Germany’s chancellor-in-waiting Friedrich Merz is considering unlocking hundreds of billions in extra funding for the country’s military and infrastructure as coalition talks with Social Democrats gather pace.
One option under review is a proposal by top German economists to raise up to €800bn in new public borrowing for two separate off-budget funds over a decade, said two people with knowledge of the matter.
A third person briefed on the early-stage negotiations said they were centred on a combined €500bn package. The people cautioned that other options could be examined.
Such a plan would mark a step-change in Germany’s traditionally conservative approach to public borrowing. Berlin in 2009 enshrined a debt brake in its constitution, which limits government borrowing and keeps the structural deficit at 0.35 per cent of GDP.
The economists’ proposal would be “a double bazooka”, said Armin Steinbach, professor of economics at HEC, referring to the term used for…