According to Bloomberg, Donald Trump has awakened the “sleeping giant Germany”, which will now boast not just Europe’s largest economy but also its greatest defence capacity. Presumptive next chancellor Friedrich Merz announced this week that, alongside the Social Democrats and the Greens, he plans to revise the German constitution to exclude defence and security expenditures from fiscal spending limits (the so-called “debt brake”), emphasising that the country will do “whatever it takes” to protect itself. Merz claimed that, with the support of his prospective coalition partners in the SPD, the incoming government plans to spend €500 billion on defence and infrastructure over the next decade, including key areas such as transportation, energy grids, and housing.

This all sounds promising, but any enthusiasm could prove premature. For one thing, the Greens have not yet decided whether they will actually vote for the proposed constitutional change. While they agree with Merz in principle, they also have not forgotten that before the federal elections last month he categorically rejected the idea of additional funds demanded by the Greens to the tune of €200 billion. Now, less than two weeks after his election victory, Merz has dropped a €500 billion bomb.

Unsurprisingly, some Greens are frustrated, with party co-chair Felix Banaszak saying: “You simply have to say that he based his election victory last week on untruths.” A glance at the CDU’s party programme from January of this year gives some substance to this. Page 14 states that “the triad of adherence to the constitutional debt brake, tax relief and necessary investments characterises our sound financial policy. The debt brake ensures that today’s debts do not become tomorrow’s tax increases, and that Germany remains an anchor of stability in the eurozone.”

While Banaszak has indicated that the Greens are still willing to go along with the proposed changes, this will come at a price. He is calling for investment in climate protection and schools in addition to higher security spending. The leader of the Green faction in the Bundestag, Britta Hasselmann, also declared that “defence policy is more than the armed forces.”

It doesn’t take much imagination to see that the €500 billion will ultimately be divided up for all kinds of party interests, including additional money for the same climate policies that have done so much harm to the German economy. The seriousness of Merz’s proposal will soon be tested by Germany’s nuclear engineering lobby, which claims that up to six nuclear power stations could be restarted very quickly, and that reliable and affordable energy will be absolutely necessary for a functioning arms industry.

Pumping money into an economy with shrinking production capacities and an ongoing energy crisis would force Germany to use all that additional money for imports — likely including energy from Russia via third parties like India and Turkey. Considering that Russia is the main reason for renewed European defence spending, it would be absurd if even a fraction found its way into Moscow’s coffers. So, if Merz means what he says, he must also create investment opportunities for all these new funds. A return to nuclear power and fracking in Lower Saxony would be the first two steps into the right direction.

Otherwise, the most likely outcome would be renewed inflationary pressures, with the production of consumer goods declining — therefore making them more expensive. If, for example, Germany produces tanks instead of refrigerators, refrigerators will become more expensive for German consumers because there is less supply confronting unchanged demand.

The “German giant” is certainly moving, but whether it is truly awakening from its slumber is less clear. Merz may be feted now, but the country’s long-term economic turnaround is far from assured.

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Ralph Schoellhammer is assistant professor of International Relations at Webster University, Vienna.

Raphfel

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