Germany to Relax Debt Limits to Boost Economy and Defence – Equitypandit
Germany’s next governing parties have agreed to ease borrowing limits, unlocking over €1 trillion for defence and infrastructure spending.
The debt brake, introduced in 2009, capped borrowing at 0.35% of GDP, much stricter than EU and U.S. budget rules.
Emergencies like the pandemic and Ukraine war led to repeated exemptions, but a late 2023 court ruling blocked further loopholes, triggering a budget crisis.
The reform removes borrowing caps for defence and establishes a €500 billion infrastructure fund for transport, hospitals, energy, education, and digitalization.
The move addresses security concerns, especially after the U.S. signaled a reduced role in European defence under Donald Trump.
Economists predict the changes could boost Germany’s economy, with revised growth forecasts of 0.2% in 2025 and 0.7% in 2026.
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