Germany’s CDU/CSU, SPD, and Greens have agreed on a €500 billion investment plan, therefore freeing borrowing restrictions for crucial infrastructure and military.

The main political parties in Germany have agreed on a package of large-scale defence and infrastructure projects, including the loosening of military expenditure borrowing limits. Supported by the Social Democratic Party (SPD) and the Greens, the agreement—brokered by CDU/CSU head Friedrich Merz—is scheduled for voting in the Bundestag on March 18. 

Lifting Borrowing Limits for Defence Spending

The agreement exempts defence spending exceeding 1% of Germany’s GDP from the constitutional “debt brake”, which has restricted government borrowing since 2009. This measure will allow for higher military expenditure without violating fiscal constraints.

The plan includes:

€500 billion investment fund for defence and infrastructure.

Higher military spending to support Germany’s NATO commitments.

Relaxation of debt restrictions for specific strategic projects.

Political Implications

Considered Germany’s future chancellor, Friedrich Merz has advocated more military expenditure and investment to revive the German economy. Thus, Green Party cooperation is vital for enacting the bill as the CDU/CSU and SPD lacked the parliamentary majority to change the constitution.

The Bundestag will discuss the idea on March 18; the Greens are now likely to support the military and investment strategy in the final vote.

Monetary Effect 

Germany’s DAX 40 market surged about 2% after the announcement, while rates on 10-year German bonds climbed. Reflecting market hope in the proposal’s economic impact, the euro also acquired value versus the dollar.

If approved, the agreement will fundamentally change Germany’s economic strategy and open the path for more military and infrastructure spending in response to mounting world security issues.