Breaking Down the Bundestag's Historic Vote: A New Twist in Germany's Basic Law
- by Phil Goebel
- 2 Mins
Alterations made to Germany's Basic Law by the Bundestag outlined - Alterations made in Germany's Basic Law by the Bundestag
The old halls of the Bundestag echoed with heated debates, tough negotiations, and, in the end, a historic vote. The "old" Parliament gave the green light to the debt plans of Union and SPD in its final session. With hundreds of billions on the table, mainly for defense and the nation's infrastructure revamp, including a whopping 100 billion euros for climate protection, it was a move that required a change in the Basic Law. Here's a lowdown on what's actually changing now:
Why bend the Basic Law for the Special Fund?
The hurdle was the "debt brake" decided in 2009, a swift restriction on new debts by the federal government and the states. Article 115 of the Basic Law states that, in principle, revenue and expenditure must be balanced without resorting to loans. In other words, the states were barred from taking on new debts at all, and the federal government could only do so within a limited framework of 0.35 percent of the gross domestic product (GDP). The planned investments were beyond this limit, making this amendment a necessity.
With a two-thirds majority vote, the Bundestag provided a way to circumvent the "debt brake." The "debt brake" hasn't vanished but now offers more breathing room.
The One-percent Limit in Defense: A Game Changer
Defense got a massive boost with the creation of a "special fund" of 100 billion euros for the Bundeswehr post-Ukraine conflict. The financing of defense expenditures will no longer be tied to the regular federal budget. Instead, we see a shift: Expenditures for defense, civil and population protection, and intelligence services will bypass the debt brake once they surpass one percent of GDP. Expenditures under this threshold will be covered by the budget, while those exceeding it can be financed through debt.
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Investments in "Infrastructure" and Climate Neutrality by 2045
Infrastructure development and achieving climate neutrality by 2045 are now priority areas with a €500 billion special fund allocated over a decade. A fifth of this will be assigned to the so-called "climate and transformation fund."
Article 143h was added to the Basic Law to facilitate this. Initially, this debt allows a relaxation, as ten percent of the planned expenditures must be financed from the budget, while the remaining amount may be covered by debt.
Moreover, the amendments now permit the 16 federal states to borrow funds, offering them the same flexibility they formerly enjoyed.
Climate Policies and the Updated Constitutional Framework
While the amendment does not set new climate targets in the Basic Law, it aligns with the existing commitments to climate protection. Around €100 billion of the infrastructure fund will be channeled towards climate projects, supporting a green transition.
Now, the amendments must be approved by the Bundesrat (the upper house of parliament) to take effect.
- The Bundestag's historic vote has led to a change in the Basic Law to create a special fund for investments in infrastructure, defense, and climate protection, with a limit of one percent of GDP for defense expenditures bypassing the debt brake.
- Article 143h was added to the Basic Law to facilitate the allocation of a €500 billion special fund over a decade, with a "climate and transformation fund" receiving a fifth of the total.
- With the amendment, the 16 federal states are granted the same flexibility as before to borrow funds for their projects, aligning with the existing commitments to climate protection, while a significant portion of the fund will support green transition projects.
