Pushing to Allow National Debt Exceeding 1% of GDP for Defense Spending
The German political sphere has decided to allocate an astronomical special budget exceeding 700 trillion won to expand military spending and stimulate the economy. As the United States withdraws support for Ukraine, which is at war, the urgent need to increase defense spending has led to the relaxation of the so-called 'debt brake' to secure funding.
On the 4th (local time), representatives of the Christian Democratic Union (CDU) and Christian Social Union (CSU) alliance and the Social Democratic Party (SPD) held a press conference after coalition negotiation meetings and announced their agreement to establish a special fund of 500 billion euros (approximately 773 trillion won) over 10 years for infrastructure investment.
Friedrich Merz, the leading candidate for the next German Chancellor and CDU leader. Photo by AFP Yonhap News
This amount exceeds last year's German federal government budget of 465.7 billion euros.
The two parties also agreed to amend the Basic Law (constitution) to allow debt exceeding 1% of the Gross Domestic Product (GDP) if necessary to finance defense spending. The current regulation limits new annual debt to no more than 0.35% of GDP to maintain fiscal soundness.
They did not specify the exact scale of the defense spending increase. With the United States reducing its security commitments on the European continent and former President Donald Trump ordering a halt to all military support for Ukraine, European countries urgently need to increase their defense budgets. Earlier, local media such as ARD reported that an advisory group of economists proposed 400 billion euros for defense and 400 to 500 billion euros for infrastructure investment, and that these proposals are under review. If implemented, this would allow an additional investment of about 45 billion euros, equivalent to 1% of GDP, in defense. The German government, following the outbreak of the Ukraine war in February 2022, established a special fund of 100 billion euros (154 trillion won) separate from the regular defense budget (50 billion euros annually) and has been using around 20 billion euros annually, but this fund is expected to be depleted by around 2027.
Bloomberg News evaluated, "Since Germany generally opposes increased spending, this announcement will be a game changer for European defense."
Friedrich Merz, CDU leader and a candidate for the next chancellor, announced that he will submit a Basic Law amendment bill to establish the special fund to the Bundestag next week. Merz said, "We know we have to do more," adding, "Europe must grow and be able to defend itself."
The two parties plan to pass the special budget within this month with the cooperation of the Green Party, SPD's coalition partner. Establishing the special fund and amending the debt limit regulation require approval by more than two-thirds of the federal parliament members. However, in the new parliament, the combined seats of the Left Party, which opposes increased defense spending, and the far-right Alternative for Germany (AfD) exceed one-third of the total seats, the threshold to block constitutional amendments. The Left Party has stated it will file a lawsuit with the Constitutional Court if the special budget passes. Alice Weidel, co-leader of AfD, claimed that Merz's discussion of expanding defense spending after winning the general election was "election fraud."
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