The agreement between centrist parties, led by the likely next chancellor, Friedrich Merz, was billed as a response to America’s shrinking security guarantees.
Friedrich Merz, the likely next chancellor of Germany, announced on Friday that he had cut a deal with the Green Party to allow extensive new government spending for defense, infrastructure and projects related to climate change, appearing to seal the votes for a stunning turnabout in German fiscal policy before he even takes office.
The deal, which Mr. Merz announced after days of negotiations, paves the way for a vote early next week to pass measures that are billed as a response to President Trump’s moves to pull back American security guarantees for Europe.
The measures would lift Germany’s hallowed limits on government borrowing as they apply to military spending. It would exempt all spending on defense above 1 percent of the nation’s gross domestic product from those limits, and it would define “defense” broadly to include intelligence spending, information security and more. Effectively, that would allow Germany to spend as much as it can feasibly borrow to rebuild its military.
“There will no longer be a lack of financial resources to defend freedom and peace on our continent,” Mr. Merz said, adding: “Germany is back. Germany is making a major contribution to defending freedom and peace in Europe.”
To win support from the Greens and from the center-left Social Democrats, who are in negotiations to join Mr. Merz in the new government, Mr. Merz and his center-right Christian Democrats agreed to a pair of large new domestic spending funds.
One, financed with borrowed money excluded from the constitutional debt limit, would spend 500 billion euros (approximately $544 billion) over the next dozen years to improve dilapidated infrastructure, an investment that economists have long said Germany needs to kick-start an economy that shrank last year.
A second fund would spend 100 billion euros to address climate change — the major demand of the Greens, who earlier this week threatened to block Mr. Merz’s measures in Parliament. It would be endowed from the infrastructure fund.
Mr. Merz called the agreement “a good result acceptable to all parties involved.”
Jim Tankersley is the Berlin bureau chief for The Times, leading coverage of Germany, Austria and Switzerland. More about Jim Tankersley