Merz, Greens reach debt deal in Germany

According to a report in Handelsblatt newspaper, Germany’s prospective chancellor, Friedrich Merz of the CDU, has reached an agreement with the Greens on a financial reform package that envisions major investments in infrastructure and defense.

The report indicates that party caucus meetings are scheduled for 1:00 PM local time in Berlin to brief officials on the latest status of the negotiations. The news is attributed to unidentified individuals close to the groups.

Yesterday, as German lawmakers debated Friedrich Merz’s spending plans, the Greens stated that his revised proposal, which agreed to billions of dollars in defense and infrastructure spending, was insufficient to pass the parliament.

The CDU/CSU and Social Democrats (SPD) had called for an extraordinary parliamentary session to make progress in passing the proposal, which would overturn Germany’s cautious fiscal policy.

However, the required two-thirds majority was still not achieved, as the parties needed the support of the Greens.

During the first reading of the bill in the Federal Parliament, Merz asked the Greens, “What more do you want in such a short period than what we have offered you in the negotiations?”

The coalition had initially proposed exempting defense spending exceeding 1% of GDP from the country’s strict constitutional debt rules. They also wanted to create a special exempt fund worth 500 billion euros for infrastructure spending.

But Merz said they had amended the draft to address the Greens’ concerns and because he “takes climate protection seriously.” The new draft includes a broader definition of defense spending and paves the way for allocating up to 50 billion euros for the net-zero transformation of the German economy.

The Greens accused Merz of prioritizing only his own interests, as the CDU had rejected a Green proposal to relax German borrowing rules when they were in opposition.

They also insisted that the text should guarantee that the additional fiscal space would not be used for tax exemptions.

The party’s parliamentary leader, Katharina Dröge, said, “If you wonder why the negotiations between us are progressing this way, it is because we do not trust your word.”

The Greens’ alternative draft proposes a defense spending exemption of 1.5% of GDP. They also want the fund to be abolished in favor of a fundamental reform of the borrowing rules with the newly elected parliament.