It may have taken a geopolitical rupture to prod it into action, but famously stingy Germany is finally opening its wallet.
Driving the news: The German Parliament approved a constitutional amendment this week, allowing it to borrow as much as it needs to fund military spending — plus cash for a €500 billion infrastructure fund thrown in for good measure.
- Germany’s spending had previously been tightly limited by a constitutional “debt brake” that, with some exceptions, capped its yearly borrowing to just 0.35% of GDP.
- To put that in perspective, Canada's federal deficit last year amounted to around 2.4% of the country's GDP.
Why it matters: The change is expected to unleash around €1 trillion of new spending, a princely sum that would expand Germany’s negligible military capacity and stimulate both the country’s and the continent’s economy.
- It may also mark the beginning of the end of Western Europe’s military dependence on the United States, a policy that has held for nearly 80 years.
Why it’s happening: European leaders have decided that the U.S. is no longer the reliable ally it once was — in fact, on certain matters like trade and Ukraine, the trans-Atlantic relationship has turned downright adversarial.
- As a result, European governments are reportedly making plans to mostly replace U.S. forces on the continent over the next five to 10 years.
Zoom out: Together with the U.K., the European Union’s economy is comparable to that of the U.S. and China, a fact that makes Europe a contender for superpower status. Until now, it’s been content to rely on America rather than embrace that role, but those days may be over.—TS