Germany approves Merz’s historic spending surge for defence, economic growth

Merz has a windfall of hundreds of billions of euros to ramp up investment after two years of contraction in Europe’s largest economy

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Germany’s chancellor-in-waiting and leader of the Christian Democratic Union party Friedrich Merz attends a session of the outgoing lower house of parliament for a vote on March 18, 2025. Photo: Reuters

Published: 11:39pm, 18 Mar 2025Updated: 12:09am, 19 Mar 2025

Germany’s parliament approved plans for a massive spending surge on Tuesday, throwing off decades of fiscal conservatism in hopes of reviving economic growth and scaling up military spending for a new era of European collective defence.

The approval in the Bundestag hands conservative leader Friedrich Merz a huge boost, giving the chancellor-in-waiting a windfall of hundreds of billions of euros to ramp up investment after two years of contraction in Europe’s largest economy.

Germany and other European nations have been under pressure to shore up their defences in the face of hostile Russia and shifts in US policy under President Donald Trump, which European leaders fear could leave the continent exposed.

Merz’s conservatives and Social Democrats (SPD), who are in talks to form a centrist coalition after last month’s election, want to create a €500 billion (US$546 billion) fund for infrastructure and to ease constitutionally enshrined borrowing rules to allow higher spending on defence.

“We have for at least a decade felt a false sense of security,” Merz told lawmakers ahead of the vote.

“The decision we are taking today on defence readiness … can be nothing less than the first major step towards a new European defence community,” he said.