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Friedrich Merz, who once presented himself as the last line of defence against debt madness, is now set to push Germany’s new debt into the trillion-euro range. This program will accelerate the country’s economic decline, Joachim Nikolaus Steinhöfel writes.
CDU’s Friedrich Merz wants to become the next chancellor of Germany — yet rarely has a leading politician shrunk so quickly to the stature of a dwarf, even before his presumed assumption of office, as the nearly 2-metre-tall Christian Democrat.
Observers have long known that Merz is capable of breathtakingly rapid changes in direction when opportunism dictates, and that he lacks the backbone to stand up for uncomfortable necessities is also well established.
Now, the potential future German chancellor has demonstrated his extraordinary clumsiness in foreign policy matters with particular emphasis.
Merz claimed that the policies of Argentinian President Javier Milei would ruin the state and trample on the people, reacting to former FDP Finance Minister Christian Lindner’s demand that Germany should “dare (to be) more (like) Milei”.
Merz was apparently unaware of the spectacular successes of Milei’s policies and the turnaround of Argentina’s economy. Even more amateurishly, the self-proclaimed transatlanticist Merz responded to US Vice President JD Vance’s speech at the Munich Security Conference.
He described Vance’s remarks as “almost an overbearing approach to Europeans, especially to us Germans.” He added, “I will not let an American vice president tell me with whom I should speak here in Germany.”
While this sounds very self-confident, it completely lacks any sense of reality. Germany plays in the second league both militarily and politically, and Merz will very soon feel the consequences of not being in a position to dictate terms.
Once ‘the last line of defence against debt’ is now all for it
Germany’s military dwarfism is now to be countered by a historic debt spree, diametrically opposed to everything the CDU promised voters before the recent general election.
There has never been a more blatant 360-degree turnaround — to quote the still-serving German Foreign Minister Annalena Baerbock — regarding campaign promises in Germany.
According to a report by Der Spiegel, Merz fell for an internet rumour that US President Donald Trump would announce the United States’ withdrawal from NATO in the recent State of the Union address.
This led him to be persuaded by his potential coalition partner into a debt orgy that will massively damage the country and for which he received nothing in return, especially regarding migration policy.
This humiliation by the Social Democrats, who suffered their worst election result since the 19th century, will go down in history as a historic failure in coalition negotiations.
One can now bet that Merz and the CDU will also hand over a few hundred billion to the further marginalised Greens for their pet projects, such as climate protection. Friedrich Merz, who once presented himself as the last line of defence against debt madness, is now set to push Germany’s new debt into the trillion-euro range.
Can the outgoing Bundestag vote on this?
There are also concerns about the democratic legitimacy of an outgoing parliament deciding on far-reaching constitutional amendments that would bind the future government and are necessary to implement Merz’s debt plans.
Even more so, as the constituent session of the new federal parliament is delayed without necessity just for this purpose. Many interpret this as a disregard for the will of the voters.
Although Merz promised the entire country exactly the opposite — no new debt — he now wants to use or abuse the voted-out German parliament, the Bundestag, to lead the country and future generations on the “road to serfdom” and into debt bondage.
Friedrich Merz knows that he would not get a majority for this in the newly elected parliament. That’s why those who have been voted out of office should have one last go at chiseling this huge burden into the German constitution.
Dietrich Murswiek, Germany’s leading constitutional lawyer, assessed the events as follows: “The old Bundestag is now to decide quickly, not because the project cannot be postponed, but for the sole purpose of tricking the newly elected Bundestag and presenting it with a fait accompli with the help of the old majority.”
“This approach shows contempt for the will of the voters, indeed contempt for the democratic legitimisation process. An aloof political class arrogantly disregards those from whom the power of the state should emanate in a democracy,” Murswiek added.
“It shows no respect for the election results and no respect for the constitution. The constitution is quickly changed because the required majority to do so was just lost in the election.”
More debt, more problems
The debt spree, misleadingly referred to as Sondervermögen (“special assets”), is equivalent in size to around 20% of Germany’s gross national product. It will thus catapult the country’s debt from 65% to 85%, which is not only a serious violation of the Maastricht debt criterion but will also expand the money supply and drastically worsen Germany’s credit rating.
Debt of 0.35% of GDP per year, which was previously permitted under Article 115 of the constitution, will effectively become a minimum annual debt of 4.5% p.a. over the 10-year term.
Many countries in the eurozone will therefore also turn away from fiscal discipline and ignore the debt rules of the Maastricht Treaty, which will have a considerable impact on the German and eurozone bond markets, resulting in significant interest rate increases. A new European sovereign debt and banking crisis is therefore looming in a few years’ time.
Rising capital market interest rates and the absorption of a large proportion of the economy’s savings will crowd out private investment, the government spending ratio will increase significantly, and private investment activity will decline, causing the economy’s productivity to fall.
While short-term growth may be stimulated through government demand in the spirit of a Keynesian economic stimulus program, the above-described effects will overcompensate for this in the medium term.
Given the performance profile of German authorities in procurement, it is expected that a large part of this program will be wasted. From an economic perspective, defence spending is government consumption, as tanks and other acquisitions are not designed to produce anything in the future. In this sense, they are not even investments.
Regarding infrastructure, the state’s inefficient and poor procurement system generally results in paying twice as much as private companies for the same outcome.
If €500 billion are allocated to this, significant price increases should be expected due to high demand and limited supply capacity. The real purchasing power of this program will therefore be closer to €200 billion rather than €500 billion. The same logic applies to defence spending.
In conclusion, this program will accelerate Germany’s economic decline, both in terms of defence and infrastructure.
Joachim Nikolaus Steinhöfel is one of the most renowned German lawyers specialising in media law. In 2024, he won 16 out of 16 cases against the German government, including before the Federal Constitutional Court. His book “Die digitale Bevormundung” (“The Digital Paternalism”), published last year, was a national bestseller.
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