# The Guardian view on Merz’s U-turn on debt: Germany responds to the signs of the times

The chancellor-elect’s proposals for gamechanging spending on defence and infrastructure are the right response to a new era

Three days after Russia’s invasion of Ukraine in February 2022, the German chancellor, Olaf Scholz, created a £100bn special fund to modernise Germany’s armed forces. Vladimir Putin’s aggression, he  a stunned Bundestag in explanation, meant that Europe was living through a _Zeitenwende_, or turning point.

Mr Scholz was right. But it has taken the return of  to the White House to lay bare the full scale of the emerging threat to European values, security and economic interests. For leaders across the continent, the dawning realisation of what Trump 2.0 means for the transatlantic alliance constitutes a second historic moment of jeopardy and decision.

Crucially, Mr Scholz’s centre-right successor-in-waiting, Friedrich Merz, appears ready to act accordingly. Mr Merz won February’s snap  on a manifesto that would have boxed in state spending on both defence and a stagnating economy. But on Tuesday he  to quite spectacular effect, unveiling a proposal to change Germany’s Basic Law to permit huge debt-financed investment in the military and the economy.

In a famously cautious political culture, Mr Merz’s bid to bypass legal restrictions on government debt represents a . It would permit a step-change in defence spending for years to come, putting Germany in a leadership position as Europe seeks strategic autonomy from the United States.

This would not, however, come at the expense of vital investment in other areas. The proposed deal, if passed by the outgoing Bundestag next week, would also incorporate Social Democratic party (SPD) demands for spending on economic and social infrastructure. This would be channelled through a €500bn special fund, also to be financed by borrowing.

, a former investment banker, has been a deficit hawk and economic liberal throughout his career. It is an irony of fate that it should fall to him to challenge the debt-aversion that has hobbled Germany’s ability to react to new geopolitical realities. But the Christian Democratic Union (CDU) leader should be congratulated for having the political courage to read the signs of the times.

Across Europe,  economies and a lack of investment have fuelled distrust in mainstream politics, and contributed to the dangerous rise of the Trumpian far right. In Germany, the constitutional “debt brake” – in effect a legal requirement to balance budgets – was originally conceived as a means of protecting younger generations from the consequences of risky borrowing. In these tumultuous times, amid multiple costly challenges, it has instead become an obstacle to investing in their future.

Other leaders should take note – not least in Britain, where the chancellor, Rachel Reeves,  to double down on her self-imposed fiscal rules in this month’s spring statement. Thursday’s EU summit in Brussels is expected to license greater national spending on defence. But for a new era characterised by threats at home and abroad, a sea change in the EU’s overall approach to debt and deficits, similar to that agreed by Mr Merz with the SPD, is needed.

Echoing the words of the former European Central Bank chief, Mario Draghi, during the eurozone crisis, Mr Merz  on Tuesday to do “whatever it takes” to protect freedom and peace. He will need the support of the Greens, as well as the SPD, to push his gamechanging proposals through. It is in the overwhelming interests of Germany and Europe that he gets it.
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