Germany’s top court backs Merz’s €500bn borrowing plan

Germany’s constitutional court has rejected last-minute legal challenges to a €500 billion ($546 billion) infrastructure fund proposed by conservative leader Friedrich Merz.

The ruling clears the way for parliament to vote on Tuesday, as Merz seeks to push the initiative through before an influx of far-right and far-left lawmakers complicates its approval.

The court dismissed appeals from the far-right Alternative for Germany (AfD), the pro-business Free Democrats (FDP), the far-left Left party, and the Sahra Wagenknecht Alliance, who had argued that the outgoing Bundestag should not decide on such a major borrowing package. In a statement, the court said it saw no grounds to block the special parliamentary session scheduled for March 18.

Merz, who won Germany’s recent elections, has made the fund a central part of his economic strategy. The plan involves temporarily easing constitutional debt rules to finance large-scale infrastructure and defence projects. He has warned that delays could harm Germany’s ability to respond to growing security threats, citing an increasingly hostile Russia and shifting U.S. policies under President Donald Trump.

Merz has secured the backing of the Greens, alongside his conservative bloc and the Social Democrats (SPD), to ensure the package has the two-thirds majority needed to pass constitutional amendments. However, the margin is slim, with only 30 votes to spare, leaving little room for defections.

On Monday, Merz and the leaders of the SPD and Greens expressed confidence that the measures would pass, after the parliamentary budget committee gave its approval on Sunday.

The urgency of the plan is underscored by fresh economic warnings. The Munich-based Ifo Institute predicted Germany’s economy would expand by just 0.2% this year after two consecutive years of contraction, citing weak industrial demand and poor consumer confidence.

“The German economy is stuck,” said Timo Wollmershaeuser, head of Ifo’s economic forecasts. Despite improved purchasing power, he noted that businesses remain hesitant to invest.

A survey by the German Chamber of Industry and Commerce (DIHK) found that 40% of German companies were planning to move investments abroad to cut costs.

“Germany is in danger of falling behind,” warned Volker Treier, the DIHK’s head of foreign trade. He pointed to high energy costs, excessive bureaucracy, and rising taxes as factors driving companies overseas.

Meanwhile, the Organisation for Economic Co-operation and Development (OECD) downgraded Germany’s 2025 growth forecast from 0.7% to 0.4%. The economy ministry echoed concerns over domestic and foreign policy uncertainty but suggested that Merz’s borrowing plan could help stabilise the economy.

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