In a critical week for Germany, a coalition government looks set to be formed by the center-right Christian Democrats (CDU), their Bavarian counterpart the Christian Social Union (CSU), and the center-left Social Democrats (SPD). The pivotal moment came on March 18, 2025, when likely new Chancellor Friedrich Merz from the CDU made significant concessions to the Greens to secure a massive investment package. Merz’s ambitions hinge on an unprecedented €500 billion in additional debt to fund infrastructure projects, necessitating a constitutional amendment that required a two-thirds majority in both chambers of the Bundestag.
The support of the Greens was essential to advance this plan, especially following their losses in the February federal election that relegated them to opposition status. The agreement struck on March 18 saw the Green party successfully push for €100 billion to be allocated to the Climate Transformation Fund (Klima Transformationsfonds). According to reports, the special fund will be directed towards “investments in infrastructure and for additional investments to achieve climate neutrality by 2045.” This inclusion has stirred debate among conservatives and the business community regarding whether climate goals will overshadow other infrastructure needs.
Former judge at the Federal Constitutional Court Udo Di Fabio believes that the wording does not equate to a state objective of climate protection. He noted, “This does not result in a state objective of climate protection with a commitment to climate neutrality by 2045.” Christian Calliess, a professor of Constitutional and Environmental Law at the Free University of Berlin, echoed this sentiment, stating that the existing “state objective of environmental protection” already encompasses climate protection.
As the Greens celebrated a significant victory—their most substantial since they joined a coalition with the FDP and SPD in 2021—they reflected on their previous struggles to secure funding for climate projects, particularly after the 2023 court ruling that quashed their plans for reallocating pandemic relief funds. The recent coalition negotiations underscore the shifting dynamics of power within the German political landscape, particularly with the far-right Alternative for Germany (AfD) party gaining traction.
In a separate issue, the Bundestag also took historic action by voting to amend Germany's constitution to allow for a debt-financed investment package potentially exceeding €1 trillion, aimed at enhancing military spending and upgrading aging infrastructure on March 18, 2025. This decision loosens Germany’s strict budget rules, referred to as the “debt brake,” enabling greater borrowing flexibility for the incoming government.
During the vote, which took place before the new parliament was seated, 720 lawmakers participated, with 513 in favor and 207 against the proposed amendments. Merz justified the need for increased military spending by emphasizing the threat posed by Russia, stating, “We have for a decade felt a wrong sense of security.” His remarks also pointed to a broader need for Europe to reduce its reliance on the U.S. for defense capabilities, suggesting this initiative was merely the beginning of a new European defense community.
The amendment encompasses provisions for exempting military and Ukraine-related aid from the budget constraints of the debt brake, thereby facilitating a significant €500 billion allocation for infrastructure developments, including €100 billion earmarked for climate and energy transition projects. Christian Dürr, leader of the pro-business Free Democrats, criticized the proposal as a “starting signal for unrestrained debt creation,” suggesting it sacrifices long-term stability for short-term gains.
After the Bundestag vote and with a coalition poised to form under Merz, the upper chamber, the Bundesrat, now must approve these changes. The urgency of this legislation is heightened by imminent EU discussions on defense and economic competitiveness slated to begin shortly.
Compounding the transportation challenge in Berlin, as early as March 19, 2025, a two-day strike by workers at the Berliner Verkehrsbetriebe (BVG) was initiated by the Verdi trade union, demanding significant salary increases. This strike has disrupted public transport, affecting subways, trams, and buses with only S-Bahn and regional trains continuing to operate. The BVG's counter-offer, which included incremental raises of €240 in 2025 and an additional €135 in 2026, fell short of the union's minimum demand of €750 per month.
As government plans unfold, issues like the transit strike coupled with monumental spending initiatives highlight the complex landscape shaping Germany’s immediate future. As the coalition partners finalize their agreements, attention turns to the challenges ahead, from managing public resources to ensuring social stability against a backdrop of significant national and global shifts.
In the larger geopolitical context, Germany's leadership is also responding to critical security issues. Recently, Chancellor Olaf Scholz expressed concerns following reports of renewed Israeli airstrikes in Gaza, stating, “We are greatly concerned about the civilian casualties in Gaza now that fighting has resumed there.” The ongoing violence raises imperative questions about humanitarian crises in conflict zones and the implications for Germany's foreign policy.
The economic landscape is gearing up for formidable changes as companies like Siemens announce extensive job cuts—with approximately 2,850 of the projected 6,000 cuts occurring in Germany—highlighting the ongoing pressures businesses face amidst rising costs and competition. As challenges mount for both workers and policymakers, their ability to navigate these significant transitions will be pivotal for the future stability and prosperity of Germany.
