The Bundestag has approved a historic loan package worth hundreds of billions of euros aimed at defense, infrastructure, and climate protection. The lawmakers approved necessary constitutional amendments with a two-thirds majority, surpassing the minimum requirement by 20 votes.
However, before the debt plans can become reality, they must also be confirmed by the Bundesrat, the council of German states, on Friday.
Following February’s elections, the Christian Democrats (CDU/CSU) and Social Democrats (SPD) agreed to renew the so-called “grand coalition,” also known as the black-red coalition. The first decision they made, even before the formal start of negotiations for the future government program, was the financial package.
The package consists of two components: a special fund of 500 billion euros for infrastructure and a modification to the constitutional “debt brake,” which regulates excessive borrowing. Since changes to the debt brake are constitutionally regulated, they require approval by a two-thirds majority in the Bundestag.
In the new Bundestag session, which will begin next week, more than a third of the votes will be controlled by the far-right Alternative for Germany (AfD) and the Left Party. CDU/CSU and SPD aim to avoid seeking support from these two parties, so they have turned to the outgoing Bundestag to ensure approval.
The financial package is fundamental to everything that has been agreed so far by the Christian Democrats and Social Democrats in forming the coalition. Without the billions from the loans, many initiatives would need to be reconsidered from scratch.
However, the plan’s implementation will not be easy. A potential complication is that only additional projects can be funded from the special fund, meaning negotiators will need to find money for many initiatives from the regular budget.
The federal states will also receive significant benefits from the package. Not only will they get 100 of the 500 billion euros for infrastructure and climate protection, but they will also be able to borrow up to 0.35% of their GDP collectively. Until now, the federal states have been limited to zero borrowing.
