Bundestag gives nod to more debt and special fund
The Bundestag passed a controversial reform of the debt brake enshrined in the German Basic Law with the required two-thirds majority on Tuesday. This clears the way for a massive boost in defence and security spending and the creation of a special fund for infrastructure and climate protection measures – provided the Bundesrat also approves the plan on Friday. The press is at odds over the move.
Appropriate under the circumstances
La Stampa welcomes the decision:
“Ever since the introduction of the euro, German governments have been accused of pursuing a far too cautious fiscal policy. The belief is widespread that this has prevented Germany from renewing its public infrastructure and limited the growth of aggregate demand at the European level. Such criticism doesn't only come from economists, but also from politicians in traditionally less virtuous countries such as France, Italy and Spain. Yesterday the Bundestag made a significant breakthrough. ... This reform shows that the Germans are willing to deviate from the principles of fiscal discipline in certain exceptional circumstances.”
Now we need results
This government must prove that this can work, the Neue Zürcher Zeitung explains:
“Policies are not effective simply because they're written down on paper. The real feat lies in their implementation. If the black-red coalition wants to stabilise the now precarious trust in German democracy, it must brutally focus all its efforts on results. Only if the Bundeswehr really grows, only if the railways actually run on time again, only if the economy is freed from its bureaucratic shackles, and only if illegal immigration visibly decreases will it be able to repay its political mortgage by 2029.”
SPD and Greens came out winning
Chancellor candidate Friedrich Merz is paying a very high price for forming a government, notes Die Welt:
“The super debt deal is exactly what the SPD and Greens always wanted during the time of the traffic light coalition – and what the FDP and CDU/CSU prevented for good reason. This deal, which is now being made possible by an amendment to the Basic Law, bears the hallmarks of the SPD and Green parties, the other two partners of that coalition, which were voted out of office less than a month ago. Rarely have the SPD and Greens pushed through as much as they have in the face of this defeat. And what did the CDU/CSU get in return? Very little. Far too little.”
Budgetary discipline is preventing economic upturn
Without change at the ideological level a major economic recovery remains unrealistic, economist Serge Besanger writes in The Conversation:
“The success of the project will depend on [Merz's] ability to balance growth and fiscal discipline in an increasingly uncertain environment. ... In France, the influence of Keynesian theories remains predominant. ... By contrast, Germany has a long-standing tradition of budgetary discipline and fiscal austerity. ... As long as this ordoliberal doctrine prevails, it would be illusory to hope for a strong German economic recovery based on massive government spending.”