(de-news.net) – Four Green state finance ministers have proposed an alternative reform of Germany’s constitutional debt brake after a government expert commission failed to reach consensus. While Chancellor Friedrich Merz has expressed skepticism about another constitutional amendment, the debate continues, with Finance Minister Lars Klingbeil supporting reform and economist Veronika Grimm urging greater fiscal restraint.
Following the failure of the expert commission established by Federal Finance Minister Lars Klingbeil to reach agreement on a common reform proposal, four Green state finance ministers have presented their own framework for updating Germany’s constitutional debt brake. In a joint position paper, Danyal Bayaz of Baden-Württemberg, Björn Fecker of Bremen, Gerald Heere of Lower Saxony, and Silke Schneider of Schleswig-Holstein argued that, after nearly a year of deliberations, the commission had been unable to develop recommendations capable of attracting broad support among its members. They said the initiative reflected the perspectives of Green finance ministers serving in different coalition governments and was intended to contribute constructively to the broader debate over Germany’s fiscal framework.
The proposal envisions a gradual phaseout of the temporary exemption for defense spending from the debt brake during the 2030s rather than maintaining the exception indefinitely. At the same time, the ministers advocate expanding the structural borrowing limit for the federal and state governments from the current combined ceiling of 0.7 percent of gross domestic product to 1 percent beginning in 2036, once the 500 billion euro infrastructure fund expires. They also support introducing multi-year emergency declarations that would allow borrowing limits to be suspended during exceptional crises, such as the COVID-19 pandemic, providing governments with greater flexibility while preserving the overall constitutional framework.
The proposal enters a debate that has become increasingly central to Germany’s fiscal and economic policy, balancing demands for long-term investment with concerns about maintaining budgetary discipline. Supporters argue that additional borrowing capacity could help finance future-oriented investments, while preserving clear constitutional limits intended to safeguard fiscal sustainability.
Chancellor Friedrich Merz (CDU), however, has tempered expectations that another constitutional amendment to the debt brake will be completed during the current legislative term. He has indicated that both the political and procedural hurdles remain exceptionally high and suggested that the expert commission is unlikely to deliver a unified recommendation. Without agreement within the governing coalition, he noted, any constitutional amendment would also require support from the Greens and additional members of parliament to secure the necessary two-thirds majority, making another revision difficult under current political conditions.
Competing fiscal visions shape Germany’s debt-brake discussion
Before the 2025 federal election, Merz pledged to preserve the debt brake in its existing form. Following the election, however, he reached an agreement with the SPD to establish a 500 billion euro debt-financed infrastructure fund while exempting defense expenditures from the borrowing limits. He later acknowledged that the policy shift had affected his political credibility but argued that the decision was justified because Germany’s top sovereign credit rating remained secure, allowing the government to pursue investments without undermining confidence in the country’s public finances.
Vice Chancellor and SPD leader Lars Klingbeil has nevertheless reaffirmed his commitment to pursuing reform of the debt brake despite the commission’s inability to produce a consensus proposal. His position reflects the government’s broader objective of finding a fiscal framework capable of supporting long-term investment while maintaining constitutional safeguards.
Economist Veronika Grimm, a member of the German Council of Economic Experts, has taken a different view, arguing that it would be preferable to leave the existing framework unchanged rather than weaken it further. She has maintained that recent constitutional amendments had already substantially reduced the practical constraints imposed by the debt brake and warned that public debt was increasing rapidly without a sufficiently credible strategy to reverse that trend. Grimm supported gradually eliminating the open-ended exemption for defense spending, either by introducing a borrowing cap or by requiring an increasing share of defense expenditures to be financed through the regular federal budget over time. At the same time, she argued that such adjustments should not be accompanied by broader relaxation of fiscal limits in other areas of public spending.
Germany’s debt brake, embedded in the country’s constitution, limits the Federal Government’s ability to incur structural borrowing and has long served as a cornerstone of its fiscal policy. As part of their coalition agreement, the CDU/CSU and SPD committed to establishing an expert commission tasked with developing proposals that would enable additional long-term investment while preserving the constitutional framework. The coalition had originally envisioned completing the necessary legislation by the end of 2025. Although the commission has so far been unable to reach a common position, the competing proposals now emerging from political leaders and economic experts suggest that the debate over the future of Germany’s fiscal rules is likely to remain an important element of the country’s economic policy agenda.