Germany cannot afford to wait to relax its debt brake

GERMAN POLITICIANSspdcduspdcducduadbswspdcduspd adbsw and economists have bickered over the country’s “debt brake” for years. So it was no surprise that a row over the rule, a constitutional provision that bars the federal government from running anything other than minuscule budget deficits, finished off despised earlier this month. The good news is that the consensus for easing the brake to allow more public investment in bridges, buildings and brigades is now . The bad news is that a quirk of Germany’s electoral system could stop reform in its tracks.Germany’s snap election, expected on February 23rd, is likely to see Mr Scholz, from the Social Democrats (), tossed out of the chancellery and replaced with , leader of the centre-right Christian Democrats ()—assuming that the does not first ditch Mr Scholz as its candidate for chancellor in favour of Boris Pistorius, the popular defence minister.The debt brake was written into the constitution under Angela Merkel, the previous chancellor, in 2009. But thanks in part to pressure from the party’s regional chiefs, the is coming around to the need for reform. Germany’s stagnant economy, which in real terms has barely grown since before the pandemic, and the need to fund Ukraine and its own army, have added to the pressure.’s preference would be to do away with the debt brake entirely, but we accept that it may be a step too far for many voters. Instead, a Chancellor Merz would probably agree to ease the debt brake after the election in exchange for concessions from his coalition partners, perhaps on welfare or on immigration. That is part of the give-and-take of coalition talks in Germany. The trouble is that, because the debt brake sits inside the constitution, amendments to it need a two-thirds majority in both houses of parliament. And polls suggest that when Germany votes next year, enough small parties could fall below the 5% threshold needed to enter the Bundestag to bestow a blocking minority on a pair of fringe parties—the hard-right Alternative for Germany (f) and the new “left-conservative” Sahra Wagenknecht Alliance ().To forestall that, the and the Greens, who now form a minority government, have asked Mr Merz to help them act immediately. Together with the and its Bavarian sister party, they hold more than two-thirds of the seats in parliament. The Greens suggest another special fund for the armed forces, like the one pushed through by Mr Scholz in the wake of Russia’s invasion of Ukraine in 2022. The has proposed changing the rules of the debt brake itself. In the normal course of things, working out the details of such far-reaching changes would be left until after the election. Making legally sound distinctions between productive investments and government consumption is hard. In addition, legal appeals to Germany’s powerful constitutional court would be inevitable. Mr Merz seems minded not to budge, hoping to obtain as high a price as possible from his coalition partners after the election.But the dangers of waiting are too great. Should the f and the achieve their blocking minority, Mr Merz may find himself leading a government that cannot tackle urgent problems, including Germany’s crumbling public sector and Ukraine, newly vulnerable if it is abandoned by Donald Trump. If so, Mr Merz may end up being a one-term chancellor. For Germany’s and Europe’s sake—and his own—he would do better to act now.