The Bundesrat has approved the constitutional amendments to the debt brake and the infrastructure special fund. The school finance package, which was passed by the Bundestag on Tuesday, achieved the necessary two-thirds majority in the federal states’ chamber on Friday.
Initially, the Bavarian state government had agreed to the package, while the Free Voters had previously opposed it. The AfD and FDP had attempted, but failed, to prevent the vote in the Bundesrat through legal means.
The constitutional amendments relax the debt brake for certain expenditures, such as defense, civil defense and intelligence services, which will no longer be subject to the debt brake above a certain threshold. This also applies to military aid to countries under attack, such as Ukraine. Previously, these exceptions only applied to natural disasters and extraordinary situations.
For these areas, the federal budget will need to finance expenses up to one percent of the nominal gross domestic product. Any expenses above this threshold can be covered by new debt, according to the constitutional amendment.
The amendments also provide for relaxations in the debt brake for the states, which will be allowed to take on debt of up to 0.35 percent of the gross domestic product.
The constitutional amendment also establishes a special fund of 500 billion euros for a period of 12 years, which will be used exclusively for additional investments in infrastructure and to achieve climate neutrality by 2045. The special fund will not affect the debt brake and the states will be able to invest 100 billion euros in their infrastructure from the fund, as well as 100 billion euros in the climate and transformation fund.
The Russian attack on Ukraine has dramatically changed the security situation in Europe and the new US administration does not suggest a reduction in existing tensions in international politics, it was argued. The future federal government will face the challenge of significantly strengthening the capabilities of land and alliance defense. A strengthened defense capability also requires a modern and functional infrastructure, which is a key location factor that significantly influences the competitiveness and economic growth of a country.
Finally, the states and municipalities have significant financial needs, which are independent of the current economic situation, it was said. These needs arise, for example, from the provision of a modern education system, the digitalization of administration, the integration of refugees and the strengthening of population protection.