The German Parliament is set to vote on Tuesday on a proposal to relax government borrowing limits in order to increase spending on defense and infrastructure. The aim is to counteract America’s shift away from Europe and to boost the country’s economy, which has been experiencing stagnation for years. If the measure becomes law, it will significantly alter Germany’s approach towards government debt and its potential to take on a more influential leadership role in Europe.

At the heart of the proposal is the intention to loosen the “debt brake,” a constitutional limit on government borrowing established in Germany. This limit has been successful in keeping German debt low but has also restricted investments in important areas such as roads, software, bridges, and the military. Thelimit has been a focal point for both reducing government debt and promoting economic growth and security.

Germany introduced the debt brake in 2009 to curb the country’s budget deficit following the global financial crisis. At that time, Germany, along with the United States and Britain had similar levels of debt as a share of their economies. However, since then, the debt levels in Britain and America have increased, while they have decreased in Germany. The introduction of the debt brake was also influenced by the country’s historical experiences with high government debt, including the hyperinflation in the Weimar era.

Critics argue that the debt brake has not only reduced borrowing but also hindered the country’s ability to invest in its future and take a proactive role in European security affairs. Advocates for change believe that now is a critical time to increase spending on infrastructure and defense, especially as the German economy contracts and the United States may reduce its security role in Europe.

Proposed changes to the debt brake include creating an exemption for defense spending that would allow for borrowing beyond the existing limits. The package also includes the creation of a new infrastructure fund of 500 billion euros, with 100 billion euros allocated to projects addressing climate change. However, the constitutional nature of the debt brake creates challenges for its amendment, and approval will require the support of various political parties and state governments. Despite these challenges, there is optimism and urgency among lawmakers to prevail in their efforts to reform the debt brake and inject significant investments into the country.

Source: https://www.nytimes.com/2025/03/18/world/europe/germany-debt-brake.html