Germany's €500 billion spending plan could prompt EU fiscal rule revision

Germany may advocate for changes to the European Union's recently updated fiscal rules following the establishment of a new €500 billion (approximately $560 billion) special fund, according to Moritz Schularick, president of the Kiel Institute.

Under EU fiscal rules updated last April, member states must limit budget deficits at 3% of GDP and public debt at 60% of GDP. However, as Eurostat data showed, in Germany the ratio was about 61% for 2024. According to Investing's report, the figures have raised concerns among economists. The plans of Germany's new coalition government may violate the bloc's rules.

As the agency reminds us, Germany changed its long-standing "debt brake" rule in March. The amendment, which previously limited borrowing and required maintaining structurally balanced budgets, now allows for increased defense spending.

According to research by the Bruegel think tank, Germany's long-term debt could exceed 100% of GDP under the new spending package.