Germany Plans Record €850 Billion Debt for Infrastructure, Defense by 2029

Germany's new government, led by Chancellor Friedrich Merz and Finance Minister Lars Klingbeil, has committed to an unprecedented borrowing plan to address severe infrastructure deficits, allocating approximately 850 billion euros in new loans by 2029, including 115 billion euros for 2025 alone. This massive investment aims to revitalize aged roads, bridges, schools, and digital infrastructure while also increasing defense spending to strengthen the Bundeswehr. However, this fiscal strategy marks a significant departure from Germany's traditional debt brake policy, with net borrowing expected to exceed the Maastricht deficit limit of 3 percent of GDP, effectively abandoning previous budgetary constraints. Critics warn that this return to debt-financed stimulus reflects a political capitulation that risks constitutional confidence and signals troubled economic times ahead, especially as social expenditures rise disproportionately. While the investment boost is seen as necessary to stimulate a weakening economy and support Europe's broader recovery, experts emphasize that regulatory reforms in Berlin are essential to ensure the long-term effectiveness and sustainability of these spending plans. The coalition government, formed after elections in early 2025, is relying heavily on borrowing and special off-budget funds to finance these initiatives, showcasing a new era of expansive fiscal policy in Germany.