Germany: Upper House Signs off on Landmark Debt Reform Plan
Germany's second chamber of parliament, the Bundesrat, on Friday, voted in favor of a massive spending package that is set to pour billions of euros into defense, infrastructure and climate protection.
Earlier this week, German lawmakers approved a historic amendment to the constitution that will allow unprecedented levels of government spending.
Last major hurdle for debt reform
Approval from the Bundesrat, which represents Germany's 16 federal states, was necessary for the reform to pass into law.
At least two-thirds of members voted for the amendment for it to pass.
The yes vote was not a sure thing, as smaller parties in state coalition governments voiced objections.
In Bavaria, there were concerns the "Free Voters," a junior coalition parter with the conservative Christian Social Union (CSU), would block the state's vote. In the end, Bavaria voted yes as a bloc.
The amendment was backed in the Bundesrat with 53 out of 69 votes in favor, passing the the 46-vote threshold.
Brandenburg, Saxony-Anhalt, Thuringia, and Rhineland-Palatinate abstained, with abstentions counted as opposition votes.
Germany ready to spend big
The Bundesrat vote paves the way for massive spending from Europe's largest economy.
The debt reform plan exempts defense spending from Germany's so-called "debt brake," a constitutionally enshrined mechanism that limits government borrowing.
The plan also earmarks a special €500 billion special infrastructure investment fund.
The proposal to loosen the debt brake was pitched by the Christian Democratic Union (CDU) and Social Democrats (SPD), who are trying to move quickly to push the reform through the outgoing parliament.
There were fears the plan could have been blocked in the new parliament after far-left and far-right lawmakers, who oppose the plan in principle, won more seats in the February election.
On Tuesday, the plan passed in Germany's Parliament, the Bundestag, after the Greens were promised €100 billion ($109 billion) in climate investment would be included.
Why does Germany want to reform debt rules?
For CDU leader, and Germany's next chancellor, Friedrich Merz, getting the debt brake reform passed before taking office amounts to a big win. The CDU is in coalition talks with the SPD, and hopes to get a coalition government on its feet by the end of April.
After the CDU came out on top in last month's general election, Merz went on television and warned that the administration of US President Donald Trump was largely "indifferent" to the fate of Europe, and that Germany must act quickly to bolster its defense capabilities.
Merz was responding to major shifts in transatlantic ties under Trump, who has embraced Russian narratives on the war in Ukraine, while calling into question Washington's commitment to European security.
"My absolute priority will be to strengthen Europe as quickly as possible so that, step by step, we can really achieve independence from the USA … I have absolutely no illusions about what is happening from America," Merz said.
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