German election: Scholz meets Merz for talks on Ukraine

We will be back tomorrow with articles and major updates regarding Germany's next government. You can follow the latest here.

The Green Party will negotiate hard before giving their much-needed backing to debt reforms proposed by the conservative CDU/CSU and Social Democrats, parliamentary co-leader Katharina Dröge said.

Merz's conservatives and Olaf Scholz's Social Democrats (SPD) agreed to loosen the country's constitutional "brake" on borrowing as Berlin seeks to ramp up defense spending.

"Whether we will ultimately approve these constitutional amendments remains open," Dröge told reporters. "We have a number of questions, and you know that we also have our own stance on what is necessary now," Dröge said.

The senior Green party leader also said she was baffled that efforts to address climate change played no role in the massive fiscal proposals pushed by the two centrist factions that hope to form the new ruling coalition.

Germany's prospective leaders have said they will seek to loosen rules on running up debt to allow for higher defense spending.

But what is Germany's debt brake? In short, the rule was introduced in 2009 by former Chancellor Angela Merkel to show Germany was committed to balancing the books after the financial crash of 2007.

The rule limits new borrowing to 0.35% of gross domestic product — a tight limit when compared to EU budget rules requiring less than 3%, and the 2024 US federal deficit of 6.4%.

Read all about it here.

 

Germany's likely next future chancellor, Friedrich Merz, said on Tuesday night it was time for Europe "to grow up and defend itself" following his announcement on overhauling the country's infrastructure and defense priorities.

Merz announced Tuesday night his conservative bloc and the left-leaning Social Democrats (SPD) agreed to create a €500 billion fund ($535 billion) to repair the country's ailing infrastructure over the next 10 years. The two factions hope to form Germany's next government.

Merz also announced that Germany would amend its Basic Law to exempt defense and security costs from limits on fiscal spending and that proposals would be put forward to the German parliament next week. 

Some German lawmakers pulled their punches to an unusual degree on Ash Wednesday, a day that traditionally sees politicians trade uncushioned barbs.

Leading figures in the Christian Democratic Union (CDU) and the Social Democratic Party (SPD)declined to attend events in view of the ongoing exploratory coalition talks, but lower-ranking lawmakers replaced them as speakers around the country.

Health Minister Karl Lauterbach of the SPD, for example, struck a conciliatory tone when speaking of the conservative bloc of CDU and its Bavarian sister party Christian Social Union (CSU), which is currently involved in the talks with his party.

Lauterbach said the conservatives, known in Germany as the Union, had moved in the right direction.

"Here is not the moment to settle old accounts, but we have to look forward instead in a constructive manner," he said.

He said the priorities should be first the country, then the party, then the person.

CDU General Secretary Carsten Linnemann also showed understanding for the SPD.

"Believe me, I am not interested in the SPD becoming marginalized," he said, saying the party, which scored its worst result in postwar history at February elections, was still a major political force in Germany.

The leader of Bavaria's Christian Social Union (CSU), Markus Söder, has taken advantage of the humoristic leeway given to German politicians on Ash Wednesday to lambaste the outgoing Social Democrat (SPD)-Green coalition.

In remarks made as the CSU, along with its sister party, the Christian Democrats (CDU), is participating in exploratory coalition talks with the SPD, Söder, who is also Bavarian premier, had harsh words for Social Democrat Chancellor Olaf Scholz.

"The nightmare of three years of Olaf Scholz is history from today," he said in his Ash Wednesday speech in the southern city of Passau.

He claimed — in what can be seen as an exaggeration suited to the occasion — that the CSU was the main winner of February federal elections.

"Dear Prussians, understand that from now on nothing in Germany can work without Bavaria," he said, using the name the Bavarians often give to Germans living to the north of the border of their state in reference to historical antagonisms.

But Söder's main venom was reserved for the Green Party and particularly outgoing Green Economy Minister Robert Habeck, to whom he symbolically called out in English, "Goodbye," before switching to German to add "Have a good trip, till we never meet again."

Söder did strike some more serious tones in his speech, calling, among other things, for Germany to massively increase its defense capabilities.

