Germany’s massive spending package under chancellor-in-waiting Friedrich Merz has officially passed its final parliamentary vote, unlocking up to €1 trillion for civilian and defense investments. The plan aims to stimulate economic growth across the region while strengthening the country’s military capabilities, reducing its dependence on the U.S. for defense.
While Berlin is now set to unlock up to €1 trillion over the next decade for defense, infrastructure, and green energy, at the same time this prospect is causing deep unease among other EU countries. Many are voicing concern that the move could distort the single market and create unfair advantages for German industry.
At the center of the plan is a proposed historic change to Germany’s basic law, which would exclude defense investments exceeding 1% of GDP from national spending rules. Alongside this, Merz’s CDU/CSU bloc and the Social Democrats are backing a €500 billion fund aimed at transforming Germany’s economy, including subsidies for energy-intensive sectors and strategic industries like semiconductors, battery production, and pharmaceuticals.
While many EU leaders welcome Germany’s long-overdue fiscal flexibility — especially regarding defense — countries such as France, Italy, and Spain are increasingly worried. They fear Berlin’s ability to pump billions into national industries will undermine competitiveness elsewhere in the bloc, particularly as many governments face tighter fiscal constraints.
French officials, speaking anonymously to Politico, warned that Germany’s advantage could widen the productivity gap between the EU’s top two economies. Southern European diplomats echoed the sentiment, stressing the need for safeguards to prevent market distortion and calling for EU-wide responses, such as joint borrowing — a measure Berlin continues to resist.
The European Commission, which monitors state aid and subsidy rules, is expected to scrutinize Germany’s actions closely. Past initiatives, like the controversial €200 billion energy relief package introduced by outgoing Chancellor Olaf Scholz in 2022, already sparked backlash across Europe for perceived imbalances.
As Merz seeks to relax the EU’s own fiscal rules — rules once championed by Germany — tensions are rising within the bloc. The coming months will be crucial in determining whether Berlin’s spending splurge strengthens EU solidarity or tests it to the limit.
