Bundestag adopts historic fiscal package - including amendment to the German Constitution

On Tuesday, 18 March 2025, the Bundestag voted in favour of easing the so-called “debt brake” and creating a new special fund. The Bundesrat approved these plans on 21 March.

Despite urgent applications to the Federal Constitutional Court [BVerfG] by members of the Left Party, the BSW, the FDP and the AfD against the convening of the special session and the initial rejection by the Greens, the Bundestag has passed the billion-euro financial package.

Since several amendments to the German Constitution [Grundgesetz] are required for this, a two-thirds majority of the Bundestag was needed. A total of 512 MPs voted in favour of the amendments, while 206 voted against.

Loosening of the debt brake for defence spending

The federal government can finance defence spending of one per cent of gross domestic product or more – approximately 43 billion euros – through loans. The debt brake does not apply to this defence spending, which also includes funds for civil defence and civil protection, intelligence services and support for states attacked in violation of international law (e. g. aid to Ukraine).

Special fund for infrastructure and climate protection

The decision also includes a new special fund for investments in infrastructure, with its own credit authorisation of up to 500 billion euros. The special fund is to run for twelve years, with 100 billion in funding going to the federal states. A further 100 billion is earmarked for climate protection and the climate-friendly transformation of the economy and will be channelled into the existing Climate and Transformation Fund (KTF).

The authorisation to establish this special fund is to be included in a new Article 143h of the German Constitution, which will explicitly reinforce the intention to achieve climate neutrality by 2045 in the German Constitution for the first time.

New debt brake for the federal states

In future, Germany’s federal states will be able to take on debt amounting to 0.35 per cent of gross domestic product (approx. 15 billion euros). Previously, the federal states were not allowed to take on any new debt. A federal law is to distribute the authorised borrowing among the federal states.

Climate protection target included in the German Constitution

The explicit inclusion of Germany's climate neutrality by 2045 in the Constitution is a first, but the legal consequences remain modest. The inclusion in the German Constitution is primarily declaratory. With this amendment, the Bundestag confirms the statements from the Federal Constitutional Court's climate protection ruling of 24 March 2021, but links it only to a new credit framework and not to a new enforceable national goal of "climate neutrality". It remains to be seen how the planned Article 143h of the Basic Law will be interpreted in practice. However, it is not foreseeable that this amendment to the German Constitution will directly increase the chances of climate lawsuits and that infrastructure projects will be at greater risk of being blocked.

Outlook

The fiscal package creates considerable scope for investment in defence, infrastructure and climate protection in order to boost the economy and strengthen Germany's competitiveness. It remains to be seen how these incentives will work in practice. Now it is up to the Bundesrat and the newly formed government to make meaningful use of the leeway.

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