200 billion euros for rearmament: Is Merz daring to go against the will of the voters?

The election is barely over and Friedrich Merz is looking for money. During the election campaign, the designated new chancellor of the Union simply brushed aside all questions of financing. Now he is clearly noticing where the holes are. Ukraine , the German army, tax cuts - all quite expensive and impossible to finance under the normal rules of the debt brake .

In addition, in order to reform the debt brake or to decide on new special funds, he will have to rely on the votes of the Left in the new Bundestag. This is because the Union, SPD and Greens can no longer form a two-thirds majority for changes to the Basic Law. The result: The Union will have to deal with the incompatibility decision with the Left, the budget lawsuit against the traffic light coalition and its own zigzag course on the debt brake before it has even moved into the Chancellery!

The initial situation: That is why there is no money

Let's start with the initial situation. There is already a gap of 25 billion euros in the 2025 budget year, as current Chancellor Scholz mentioned during the big TV debate. Added to this are the Union's promised tax cuts, which various economic institutes have estimated at around 100 billion euros. Of course, the Union will not be able to implement all of the proposals with the SPD , and certainly not immediately in the first year, but anything other than a whopping double-digit billion euro amount in tax relief as part of the emergency program would be a surprise.

But things will get really tricky in the years that follow. The Bundeswehr's special fund of 100 billion euros will be empty by 2028 at the latest. Perhaps even as early as 2027. In order to meet the two percent NATO quota alone, at least 30 billion euros would have to be cut from the normal budget for defense. Given Donald Trump's current course, even larger sums for defense are realistic. Donald Trump recently demanded five percent of economic output from NATO partners, while Defense Minister Pistorius spoke of three percent. Every percentage point more means, roughly speaking, 40 billion euros more from the federal budget. For comparison: in 2024, Germany's total budget expenditure on defense amounted to around 71.75 billion euros.

In addition, starting in 2028, Corona loans of around 300 billion euros will have to be repaid over the next 31 years. This will further reduce the scope for maneuver under the debt brake by around nine billion euros per year.

Use old majorities in the Bundestag? This is how Merz could solve the money shortage

A reform of the debt brake is controversial within the Union. Berlin's Governing Mayor Kai Wegner (CDU) is in favor of it and Merz also left a few loopholes open during the election campaign, but the election manifesto contains a clear commitment to the debt brake. It would therefore be easier within the party to increase the special fund for the Bundeswehr. According to Bloomberg, there have already been initial discussions with the SPD on this. Apparently, the issue is another 200 billion euros.

The catch: This would only be possible with the majority of the old Bundestag. The Left would not support a special fund for the Bundeswehr. And: Using old majorities might still be legal, but would obviously be a ploy to ignore the will of the voters.

In order to secure the votes of the Left in the new Bundestag, Merz would have to negotiate and offer something. For example, to increase the special fund and extend it to infrastructure investments. Or to reform the debt brake so that expenditure on defense and investments in infrastructure are exempt from the debt brake. "It is out of the question in the near future that we will reform the debt brake," Merz said on Tuesday before a meeting of the CDU/CSU parliamentary group. This would be "quite extensive, difficult work."

Ukraine war: Merz could still activate the emergency clause

Whatever you do, the more money is spent outside the debt brake, the greater the scope for maneuver under the debt brake. The Left and the SPD should also be happy about this because it will reduce the pressure to cut the welfare state.

In addition, with the new government and a simple majority for the chancellor, Merz could activate the emergency clause of the debt brake with reference to the war in Ukraine . But that would only be an emergency solution and not a plan for the tasks from 2028 onwards. Or he could promote a new debt-financed fund for defence spending at EU level - similar to "NextGenEU". After all, all EU states will face similar financing problems when it comes to defence.

One thing is certain: Merz is already under pressure before he has even been elected chancellor. What is questionable, however, is whether the SPD, the Greens and the Left can use the pressure to negotiate a real reform of the debt brake out of financial difficulties. A historic opportunity!

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