Germany’s $1.2 Trillion Debt Bazooka Is Veering Off Target
The A45 highway bridge near Luedenscheid, Germany, reopened recently following extensive construction work — shown here in March 2025. If Germany’s fiscal splurge is invested wisely, modernization efforts like this can help boost the economy’s potential.
Photographer: Alex Kraus/BloombergFriedrich Merz won plaudits for ending Germany’s obsession with fiscal restraint to help the country fix up its decrepit infrastructure and rearm. I’m starting to doubt whether this roughly €1 trillion ($1.2 trillion) spending splurge will deliver an enduring economic recovery.
If investments are well targeted, the chancellor’s decision to overhaul the constitutional debt brake — which previously restricted structural net borrowing to 0.35% of gross domestic product — could end six years of stagnation and boost the chances of long-term growth. The main elements of the fiscal U-turn comprise a €500 billion infrastructure fund to be disbursed over 12 years, plus unlimited borrowing for any defense spending that exceeds 1% of GDP.