Germany – Agreement on Debt Brake Relaxation: What Berlin’s ‘Return’ Means

The effort of CDU-SPD to pass the constitutional amendment relaxing the debt brake received a double green light on March 13, 2025. Firstly, an agreement was reached between CDU-SPD and the Greens for economic measures (key element being the extension of the debt brake relaxation to support Ukraine and protect citizens), securing the necessary two-thirds majority in parliament. Secondly, the German Constitutional Court rejected the appeal by AfD and The Left, which argued that the old parliament lacked the authority to vote on constitutional changes after a new one had been elected. Thus, the pending CDU-SPD coalition can now proceed with the historic agreement to relax the debt brake from 0.35% to 1% of GDP for rearmament purposes, marking the first time since WWII. The relevant vote in the Bundestag is scheduled for Tuesday, March 18, 2025, followed by the Bundesrat vote on March 21, 2025. Germany will become the first EU member to vote on increasing defense spending post-European Commission President Ursula von der Leyen’s announcement of an €800 billion defense package. Final decisions on the Euro-defense package are expected at the June 26-27 NATO summit in The Hague, Netherlands. After these votes, government formation is anticipated, with specialized exploratory talks between CDU and SPD commencing across 16 policy areas. These discussions aim to conclude by March 23, 2025, paving the way for a new cabinet under Merz, likely receiving a confidence vote by mid-April 2025.