Why Germany Finally Approved a €1 Trillion Defense and Infrastructure Package

After a delay of up to 15 months, Germany’s Bundestag passed a constitutional amendment yesterday (March 18, 2025) to lift the debt brake and increase defense spending by €1 trillion. Back in December 2023, Chancellor Olaf Scholz narrowly avoided government collapse by sealing a fragile agreement with the liberal party on how to plug a significant hole in Germany’s state budget without amending the constitution. However, this deal collapsed in November 2024 due to disagreements over whether to amend the constitution to relax the debt brake for increased defense spending. The election of Donald Trump in the U.S. accelerated these discussions as it signaled reduced support for Ukraine and an increased threat to Europe. Following the collapse of Scholz’s government, Friedrich Merz’s CDU was compelled to reverse its stance, leading to a final agreement just before yesterday’s vote. The package includes substantial investments in both defense and infrastructure, aiming to bolster European defense post-U.S. withdrawal threats and revive the German economy amidst economic downturns.