Friedrich Merz, Germany’s chancellor in waiting, won a historic vote in the Bundestag on 18 March 2025 to facilitate the country’s biggest ever spending programme in light of Russian belligerence in Europe.
The Christian Democrat Union (CDU) party leader, who won Germany’s 23 February election and is set to form a government with the Social Democrats (SPD), secured the two-thirds majority needed for the constitutional change to unlock new borrowing estimated to exceed EUR1 trillion.
Specifically, the Bundestag passed amendments to Articles 109, 115 and 143h of the Basic Law by 513 votes to 207, putting the financing of German defence spending on an entirely new footing.
In Article 109, sentence 5 of paragraph 3 is amended as follows: “The amount by which defence expenditure, federal expenditure for civil defence and civil protection and for the intelligence services, for the protection of information technology systems and for aid to states attacked in violation of international law exceeds 1 per cent in relation to nominal gross domestic product shall be deducted from the revenue from loans to be taken into account. The total of the federal states [Länder] corresponds to sentence 1 if the revenue from loans generated by them does not exceed 0.35% in relation to the nominal gross domestic product. The allocation of the borrowing authorised for the Länder as a whole in accordance with sentence 6 to the individual Länder shall be regulated by a federal law with the approval of the Bundesrat. The details of the Länder budgets shall be regulated by the Länder within the scope of their constitutional competences. Existing regulations under federal state law that fall short of the upper borrowing limit determined in accordance with sentence 7 shall cease to apply.”
The following will be inserted in Article 115: “The amount by which defence expenditure exceeds 1 per cent in relation to nominal gross domestic product shall be deducted from the revenue from loans to be taken into account.”
In the new Article 143h, the federal government is authorised to establish a special infrastructure fund with a volume of EUR 500 billion, which does not count towards the debt brake. Of this amount, EUR 100 billion each is earmarked for the federal states and the climate transformation fund.
This was preceded by two heated special sessions of the Bundestag, in which the legitimacy was questioned and the speed of the procedure criticised. The Federal Constitutional Court had established legitimacy in several urgent rulings. The speed remained controversial to the end, but this could not stop the procedure.
The next step is now the involvement of the Federal Council, which has scheduled its next meeting on 21 March. After Bavaria announced its approval yesterday, the federal states with the participation of the CDU, Christian Social Union (CSU), SPD, Bündnis90/Die Grünen and Freie Wähler now have the necessary two-thirds majority. This means that the amendments to the Basic Law could be approved and the Federal President can sign the law before the end of March.
In the government’s draft budget for 2025, expenditure totalling EUR 53.25 billion is planned in the Federal Ministry of Defence’s individual budget (EPl) 14. In EPl 06 of the Ministry of the Interior a total of EUR 1.4 billion is planned for the Federal Office of Civil Protection and Disaster Assistance, Federal Agency for Technical Relief, Federal Office for the Protection of the Constitution and Federal Cyber Security Authority and EUR 1.2 billion for the Federal Intelligence Service in the Federal Chancellor’s EPl 04. EUR 7 billion has been earmarked in EPl 60 for upgrading partner states. This amounts to a total of EUR 62.8 billion. Of this, 1% of GDP (2025: EUR 4,407 billion) is allocated to the debt brake, which is EUR 44.1 billion. This results in a new margin of EUR 18.8 billion for the 2025 budget.
Irrespective of this, the volume of the defence budget is not limited. However, it must not increase by leaps and bounds. The budgeters must consider the EPl 14 and the special assets together and increase the total volume in line with the needs of the Bundeswehr and industry’s ability to deliver.