"Make Germany, make Europe, make Bavaria stronger than ever before," he called out to loud applause.

Political Ash Wednesday, which traditionally sees much mud-slinging between rival lawmakers, is seen as an obligatory event for Bavarian politicians. This year, the CDU and SPD leaders decided against participating as they pursue their exploratory talks.

 

 Outgoing German Chancellor Olaf Scholz is to discuss policy on Ukraine and European security issues with CDU leader Friedrich Merz and the chairman of the CSU parliamentary group, Alexander Dobrindt, on Wednesday.

The talks are likely to focus on the changes in US policy on Ukraine and their consequences for Germany and Europe.

Scholz will also be informing the two conservative lawmakers about the international crisis meeting on Ukraine last Sunday.

Wednesday's discussion has been prompted by the upcoming EU summit on Ukraine and European defense capabilities on Thursday, which Scholz will attend.

Germany's central bank, the Bundesbank, on Tuesday put forward proposals for loosening strict debt rules, the so-called debt brake, as the country's likely future leaders seek ways of raising money for defense and infrastructure.

The main proposal is to increase the amount the government is permitted to borrow annually from the current 0.35% of GDP to 1.4%. A large amount of the borrowed money would be earmarked exclusively for new investments.

The government's debt to GDP ratio would still have to be under 60%, in line with European rules. 

That ratio has slightly exceeded this level in recent years but is low in comparison with other EU countries. 

Under the plan, if the ratio went above this level, borrowing would be capped at 0.9% of GDP.

The plan could allow the federal and state governments in Germany to spend as much as an extra €220 billion ($231 million) by 2030, the Bundesbank said. 

Germany's current constitutionally enshrined "debt brake" is considered by its supporters as bolstering financial stability, but some say it is responsible for chronic underinvestment in both defense and infrastructure.

The two sides now involved in exploratory coalition talks — the conservative CDU/CSU block and the SPD — reportedly favor having two funds for defense and infrastructure respectively that sit outside the federal budget, exempting them from the "debt brake."

Bundesbank head Joachim Nagel said that while such special funds would be possible, reforming the "debt brake" would provide "better planning and predictability." 

Outgoing German Foreign Minister Annalena Baerbock has said she does not want to take on any leadership role in the parliamentary group of her Green Party.

In a letter to the parliamentary group, she wrote she had "decided for personal reasons to take a temporary step back from the bright limelight and not to apply for any leading office in the parliamentary party."

She wrote that after a few "high-speed years," she wanted to reflect for a few days on "what this moment means for my family and me."

The news comes amid speculation that Baerbock wanted to become a co-leader of the Green parliamentary party, currently led by Britta Hasselmann and Katharina Dröge.

Baerbock gave her strong support to the two, "With two strong women at the top, a new chapter is starting for our parliamentary party."

The 44-year-old Baerbock has been foreign minister since 2021 and will remain so until a new government is in place.

In November, she announced that she and her husband, Daniel Holefleisch, were separating but wanted to jointly care for their two daughters, now 9 and 13, and remain living together in Potsdam.

The Green Party is currently not involved in exploratory coalition talks. While its presence in government would mean a much more sizeable parliamentary majority than is held by the CDU/CSU and SPD, finding sufficient common ground to form a larger coalition would likely prove time-consuming and difficult. 

Exploratory coalition talks between the CDU, its Bavarian sister party the CSU, and the SPD are set to continue, with top CDU and SPD negotiators canceling traditional Ash Wednesday events to pursue them.

The CDU and SPD, which have already formed sometimes troubled coalitions in the past, have agreed to try and form another after the CDU ruled out working with the far-right Alternative for Germany (AfD).

The CDU finished first in Germany's snap election on February 23 with 28.5% of the vote and the AfD second with 20%.

The SPD, the party of outgoing Chancellor Olaf Scholz, came third with a postwar-low of 16.4%. 

The likely future chancellor, CDU leader Friedrich Merz, has said he hopes to have formed a government by Easter, which takes place in late April.

On Tuesday, Merz announced plans agreed during the coalition talks to raise hundreds of billions of euros to boost defense and infrastructure amid fears that the United States is losing interest in Europe and the NATO alliance.