Germany’s constitutional “debt brake,” introduced by Angela Merkel in 2009 to cap the budget deficit at 0.35% of GDP, is under scrutiny as political and economic pressures mount. Designed to ensure fiscal discipline, the rule now seems at odds with growing demands for public investment and a changing global landscape.
The debt brake has already contributed to the collapse of Chancellor Olaf Scholz’s coalition, with disagreements over budget constraints prompting the resignation of Finance Minister Christian Lindner and his Free Democratic Party (FDP). A snap election is expected in February 2024.
Reform of the debt brake is gaining traction, with the Bundesbank suggesting “moderately higher borrowing” to boost investment, and CDU leader Friedrich Merz—once a staunch supporter—indicating openness to adjustments for infrastructure spending. However, repealing or revising the law requires a two-thirds parliamentary majority, a challenging feat amid political divisions.
Advocates argue that softening the rule is critical as Germany’s economy grapples with industrial challenges and declining competitiveness. Critics, including right-wing AfD and Lindner’s FDP, resist changes, citing fears of fiscal irresponsibility.
While some European leaders suggest the debt brake has outlived its purpose, Germany remains cautious about relying on EU fiscal oversight. The debate reflects broader tensions between maintaining fiscal prudence and addressing urgent economic needs, with any resolution hinging on political consensus.
