Chancellor-in-waiting Friedrich Merz has unveiled a plan for significant constitutional changes intended to increase Germany's defense and infrastructure spending, driven by evolving global geopolitical conditions.

Merz, leading the center-right Christian Democratic Union (CDU), is under pressure to reach a political consensus by March 25, 2024, before a new Bundestag configuration could complicate legislative efforts.

The impetus for Merz's proposals arises from eroding confidence in U.S. military support, particularly in light of recent foreign policy actions, including former President Donald Trump’s withdrawal of military aid to Ukraine and his calls for Europe to take greater responsibility for its own security against potential Russian aggression.

Merz advocates for a modification of Germany's fiscal policy framework known as the debt brake, which restricts structural budget deficits to 0.35 percent of gross domestic product, allowing for exemptions on defense spending above 1 percent of GDP. He also urges the European Union to relax its budget regulations to support increased military expenditures across Europe.

Merz stated, "In view of the threats to our freedom and peace on our continent, 'whatever it takes' must now also apply to our defense," referencing a well-known phrase of former European Central Bank president Mario Draghi.

Historically, Germany has maintained strong fiscal discipline, particularly during the eurozone debt crisis, resisting calls for greater expenditure from countries like Greece and Italy.

However, the current proposals represent a notable shift in policy, largely influenced by recent global security changes.

The CDU secured electoral victories last month, which positions Merz's party in negotiations with the likely coalition partner, the Social Democratic Party (SPD), on a package designed to enhance defense capabilities and stimulate the economy.

Boris Pistorius, SPD’s Defense Minister, described the coalition agreement as a historic commitment to a more significant role for Germany within NATO and broader European security frameworks.

In addition to boosting defense capabilities, the proposed agreement includes the establishment of a €500 billion special fund aimed at infrastructure projects over the next decade, which is expected to address signs of economic stagnation in Germany.

Economists regard the proposed financial strategies as potentially transformative, yet they emphasize the importance of clear implementation details.

Robin Winkler, Chief Economist at Deutsche Bank Research, highlighted the significant ramifications of these reforms for Germany’s fiscal approach.

To enact the proposed changes, Merz's coalition must secure a two-thirds majority in the outgoing Bundestag by the March deadline, or risk enabling opposition from the Alternative for Germany party and the Left party, both of which have criticized increased military spending.

Reaching an agreement will necessitate negotiations with the Greens, who have indicated conditional support that includes additional funding for climate initiatives and amendments to the debt brake.

Green parliamentary leader Katharina Dröge remarked that the approval of any proposed deal remains uncertain.

Additionally, constitutional amendments require a two-thirds majority in the Bundesrat, representing Germany's 16 federal states.

The Left party has signaled its intention to challenge the legality of any agreement reached prior to the new Bundestag's inauguration, citing constitutional concerns.

Internally, Merz faces opposition within his party, particularly from the youth wing of the CDU, where criticisms have emerged regarding the motivations behind his shift in fiscal policy.