has also announced policies that include tax cuts and a rise in the minimum wage to reinvigorate the economy.

Klingbeil argued that more German productivity would have a positive effect on the rest of the continent.

The International Monetary Fund expects Germany’s deficit to reach 2.95 percent this year, rising to 4.41 percent in 2030.

Germany is the only member of the G7 that has seen no growth over the past two years, and the nation also faces being hit by U.S. tariffs, which could adversely impact its auto industry.

On that front, Klingbeil said Germany supported the European Commission’s approach to negotiating a trade policy with Washington.

“We want to be in dialogue, we want to find a solution, but we are also ready in case it is not possible to find an agreement in the coming weeks,” he said.

The European Commission, which acts as the EU’s executive branch, proposed countermeasures on up to 95 billion euros ($105 billion) worth of U.S. imports if negotiations fail to remove the tariffs.