On March 24, the Federal Law Gazette (Bundesgesetzblatt) of Germany published a constitutional amendment passed by both the Bundestag and Bundesrat, marking a historic adjustment to the long-standing “debt brake” principle. This reform grants the federal government greater fiscal leeway, establishing a special €500 billion fund aimed at boosting the economy, improving infrastructure, and supporting climate initiatives. More notably, expenditures related to national defense, civil protection, intelligence, cybersecurity, and aid to Ukraine are now exempt from debt limitations. This means the government can incur debt even when spending exceeds 1% of nominal GDP.
The amendment’s swift passage reflects Germany’s strategic shift under the pressure of multiple overlapping crises—from being a model of fiscal discipline to adopting a more pragmatic and flexible path. However, this transformation has ignited debate about fiscal ethics, Germany’s military reorientation, and geopolitical balance in Europe. How Germany will navigate these new challenges after “releasing the brake” has become a widely discussed issue.
On April 9, 2025, the CDU/CSU alliance and the SPD concluded coalition negotiations and held a press conference in Berlin, Germany, to introduce the joint government agreement they had reached.
Rapid Constitutional Reform Amid Procedural Controversies and Political Maneuvering
For years, the “debt brake” was a source of national pride for Germany, symbolizing sound fiscal management. However, new and old challenges—including the Ukraine crisis, the energy crisis, the Trump administration’s push to disengage from Europe, and aging infrastructure—have pushed the German government to break through fiscal constraints to meet urgent needs. Though debates had simmered for years, it was the political shift following the February federal election that ultimately enabled the reform. During the campaign, Christian Democratic Union (CDU) leader and chancellor-designate Friedrich Merz staunchly advocated for upholding the “debt brake.” Yet after winning, he quickly reached a compromise with his former rivals—the Social Democrats (SPD) and the Greens—to form a cross-party coalition and push forward the amendment.
This U-turn drew sharp criticism from opposition parties, which accused Merz of “betraying voters” and violating procedural norms. Nevertheless, with support from caretaker Chancellor Olaf Scholz and the Greens, Merz successfully overcame resistance to achieve one of the fastest constitutional reforms in German history: from an expert hearing and first reading on March 13 to the amendment taking effect on March 24—just 11 days in total.
The urgency stemmed from a narrow time window. The new parliament was scheduled to be sworn in on March 25, where the three parties would no longer command the two-thirds majority required to amend the constitution. Thus, the coalition had to act before the parliamentary transition. Supporters described this as “seizing a historic opportunity.” Merz laid a solid fiscal foundation for his upcoming term, strengthening defense and speeding up economic recovery. However, questions regarding procedural legitimacy remain. Some MPs reported that consultations were rushed, offering little time to evaluate the amendment’s content or implications. Opposition parties’ accusations of procedural violations even risked constitutional court review. Legal scholars commissioned by the CDU argued that despite the amendment’s significance, its content was straightforward and required little deliberation. Economists predicted the reform would boost Germany’s GDP by 0.7%, helping the stagnant economy regain momentum. These expert endorsements played a key role in expediting the process.
Economic Growth Prospects vs. Intergenerational Justice Concerns
Germany’s Basic Law, enacted in 1949, has been amended over 70 times, each signifying a strategic turning point. The “debt brake” clause, introduced in 2009, enshrined budget discipline in the constitution, stating that federal and state budgets should generally be balanced without borrowing, and that federal debt should not exceed 0.35% of GDP. The goal was to ensure “intergenerational justice” and prevent vote-seeking parties from distributing unsustainable benefits.
Finance Minister Wolfgang Schäuble, a key architect of the clause, pledged not to let the current generation live at the expense of future ones. The goal of “black zero” (balanced budget) became a political doctrine. Germany took pride in being fiscally virtuous and promoted similar austerity policies across the EU. During his campaign, Merz echoed Schäuble’s ideals, stating that “black zero is a matter of credibility.” For years, mainstream parties deemed fiscal restraint politically correct, branding any opposition as irresponsible.
In practice, however, the government has borrowed for years, drifting further from the “black zero” goal. The “debt brake” has increasingly been seen as ideological and unrealistic. Rather than ensuring fairness between generations, it has arguably hindered future investments and exacerbated intergenerational inequity. Chronic underinvestment in infrastructure has left Germany lagging—Deutsche Bahn’s punctuality rate fell to just 62.5% last year, sparking public frustration and international ridicule.
Merz described the challenges facing his government as unprecedented, requiring bold, unconventional actions. He called on the public to understand his change of stance. Business leaders welcomed his shift, praising his sense of responsibility. Critics, however, accused him of political inconsistency and jeopardizing the country’s long-term prospects. They fear a repeat of past debt crises experienced by German states in the 1970s and after reunification.
International reactions have been largely positive. The U.S., France, the U.K., and several EU countries have long urged Germany to relax its debt policy and invest more in the economy to support global recovery. International markets responded enthusiastically, with both equities and bonds rallying on the news.
A Stronger Military, But the Paradox of “Peace Through Strength” Remains
While Germany’s increased economic spending was welcomed, most countries—except the U.S.—reacted more cautiously to the boost in military funding. An Eastern European official remarked that the region has historically faced dual security threats from both Russia and Germany. Although they welcome Germany taking greater responsibility against Russia, they are also wary, as a stronger Germany has not historically brought prosperity or security to its neighbors.
