Germany's outgoing lower house of parliament will convene on Thursday to discuss a 500 billion euro fund for infrastructure and changes to borrowing rules aimed at strengthening defense in Europe's largest economy. The winner of last month's German election, Friedrich Merz, seeks to secure the funds before the new parliament assembles on March 25, to prevent potential challenges from far-right and far-left lawmakers.
The proposed shift in spending, unusual for Germany known for its frugality, has unsettled markets, contributing to the euro's rise against the dollar. However, the financial package faces opposition from the Greens, whose support is crucial to amend the constitution with a two-thirds majority.
Critics, including a senior Greens party official, have raised concerns about the current debt plans' effectiveness in addressing issues like climate change. The potential misuse of funds by the conservative and Social Democratic parties has also been questioned.
Besides the parliamentary hurdles, Merz's plans may face scrutiny from the Constitutional Court due to legal challenges. The prospective chancellor emphasizes the need to boost defense given the changing international landscape, with the U.S. possibly reducing its presence in Europe.
Despite his limited governmental experience, Merz's proactive approach in securing funding and forming coalitions is seen as a positive sign for effective leadership. This is deemed necessary to address security threats from Russia and China and revive the German economy.
While uncertainties loom over Merz's proposals, forecasts from the IfW economic institute suggest a positive impact on Germany's growth. Analysts anticipate a boost in economic growth due to increased public spending in the coming years. The proposal will undergo readings and voting in the lower house, with expected opposition from the Greens and Free Democrats, aiming to leverage negotiations. The passage of these reforms, if successful, would mark a significant fiscal expansion for Germany since reunification.