By Sarah Marsh and Andreas Rinke
BERLIN (Reuters) – Germany’s lower house of parliament is set to vote on Tuesday on a massive surge in borrowing that could boost Europe’s largest economy and stimulate growth across the region, even as it faces trade tensions with top partner the United States.
The conservatives and Social Democrats (SPD), who are in talks to form a centrist coalition after last month’s election, want to create a 500-billion-euro ($546.05 billion) fund for infrastructure and to ease constitutionally enshrined borrowing rules to allow higher spending on security.
The plans, if implemented, would upend decades of fiscal conservatism in Germany and have lifted euro zone yields and the euro currency over the past week.
The leaders of the conservatives and SPD, as well as the Greens, said on Monday they were confident they could reach the threshold required to pass the legislation to change the Constitution for the fiscal sea change.
“I am confident we will achieve a two-thirds majority,” said Friedrich Merz, leader of the conservative Christian Democrats who, together with their Bavarian sister party, won the election.
Fewer than a handful of conservative lawmakers were against the plans, said Merz, the likely next chancellor. SPD and Greens leaders also said they expected few lawmakers to reject them. The three parties can together spare around 30 votes and still pass the legislation.
A vote is expected around midday after a morning debate.
Should the legislation pass the Bundestag lower house of parliament, it still has to go to the Bundesrat upper house, which represents the governments of the 16 states that make up Germany.
The main hurdle to passage there appeared to fall on Monday when the Bavarian Free Voters agreed to back the plans.
The conservatives and SPD want to pass the legislation through the outgoing parliament for fear it could be blocked by an enlarged contingent of far-right and far-left lawmakers in the next Bundestag starting March 25.
Merz has justified the rapid timetable with recent shifts in U.S. policy under President Donald Trump, warning that a hostile Russia and an unreliable U.S. could leave the continent exposed.
The reforms, if passed, would mark a major rollback of the so-called debt brake imposed after the 2008 global financial crisis but since criticised by many as outdated and putting Germany into a fiscal straitjacket.
Critics, including within his own party, accuse Merz of “voter fraud” for promising not to open the spending taps during the campaign only to announce the shift in fiscal policy just days after winning.
Economists caution further reforms are needed, for example to cut bureaucracy, to ensure sustainable growth in an economy that has contracted for two successive years. Merz acknowledged the warning on Monday, hinting at difficult coalition talks with the SPD.
“The problems will not all be solved with the decision tomorrow,” Merz said in a post on X late on Monday. “We need to tackle the challenges facing us and we need to present a coalition pact that brings this country forward.”
($1 = 0.9157 euros)
(Reporting by Sarah Marsh, Andreas Rinke, Holger Hansen and Alexander Ratz; Editing by Rod Nickel)
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