Germany’s military resurgence under constitutional reform will be closely scrutinized, particularly by its eastern neighbors, as any action could evoke historical anxieties. History seems to echo: in 1956, Chancellor Adenauer, citing Soviet threats and backed by the U.S., amended the constitution to establish the Bundeswehr and conscription. Though “remilitarized,” Germany maintained restraint. Sixty-nine years later, Germany again invokes the Russian threat—and the impact of Trump-era U.S. policy—as justification for relaxing fiscal constraints and rearming. This marks a departure from postwar military restraint, aiming to secure peace through strength.
Shortly after the end of World War II, the United States shifted from disarming Germany to rearming it, in response to the growing need to counter the Soviet Union. In February 1950, the U.S. Joint Chiefs of Staff advised the Truman administration that rearming Western Europe was critical for defending against the Soviet threat. They argued it was essential to ensure that German labor and resources would become a constructive force for the free world, rather than once again posing a separate threat—or even one aligned with the Soviet Union. To achieve this, U.S. policy toward disarming and demilitarizing West Germany needed to be revised. The U.S. adopted a strategy of "combining defense and control" toward Germany, aiming to prevent a Soviet-German alliance and to lay the foundation for a U.S.-led European security system.
West German Chancellor Konrad Adenauer, for his part, seized the opportunity to leverage Germany's strategic value in exchange for sovereignty and national interests. He adeptly balanced two strategies—“peace through economy” and “peace through strength.” On one hand, he fully engaged in France’s economic integration strategy, addressing France’s desire to bind Germany through economic fusion and to assert leadership in Europe. On the other hand, he resolutely responded to American requests by accelerating rearmament, committing to taking on “Western Europe’s defense responsibilities,” countering the “Soviet threat,” and “defending Western Christian values.” Interestingly, both the Korean War (which erupted in 1950) and the Ukraine crisis (which began in 2022) served as critical turning points in Germany’s defense strategy adjustments.
Adenauer’s remilitarization policy, however, faced fierce opposition across West German society, including dissent within his own party. In 1950, Interior Minister Gustav Heinemann resigned in protest, arguing that rearmament merely served the global arms race between the U.S. and the USSR and did not align with West Germany’s interests. He warned that rearming would provoke a Soviet response, increase the risk of war, and entrench Germany’s division. He predicted that expanding West German military power would backfire. Later German scholars argued that Heinemann’s warnings were validated by the Berlin Wall crisis and the Cuban Missile Crisis in the years that followed. From a historical perspective, it is clear that strengthening Europe’s military capabilities has often led to a deterioration in security. The Ukraine crisis once again turned Europe into a battleground, signaling the collapse of the U.S.-led postwar European security architecture and casting serious doubt on the doctrine of “strength ensures security.”
Germany has amended its constitution and loosened the “debt brake,” providing ample funds for infrastructure construction and economic development. A rebound in the German economy now seems likely, which is encouraging for both Germany and the global economy. As for concerns that Germany may lose its frugal character and fiscal discipline, such worries may be overstated. Compared with other major Western economies, Germany still has the lowest debt ratio and remains in good fiscal health. The deeper concern is that, with ample funds, governments at all levels may lack the incentive for reform. The long-accumulated need for structural reform could be postponed, causing Germany to miss the opportunity for institutional innovation and sustainable development. A larger question looms: Will Germany become militarily "flush with cash"? Can Europe finally break the historical curse of “strong armies leading to war”? Many neighboring countries harbor historical memories and anxieties. Berlin finds itself in a dilemma: if it exercises restraint in security matters, allies accuse it of inaction and irresponsibility; but once it takes action, its neighbors perceive it as aggressive and invoke historical grievances. Whether Germany should do more or less in security affairs, and how it can use its improved fiscal position to push forward structural reforms while ensuring vitality and long-term stability—these are all major tests of German political leadership and wisdom.
Germany has amended its constitution to loosen the “debt brake,” unlocking ample funding for infrastructure development and economic growth. A recovery of the German economy is now foreseeable—an encouraging sign for both Germany and the global economy. As for concerns that this might lead to a loss of Germany’s traditional frugality and fiscal discipline, there is little cause for alarm. Compared with other major Western economies, Germany still has the lowest debt ratio and maintains a sound fiscal position. The deeper issue lies in the potential consequences of large-scale borrowing: with sufficient funds at all levels of government, the drive for reform may diminish. Long-standing structural reform needs could be postponed, causing Germany to miss opportunities for institutional innovation and sustainable development. An even greater concern is whether Germany will become “militarily extravagant,” and whether Europe can finally break the historical curse that “military strength leads to war.” Many of Germany’s neighbors carry historical memories and anxieties in this regard. Berlin faces a dilemma: in security affairs, excessive restraint leads allies to accuse it of inaction and irresponsibility; but any assertiveness risks being perceived by neighboring allies as aggressive, even invoking historical grievances. Whether Germany should take a more active or more restrained role in security matters, and how it can use its improved fiscal capacity to advance structural reforms while ensuring long-term vitality and stability—all these are critical tests of German political leadership and wisdom.
Author | Jiang Feng, Research Professor at Shanghai International Studies University, Chairman of Council of Shanghai Academy of Global Governance and Area Studies
Source | Global Times, Issue 9, 2025
Translated and reviewed by Zhang Yangyang with AI translator
