Friedrich Merz’s “whatever it takes” plan to unleash defence spending and overhaul German infrastructure is set to usher in the largest economic stimulus since the fall of the Berlin Wall.
While details still need to be fleshed out, the historic deal between the chancellor-in-waiting and his likely coalition partners, the centre-left Social Democrats, allows for potentially unlimited borrowing for defence spending and creates a €500bn ten-year fund to drive infrastructure investments.
Economists expect the plan, which must still be approved by a two-thirds supermajority in parliament, can provide up to €1tn of additional borrowing over the next decade — a sum that represents more than a fifth of Germany’s entire economic output — and resurrect Europe’s largest economy after years of stagnation.