By Friederike Heine and Andreas Rinke
BERLIN (Reuters) -Plans by Germany’s chancellor-in-waiting Friedrich Merz to unleash a massive state borrowing programme were hit by last minute legal challenges on Monday, with just days left for him to push the package through parliament.
The far-right Alternative for Germany party has challenged at the constitutional court a parliamentary vote due on Tuesday, arguing the Bundestag had not given time for outside experts to scrutinise plans that lifted the euro and shares last week.
Merz wants to push a 500 billion euro ($544 billion) infrastructure fund and sweeping changes to debt rules through the outgoing parliament, fearing they could be blocked by an enlarged contingent of far-right and far-left lawmakers in the next Bundestag starting March 25.
He has justified the rapid timetable with recent shifts in U.S. policy under President Donald Trump, warning that a hostile Russia and an unreliable U.S. could leave the continent exposed.
Independent lawmaker Joana Cotar also said she had filed a complaint in order to thwart Tuesday’s vote in parliament, while three lawmakers from the pro-business Free Democrats (FDP) also plan petitions.
“The federal government has so far been unable to answer very simple and fundamental questions on this,” FDP finance expert Florian Toncar told dpa.
Merz had secured the crucial backing of the Greens party last week to pass the measures in the outgoing parliament, which he hopes will revive ailing growth and boost defence spending in Europe’s largest economy.
The parliamentary budget committee approved the plans on Sunday. The measures have already survived earlier legal challenges last week from the AfD and the Left party.
Merz’s conservatives and the Social Democrats (SPD), who are in talks to form a coalition government after elections last month, are jointly pushing the measures.
Separately, the SPD leadership will speak with individual lawmakers within their own ranks who could be wavering before Tuesday’s vote. SPD general secretary Matthias Miersch expected a high level of backing from the party but could not say how many dissenters there would be in total.
“We’ll have to see how things play out with the other parliamentary groups,” Miersch said.
Merz cannot afford many defectors on Tuesday as his conservatives, SPD and Greens are set to clear the two thirds majority needed to pass constitutional amendments with just 30 votes to spare.
He has justified the urgent need to push the package through the outgoing parliament with recent shifts in U.S. policy under President Donald Trump, warning that a hostile Russia and an unreliable U.S. could leave the continent exposed.
Euro zone government bond yields dropped on Monday ahead of the Bundestag vote.
WEAK ECONOMIC OUTLOOK
The scale of the challenge facing Merz was underlined by new forecasts on Monday.
The Munich-based Ifo Institute predicted Germany’s economy to barely grow by 0.2% this year after two consecutive years of contraction, citing weak demand for industry and pressure from international competition.
“The German economy is stuck,” said Timo Wollmershaeuser, head of Ifo’s economic forecasts. “Despite a resurgence in purchasing power, consumer sentiment remains subdued, and companies are also reluctant to invest.”
Separately, a survey by the German Chamber of Industry and Commerce (DIHK) said 40% of companies polled were planning investments abroad to cut costs.
“Germany is in danger of falling behind,” said Volker Treier, head of foreign trade at the DIHK. “If companies increasingly move abroad because high energy costs, paralyzing bureaucracy, and a rising tax burden are choking them here, that sends a dangerous signal.”
The Organisation for Economic Co-operation and Development (OECD) cut its 2025 German growth forecast to 0.4% from 0.7% while the economy ministry in its monthly report flagged high levels of domestic and foreign policy uncertainty.
The ministry did, however, talk up the prospect of a “stabilising effect” if Merz’s plans succeeded.
($1 = 0.9188 euros)
(Reporting by Friederike Heine Andreas Rinke, Rene Wagner, Alexander Ratz, Christian Kraemer; Writing by Ludwig Burger and Matthias Williams; Editing by Ros Russell)
