This has not yet been in the history of the German Bundestag. On Tuesday (March 18), the Parliament will vote on the Act, which will enable the debt of debt at the upcoming years at an unprecedented level for military purposes, civil infrastructure and climate protection. In addition, 16 trade union countries are to be authorized to incur debt in a limited extent in the future.
The bill was prepared by CDU/CSU and SPD, which intend to create a new federal government, and Friedrich Merz (CDU), which wants to become a chancellor. However, to create a majority during voting in parliament, all three parties need green who will be in the future parliament oppositionAfter these four parties reached an agreement in difficult negotiations, the Bundestag budget committee decided on Sunday (March 16) to recommend the parliament to the approval of the bill.
Plan details
Relaxation of a budget anchor
According to the German constitution, the state can spend only as much money as it develops. While the budget anchor is valid only in 16 trade union countries, the federal government can still take loans within certain limits up to 0.35 percent of the gross domestic product (GDP), i.e. annual economic production.
“Everything necessary” for military expenses
In the case of expenses necessary to defend the country, the budget anchor will be virtually abolished. The draft resolution for the Bundestag states that in the future Bundeswehra funds, but also “federal expenses for civil defense and population protection, as well as for intelligence services, protection of IT systems and assistance for countries attacked in violation of international law” can also be financed from loans.
It also includes planned this year Military assistance for Ukraine in the amount of four billion euro And to which another three billion will probably be added soon. The new regulations include all costs that exceed one percent of the gross domestic product (GDP). Considering economic production achieved in 2024, one percent of GDP corresponds to about 43 billion euros. Everything above this level will no longer be subject to a credit limit. CDU leader and probably the future Chancellor of Germany Friedrich Merz He paraphrased the meaning of this regulation with the words: “Everything necessary!”.
Loans for Lands
A strict ban on indebtedness for union countries is to be softened and harmonized with the federal government. All trade union countries will be able to take new debts of up to 0.35 percent of GDP. The division of relevant amounts is to be regulated by the Federal Act, which must still be developed.
One of the problems is that union countries would have to change the new provisions in their national constitutions. However, most of the Land parliaments do not have a majority. One way to make changes would be a change in the basic law, which would at the same time repeal state law. However, this would be a serious violation of federalism in Germany.
Special Infrastructure Fund
Germany has serious infrastructure problems. Roads, bridges and railway lines have been used for decades, they were not maintained. There is also a need for modernization in the field of energy and water supply, telecommunications, schools, universities and hospitals. The digitization of the country remains behind. The conversion and expansion of the neutral energy infrastructure for the climate is far from completion.
Amendment to the basic law for investments
Article 143h of the Basic Law will be changed to ensure the possibility of enlisting EUR 500 billion Over the next twelve years for investments in infrastructure. This amount is divided: trade union countries are to use EUR 100 billion for its infrastructure, while the federal government has at his disposal EUR 300 billion. The remaining EUR 100 billion was allocated to climate protection. The bill speaks of “additional investments to achieve climate neutrality until 2045”.
The principle of additionalness
The money is to flow in addition to planned investments. To ensure this, it is assumed that at least ten percent of the total budget will have to be allocated to investments in the normal federal budget in the future. Based on the budget for 2024, it would be around EUR 47 billion. Only the needs exceeding this amount can come from a special pool financed by credit.
There are critics of the financial package
AFD, which is partly extreme right -wing, and the left party is against the debt package for various reasons. Both parties have a total of over a third of places in the new Bundestag.
Voting in the old Bundestag
Changes in the Basic Law are only possible if at least two -thirds of MPs to the Bundestag vote for their acceptance. AFD and the Left Party could therefore block the debt package after the last Bundestag elections in 2025.
Therefore, CDU/CSU and SPD submitted their bill in the “old” Bundestag, where together with the Green they still have over two -thirds of seats. He will exercise power until March 25, when the new parliament is constituted. AfD and the Left Party tried to prevent voting in an old Bundestag, but they failed by lodging a complaint to the Federal Constitutional Tribunal.
Financial effects of the debt package
Economists warn against serious consequences for financial markets if Germany enlists almost a trillion of euro new debt. Lars Feld, a professor at the Walter Eucken Institute in Friborg, assumes that German public debt will increase from the current level of about 62 percent to 90 percent annual economic production within ten years. This would cause additional interest on interest in the amount of 250 to 400 billion eurosdepending on the changes in the interest rate on government bonds, said Feld during the interrogation of the Bundestag budget committee. International bond markets have already reacted nervously.
Veronika Grimm, a professor at the Technical University of Nuremberg, sees “a challenge for stability in Europe”, which she also talked about in the budget committee. If the interest rate of German tax bonds increases, this will increase interest rates for already very indebted countries, such as Italy and Spain, to levels that are almost impossible to handle through these countries. Grimm warned that this would again increase “susceptibility to threats in the euro area”.
The article comes from the website Deutsche Welle