The upcoming German advisor intends to modify the “debt curb” system

For years, Germany’s aversion to debt was a goal, which led to a lack of investment in defense and infrastructure, and the heaviest of the local economy and the European economy as a whole.

But although he will not become a consultant until a few weeks later, Friedrich Mertz, who won the German elections on February 23, just succeeded in reviving his country’s economy with a bold and worthy step.

On the fourth of March, Mertz revealed plans to make two amendments to the “debt curbing system”, a constitutional matter since 2009, allowing the government to manage a very small structural deficit, and that Parliament is called to vote on these two amendments next week.

Noting that the change is really underway, the returns of German bonds have increased, as strong investors began to assess borrowing opportunities.

Infrastructure

The first reform will create a fundamental infrastructure fund from the debt curbing system of 500 billion euros, over a period of 10 years, an increase equal to about 1% of Germany’s gross domestic product annually. This would move the economy in time. Germany has been in stagnation in the past two years, and it is accelerating with almost a zero growth this year as well.

The country’s gross domestic product is exactly what it was five years ago, before it hit the Koruna. “Slow” Germany reduces the demand throughout the continent.

Defense spending

The second proposal of Mirtz, which was also agreed upon by Christian Democrats and Social Democrats, who are leading the outgoing government, and who are now with coalition talks are more important. It provides for the exemption of any defensive spending exceeding 1% of the gross domestic product of debt curbing procedures completely.

This opens the way for the strongest economy in Europe to do what he had to do for a long time. Germany can now start re -armament to the level that enables it to play the full role in the changing scene of the European defense, which requires its size and geographical location.

Important step

The removal of debt curb is not the same to spend more money. But Mertz and Social Democrats did not take this important step certainly until after planning to do this specifically. Germany is currently spending only 2% of GDP on defense, which is nearly a goal set by NATO (NATO) for the first time in 2014, but the government did not take it seriously before Russia launched a war against Ukraine in 2022.

A new goal of the NATO defensive spending has not yet been determined, but most observers believe it is coming. It may be about 3.5% of GDP, and perhaps a little more.

In the Cold War, European countries were usually spent between 4 and 5%, and Europe again in a state of conflict.

During the era of US President Donald Trump, America no longer seems to be reliable, so Europe must take care of its own defenses. This requires Germany to spend more money and spend it effectively, which was not in the past.

Constitutional order

Because curbing debt is a constitutional matter, its amendment requires the majority of two -thirds in Parliament. Hence the urgent need, as the right -wing “alternative for Germany” party opposes any change in the rules, as the extremist left party opposes any additional spending on defense. The two parties have achieved good results in the elections, and they will together get more than a third of the seats in the new parliament, which constitutes a broken minority, so the changes must take place now, before the new parliament has the constitutional oath on March 25. This is largely unconventional, especially since Mertz did not talk about this during his campaign, but these are not traditional times. About “Economist”

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Awake the giant

Germany was a giant asleep, but the upcoming advisor Fredchich Mertz is currently working to awaken him, as there may be more in the future, as the new coalition in the country also talks about more reforms in the field of debt curbing, which means more spending on other areas that suffer from lack of financing.

. Germany is currently spending only 2% of GDP on defense, which is nearly a goal set by “NATO”.

. During the Trump era, America no longer looks to be reliable, so Europe must take care of its own defenses.