Reuters, Berlin In the midst of trade tensions with its major partner, the United States, Germany's lower house of parliament is scheduled to vote on Tuesday on a massive increase in borrowing that may strengthen the continent's largest economy and spur regional growth.

Days before the vote, German Chancellor-in-waiting Friedrich Merz and the Greens came to an agreement on Friday, and on Monday, Germany's constitutional court dismissed fresh opposition party challenges to the proposals.

The plan should be approved by the upper house of parliament on Friday if it is enacted on Tuesday.

Fund for Infrastructure


As demanded by the Greens, 100 billion euros of the 500 billion euros ($543 billion) in infrastructure fund spending over 12 years will go towards the climate and economic transformation fund.

The remaining amount is allocated to further infrastructure spending, with the federal government receiving 300 billion euros and the states receiving 100 billion.
Room for the States' budget

Each of Germany's 16 federal states will be permitted to maintain a minor structural deficit of 0.35% of their economic output in addition to the 100 billion euros from the infrastructure fund. This will allow the federal government to invest an additional 16 billion euros. States were prohibited from taking on debt until recently.

Investing in defiance

By amending the country's legally mandated "debt brake," which caps public borrowing at 0.35% of GDP, defence expenditures exceeding 1% of GDP will be exempt from the debt restriction. Civil protection, intelligence, and "aid to countries under illegal attack" are all included in the broad scope of such spending.

UKRAINE SUPPORT

If approved by the upper house of parliament, Germany will provide Ukraine with 3 billion euros in military aid to help defend it against Russia's invasion. Next week is when the vote is anticipated.

$1 is equivalent to 0.9179 euros.