Friedrich Merz, leader of Germany’s conservative Christian Democratic Union (CDU), announced on Wednesday that the constitutional debt brake, which limits public deficits to 0.35% of Gross Domestic Product (GDP), could be open to reform under certain conditions.
Merz, the frontrunner to become Germany’s next chancellor after the collapse of the country’s “traffic light” coalition, has previously argued that Germany should adhere to the constitutionally guaranteed debt brake, a measure introduced by his party under Angela Merkel in 2009.
The debate over debt brake reform within the CDU was reignited this year by Berlin’s conservative mayor Kai Wegner. Several powerful CDU leaders from regional governments have also supported the reform push, as these states face more constraints than the federal government and lack the flexibility for new borrowing.
Merz: Revision possible if borrowing is for investment
Pressure is mounting within the party, with CDU state premiers urging Merz to include debt brake reform plans in the campaign for the early elections on 23 February.
Speaking at an event on Wednesday, Merz stated: “Of course, reform is possible. The question is: why? To what end? What would be the result of such a reform?”
Merz emphasized that he would not support reform aimed at increasing consumption or social policy spending. However, he suggested that if additional borrowing were used to increase investment, “then the answer could be different.”
According to the Greens, the only way out of the crisis is a revision of the debt brake
Merz noted that the debt brake was a “technical issue” and stated that he did not wish to engage in the discussion at that moment. Later, a source close to the CDU leader told Reuters that Merz had no immediate plans to reform the debt brake.
However, Bruno Hönel, a member of the Bundestag’s budget committee from the Greens, argued that if Merz assumed power, the debt brake would be reformed immediately, pointing out that the budget could not be financed without borrowing during such a crisis.
Hönel stated, “If you want to work with the budget in a forward-looking way, there is no other way than to reform the debt brake.” He also noted that 80 billion euros would be needed to meet NATO’s 2% defense spending target by 2028, nearly 30 billion euros more than the draft budget for 2025, which currently envisions defense spending of 53 billion euros.
Traffic light coalition collapses over debt brake debate
The debt brake was a key factor in the collapse of the coalition, leading to calls for early elections.
Christian Lindner, leader of the fiscally conservative Free Democrats (FDP), who was dismissed as finance minister last week by Social Democrat Chancellor Olaf Scholz, claimed that Scholz had pressured him to suspend the debt brake.
Suspending the debt brake in an emergency, citing special circumstances, is possible with a government majority. Germany reinstated the debt brake in 2024 after a four-year suspension to allow for extra spending on the COVID-19 pandemic and the energy crisis.
CDU’s sister party CSU opposes reform
However, reforming the debt brake requires a two-thirds majority in both the Bundestag and the Bundesrat.
The CDU premiers from the eastern states support the debt brake reform, while Markus Söder, the leader of Bavaria’s CSU, opposes it. Söder emphasized that “absurd extra spending” must be cut first.
Before discussing the debt brake, Söder argued that the fiscal equality of federal states must be addressed, referring to Germany’s income redistribution system.
The wealthy state of Bavaria recently had to transfer over €9 billion to other states. “This cannot go on,” Söder declared.
