By Andreas Rinke and Matthias Williams
BERLIN (Reuters) – Plans for Germany to unleash a massive increase in state borrowing faced new questions on Wednesday, with a co-leader of the Greens party non-committal about whether a deal could be done.
Election winner Friedrich Merz is racing to get debt reforms and a new 500-billion-euro ($545-billion) infrastructure fund through the outgoing parliament, which hinge on support from the Greens and could also be derailed by court rulings.
“Talks are underway now, and that’s a good thing,” Greens co-leader Franziska Brantner told Deutschlandfunk radio. But when asked whether a deal could be reached, she said: “I don’t know. We’ll see in the end.”
Merz has underlined his sense of urgency over increasing defence spending. After winning elections last month, he said it was “five minutes to midnight” for Europe, warning a hostile Russia and an unreliable U.S. could leave Europe exposed.
Merz wants to push through his plans in the outgoing parliament because in the new Bundestag they would be harder to pass with the necessary two-thirds majority. An enlarged contingent of far-right and radical left lawmakers is threatening to block them.
But the Greens have accused Merz of using European security as a pretext to fund measures to please his political base, such as tax cuts and restoring diesel subsidies for farmers.
Brantner doubled down on this point, saying the Greens wanted to prevent Merz using money for “short-term election gifts”.
COALITION AIMS
Investors and some economists have long urged Germany to reform its constitutionally enshrined state borrowing limits – known as the “debt brake” – to free up investment.
The reform would mark a rollback of borrowing rules imposed after the 2008 global financial crisis that many see as an outdated fiscal straitjacket.
Merz wants to amend the constitution so defence expenditure above 1% of economic output is exempt, and for a commission separately to develop proposals for broader debt brake reforms to boost investments permanently.
The plans won backing from economists polled by the Munich-based Ifo institute in a survey published on Wednesday. Out of 205 economists, 68% said debt brake exemptions for military spending were appropriate or very appropriate.
But the Greens’ parliamentary group instead has drafted a law that would foresee spending on “defence and security policy tasks” above 1.5% of gross domestic product exempt from the debt brake. Security is also defined more broadly.
Regardless of whether a deal with the Greens can be reached, the plans could also be derailed by legal challenges from the far right and radical left who want to block the old parliament from convening.
A Constitutional Court ruling could come on Wednesday or Thursday morning.
Separately Merz’s conservatives want to conclude a coalition deal with the SPD by the week starting April 14, sources told Reuters as working groups from both parties geared up for talks.
Merz and the SPD unveiled a preliminary deal towards a coalition last Saturday that promised to crack down on illegal migration and support struggling industries in Europe’s largest economy.
(Reporting by Andreas Rinke; Additional Reporting by Rene Wagner and Sarah Marsh; writing by Matthias Williams; editing by Christina Fincher)
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