Merz reaches deal on infrastructure fund by promising Greens €100 bln for climate action

Germany's chancellor-in-waiting, conservative Christian Democrat Union (CDU) leader Friedrich Merz, has reached a breakthrough deal on the 500-billion-euros infrastructure fund proposed by his prospective coalition government, by promising to dedicate a fifth of the sum to climate action. According to media reports, Merz agreed to transfer 100 billion euros of the sum to to the country’s Climate and Transformation Fund (KTF), which is dedicated to climate policy spending, thus securing support from the Greens, whose votes are required for the necessary constitutional changes.

Environmental NGO Greenpeace Germany welcomed the deal. “It is a good message for our country that the future government now wants to invest specifically in climate protection, said managing director Martin Kaiser. He called for a “bold approach” on climate by both camps in the remainder of the coalition negotiations between the conservative CDU/CSU alliance and the Social Democrats (SPD)

“The package is a powerful boost for Germany,” said SPD co-leader Lars Klingbeil. The agreement had the potential to “move Germany forward for the next few years, perhaps decades."

Prior to the breakthrough deal, Germany’s outgoing parliament met for a first debate on the special fund to prop up the country’s huge infrastructure finance demands. The likely next government proposed the fund alongside a plan to lift limits on Germany’s military spending by changing  the country’s debt brake, the constitutional ceiling for government borrowing. [see a Q&A on the fund here]

A two-thirds majority is needed in parliament to change the borrowing rules – a threshold that could be difficult to achieve in the upcoming new parliament, as it requires the CDU/CSU and the SPD to secure votes from either the Left Party or the far-right Alternative for Germany (AfD). Both parties together will possess a blocking minority, and have rejected at least parts of the proposals. The new parliament, which was voted in on 23 February, will convene for its constituting session on 25 March.

The CDU/CSU and the SPD hoped to achieve a breakthrough by next Tuesday (18 March) in the existing parliament, but depend on consent by the Green Party to get the package adopted. The Greens earlier criticised a lack of climate action and energy transition commitment in the proposal. They warned the prospective government parties want to use the funds to finance election promises, rather than implementing necessary long-term investments.

For the plan to pass, the prospective coalition parties also depend on approval by Germany’s council of federal states, the Bundesrat, where the Greens wield decisive influence. The package is also unpopular among many representatives of the CDU/CSU after the alliance campaigned for respecting the debt brake. Merz has argued that the changing international environment – and in particular the new U.S. government under president Donald Trump - require a fundamental change of course.