In a meeting of EU ambassadors on Wednesday, the German delegation argued that while the Commission’s move was a positive first step, it would not be enough to meet the new realities of Europe’s security position in the medium and long term, and that changes to the fiscal rules would be needed, three EU diplomats aware of the talks told POLITICO.
The diplomats, like others quoted in this story, were given anonymity to speak freely about the closed-door meetings.
The irony of the situation is striking: for years, Germany has been the most powerful fiscal hawk in Brussels, asking for strict budgetary discipline across the bloc.
When governments floated the possibility of an exemption for defense investments when the original fiscal rules were being negotiated, Germany’s former Finance Minister Christian Lindner was among the fiercest opponents of the idea, with countries such as Poland and Italy strongly supporting it.
But now, faced with mounting security concerns and shifting geopolitical realities, it is Berlin leading the charge for more flexibility.
The full force of the about-turn became evident on Tuesday when the center-right CDU and the center-left SPD — the two main parties that are set to lead Germany following last month’s election — struck a landmark deal to boost defense investments by reforming Germany’s controversial debt brake. The constitutionally-mandated restriction has stopped Europe’s biggest economy from using fiscal largesse to strengthen its internal demand for nearly fifteen years.