(Bloomberg) — Germany’s Social Democrats indicated they’re open to the idea of financing a big increase in military spending by either loosening rules restricting government borrowing or creating another special fund.
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After winning Sunday’s election, the conservative CDU/CSU bloc under chancellor-in-waiting Friedrich Merz is already talking with the SPD about debt-financed defense spending of as much as €200 billion ($210 billion), a person familiar with the discussions told Bloomberg on Monday.
The idea is to secure approval for the new package — worth twice as much as a fund approved three years ago after Russia’s invasion of Ukraine — in the current parliament before the new legislature is sworn in next month.
Merz confirmed the talks when quizzed about the plans on Tuesday but said he could “neither confirm nor deny” additional investments of €200 billion are under discussion.
“We are talking to each other, but it’s much too early to say something,” Merz told reporters before a caucus meeting in Berlin. “Right now, I view it as very difficult.”
Rolf Muetzenich, the head of the SPD group in parliament, said earlier the party would be open to giving its backing given the enormity of the security challenges Germany is facing. At the same time, he made it clear that it won’t accept anything “that isn’t thought through.”
He also criticized Merz for withholding their support for similar initiatives on boosting military spending and aid for Ukraine presented by Chancellor Olaf Scholz’s outgoing government.
“This was rejected again and again and I must say I’ve been amazed over the last few hours how quickly one can rediscover the wheel,” Muetzenich, who is stepping down from his role as caucus leader, told reporters in Berlin.
Without the required two-thirds majority in the new parliament, mainstream parties don’t have enough votes to make changes to Germany’s constitutional borrowing limit — known as the debt brake.
But Merz and the SPD could get around that by attempting to secure lawmaker approval before the Bundestag meets for the first time at the end of March, possibly with the support of the Greens.
Germany and its allies in the European Union and NATO are under pressure to ramp up military outlays after President Donald Trump made it clear the US will no longer guarantee Europe’s security and they need to do more themselves.
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