Germany has formally amended its constitution to permit significantly greater government borrowing, marking a major departure from the country's long-standing fiscal conservatism. President Frank-Walter Steinmeier signed the legislation into law on Saturday, March 22, enabling a suspension of the constitutional "debt brake" to meet growing defense and infrastructure demands.

"Today, on March 22, 2025, Federal President Frank-Walter Steinmeier signed a bill into law that will amend the constitutional rules on debt brake and special funds, which was adopted by the Bundestag and the Bundesrat," Presidential Spokesperson Cerstin Gammelin said on X. The amendment will come into force once published in the Bundesanzeiger, Germany's official federal register.

The legislative push was led by the CDU/CSU alliance in collaboration with their likely coalition partners, the Social Democrats. It comes in the wake of Germany's February snap elections, where the CDU/CSU secured 28.6% of the vote, positioning Friedrich Merz as the leading candidate to become chancellor. The right-wing Alternative for Germany (AfD) also made historic gains, taking 20.8%, while the SPD recorded its worst-ever result at 16.4%.

The reform relaxes Germany's 2009 "debt brake," a constitutional mechanism that had restricted structural deficits and was widely regarded as a safeguard of financial stability. With this change, Berlin can establish special funds outside the core budget, designed to finance long-term projects such as military modernization and critical infrastructure. 

The Bundestag approved the measure on Tuesday, followed by the Bundesrat on Friday. On the same day, legislators also signed off on an additional €3 billion ($3.2 billion) in military assistance for Ukraine amid the ongoing war.

Finance Minister Christian Lindner described the amendment as a necessary step to respond to heightened instability in Europe while maintaining formal adherence to Germany's fiscal rules. He stated that the reforms would help the country "preserve our sovereignty and fulfill our alliance obligations."

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Fiscal Recalibration

Germany's military spending has been under growing scrutiny since the start of the Ukraine war, prompting a broad reassessment of security policy within Europe. The revised fiscal framework is expected to help Germany finally meet NATO's defense spending target of 2% of GDP  — a benchmark it had long fallen short of.

However, the constitutional change has not been without controversy. AfD co-leader Alice Weidel criticized the move, warning that it risks undermining Germany's financial credibility. "This is a death blow for the euro, which in the coming years – and it is already beginning to do so – will devalue significantly," she said, also cautioning that it could lead to the loss of Germany's AAA credit rating. "What is being done here is the final destruction of Germany's financial stability."

Supporters argue that the shift is both timely and pragmatic, reflecting the scale of contemporary challenges. They maintain that strict fiscal restraints, while important, must be adaptable in the face of evolving geopolitical and economic pressures — from defense readiness to decaying infrastructure.