What is behind Merz's plans to cut social security while boosting military spending?

The man likely to be Germany's next chancellor has found backing for a plan to spend hundreds of billions of euros on defense and infrastructure. Friedrich Merz, who leads the center-right Christian Democrats, has convinced his likely coalition partners that the so-called debt break, which limits government borrowing, should be reformed. The parties want to change the constitution to allow a major increase in defense spending to be funded by borrowing. Cometh the hour, cometh the Merz. The man poised to be the next leader of Germany with a game-changing message on defense spending. I want to say this very clearly. In view of the threats to our freedom and peace on our continent, the same must now apply to our defense. Whatever it takes. Whatever it takes. Whatever it takes. Those were the words Mario Draghi famously used when he promised to save the euro currency back in 2012. Now Merz is pledging similar. Under his plans, defense spending over one percent of the German GDP can be financed with borrowing. A fund of 500 billion euros over 10 years for infrastructure would be set up and rules would be eased so federal states can borrow more. A plan, which the parties hope, will also help stimulate Germany's ailing economy. Anyone who travels in our country, whether by train or by car, can sense that something is no longer working well. If you have children at school and in daycare, you can see the investment backlog. Our country is running on wear and tear. The plan is for the Bundestag to vote on the measures next week. Berlin's moves are intended to demonstrate Germany's ability to act ahead of a European Union meeting to discuss a response to US policy changes. Europe must now grow up and Europe must be able to defend itself. Merz also wants to push for the immediate approval of a 3 billion euro aid package for Ukraine, which has been held up in parliament for weeks. He paid a visit to outgoing Chancellor Olaf Scholz on Wednesday morning to make sure they're singing from the same hymn sheet. Veronica Grimm is a member of the German Council of Economic Experts, which evaluates the government's economic policies. She's one of the country's so-called five economic sages. Welcome to DW. Is Friedrich Merz right to call for Germany's debt break to be eased? Yeah, I think the increase of the military budget that is planned is very important and it is also fine how they plan to do it. What we should definitely do, and there is far too little discussion about this, is to discuss how to make the necessary expenditure in the military sector in such a way that we create growth impulses. This is not discussed enough until now. Beyond the military spending, I am very skeptical of the package. I think the 500 billion to be decided by the old parliament after the election, this is partly justifiable in front of the voters. And easing of the debt break of the Bundesländer, I mean, to make this going, you need to concede to all the parties involved, the Greens, the Left Party, the Social Democrats and the Christian Democrats and the 16 Bundesländer. So it's very unlikely that this money is well used. And I think there should be more discussion about how to use it and what exactly to do before to implement, before implementing these measures. Okay. Okay, so for it, but with, you have certain, there are certain caveats. Germany's been using this debt break since 2009 to apparently great success. The world admired the country's economy and lack of debt. So what is it about the current circumstance that makes such a complete about turn necessary? Yeah, I think it is right to increase military spending quickly and to do it in a way that we really can commit to buy weaponry and to really rearm. I think this is very important. It is not that the events in the White House last week were so exceptional. We could have seen this before. I think it was clear that Donald Trump does not want to give Europe the security guarantees that the U.S. gave us up to now. I think we could have prepared earlier, but it's important that we now prepare. What we also have to see is that in Germany we have been living beyond our means for decades. The government under Angela Merkel exhausted the peace dividend when armament was not so important, for example, by expanding social spending. And now that the peace dividend is gone, every new government is loading up on debt. And I think this is not sustainable. I think we have to readjust this policy and to readjust our budget so that the social spending is in line with our growth potential. And so as far as you're concerned, this must be a one-off. They can't go mad with a checkbook. I think military spending is important. But beyond this, they should agree on readjustments in the budget. And it's very important to really have structural reforms. We are in a severe structural crisis in Germany. Jobs are laid off. So the situation is stagnating since years. And so the government has to do something. And I think that by a lot of government spending at a state quota of already 50 percent, I think this is not the right means. I think they have to think about structural reforms as well or before planning this amount of spending. Thank you so much for talking us through that. Economist Veronica Grimm from the German Council of Economic Experts. Thank you.