Germany's Christian Democratic Union (CDU) leader Friedrich Merz has announced a €500 billion (A$849.9 billion) special fund to boost infrastructure and defence spending.
This move comes just over a week after his federal election victory. Merz, alongside the Bavarian sister party (CSU) and likely coalition partner, the Social Democrats (SPD), plans to present a joint bill in parliament to ease the country's debt burden.
"I want to say that very clearly in view of the threats to our freedom and peace on our continent, our defence must now apply ‘Whatever it takes’," said Merz, speaking alongside SPD and CSU party leaders at a press conference in Berlin on Tuesday (Wednesday AEDT).
"The additional spending on defence can only be coped with if our economy returns to stable growth within a very short period of time… This requires rapid and sustainable investments in our infrastructure," he added.
The economic ramifications of this decision are significant. The additional spending on defence is contingent on the economy returning to stable growth, which requires rapid and sustainable investments in infrastructure.
This marks a departure from Germany's historically conservative approach to public borrowing, as the Berlin constitution's debt brake limits government borrowing to 0.35% of GDP.
The CDU/CSU's decision is defended in light of recent global political events, including a confrontation between Donald Trump and Volodymyr Zelenskyy.
“Europe needs to strengthen defence,” said Merz. “The necessary decisions, especially with regard to the federal budget, can no longer be postponed after the recent choices of the American government.”
Possible outcomes of this decision include a boost to Germany's economy through increased infrastructure investments, which could lead to stable growth and improved defence capabilities. However, the success of the bill depends on reconvening the outgoing Bundestag and securing the Greens' support.
If successful, this move could strengthen Germany's position on the global stage and enhance its ability to respond to future threats.
