Armin Steinbach Jeromin Zettelmeyer
On 21 March 2025, Germany amended its constitutional debt brake, which had limited its structural (cyclically adjusted) federal budget deficit to 0.35 percent of GDP and required German states to run structurally balanced budgets. Now, defence and security related spending above 1 percent of GDP is freed from the 0.35 percent limit. The amendment also created a €500 billion extrabudgetary fund for ‘additional’ infrastructure investment, and German states can now run maximum deficits of 0.35 percent of GDP 1 .
From the perspective of rearmament and closing of Germany’s infrastructure gaps, the amendment is very good news. But it also creates a conflict with the European Union’s fiscal rules, assuming Germany’s extra headroom is used as intended. A satisfactory solution requires a reform of the reform rather than fudges.
Πηγή: www.bruegel.org