FT News Briefing Germany’s debt brake problem
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Feb 25, 2025 Germany grapples with its constitutional 'debt brake' as new leadership navigates increased defense spending pressures. The political landscape shifts, echoing U.S. security policy changes. Meanwhile, Apple commits to creating 20,000 U.S. jobs, while Archer Daniels Midland remains steadfast on climate promises despite regulatory rollbacks. The contrast in corporate sustainability commitments between the U.S. and Europe raises questions about the future of green initiatives amid changing political climates.
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Germany's Debt Brake
- Germany's "debt brake" limits government borrowing to 0.35% of GDP.
- This restriction hinders necessary investments despite Germany's economic slump and European responsibilities.
Debt Brake's Political Impact
- The debt break caused contention in Olaf Scholz's government, especially regarding defense spending after Russia's Ukraine invasion.
- This infighting led to the finance minister's dismissal and snap elections.
Merz's Debt Brake Dilemma
- Despite the CDU's fiscally conservative stance, Friedrich Merz might change the debt break due to the new Bundestag's composition.
- He might use the old Bundestag's majority before the transition to push through changes.