Germany’s Upper House Approves Historic Defense Spending Bill

Germany’s Bundesrat has approved a landmark bill that will significantly boost military and infrastructure spending, marking a historic shift in the country’s fiscal policy.

Key Provisions of the Bill

• Massive Defense Spending Increase: The bill allows defense spending above 1% of GDP to be exempt from Germany’s “debt brake”—a constitutional fiscal rule limiting government borrowing.
• €500 Billion Infrastructure Fund: The legislation creates a special fund to support infrastructure projects over the next 12 years.
• Additional Borrowing for States: Germany’s 16 states will be able to borrow €15 billion more, increasing their financial flexibility.
• €100 Billion for Climate Investment: After negotiations with the Greens, a portion of the funds will be allocated to climate-related projects.

The bill, already passed by the Bundestag, cleared its final hurdle in the Bundesrat with a 53–16 majority, well above the required 46 votes.

Concerns were raised by smaller parties, including the Left (Die Linke) and the far-right Alternative for Germany (AfD), who oppose increased military spending. In Bavaria, the Free Voters initially resisted but ultimately backed the bill, with leader Hubert Aiwanger stating:

“Demanding the sensible use of these funds is always better than saying I failed.”

The states of Bremen and Mecklenburg-Western Pomerania also supported the measure, despite the Left’s presence in their coalition governments.

Friedrich Merz, leader of the Christian Democratic Union (CDU), pushed for rapid approval of the bill before the new Bundestag convenes on March 25, fearing potential opposition.

Merz’s move marks a significant reversal from his party’s previous stance on strict financial controls, with him justifying the change due to the “rapidly changing geopolitical landscape”, particularly peace negotiations between Ukraine and Russia.

This historic spending package signals a major policy shift, reflecting Germany’s commitment to strengthening its military capabilities and modernizing infrastructure amid evolving global challenges.