Historic vote in the Bundestag! Germany removes "debt brakes" and paves the way for billions in investments in defense and infrastructure

Germany's parliament approved a historic bill on Tuesday that unlocks a record level of state borrowing for defense and infrastructure by amending the country's fiscal rules stipulated in the constitution.

The vote passed in parliament with 513 votes in favor, above the 489 votes needed.

The bill still needs a two-thirds majority in the Bundesrat, Germany's lower house representing the country's states, to become law.

The crucial vote in the Bundestag followed weeks of heated debate as Merz's Christian Democratic Union (CDU) and potential coalition partners the Social Democrats (SPD) unveiled plans to free up hundreds of billions in spending by easing Germany's constitutionally guaranteed "debt brakes."

Merz faced a tense race to push the proposal through before the new parliament convenes on March 25, where the left-wing Die Linke party and the far-right Alternative for Germany (AfD) would have the ability to block the package.

The Greens were initially hesitant to offer their support for the bill until Merz last week gave the party assurances that 100 billion euros from the special fund would be directed to support economic climate transformation measures.

The historic deal marks a departure from decades of fiscal conservatism. Under the proposals, defense spending above 1% of Germany's gross domestic product would effectively be exempt from the country's "debt brake," which was written into the constitution in 2009.

A special fund of 500 billion euros will also be created to finance infrastructure projects outside the regular budget over the next decade and to give Germany's 16 states leeway to borrow around 16 billion euros.

Merz, who campaigned against debt-reinforcement reform throughout his career, has adapted his turn as necessary in response to a changing security landscape.

"Our friends in the EU are looking at us as much as our opponents and the enemies of our democratic and rules-based order," Merz said on Tuesday ahead of the vote.

Defense Minister Boris Pistorius defended the decision to scrap fiscal rules to invest in Germany's defense, including its woefully underfunded military.

"Our security should not be compromised by budgetary constraints," Pistorius said, adding that "anyone who hesitates today is denying reality."

Some of the strongest criticism in parliament on Tuesday came from the AfD and the liberal Free Democratic Party (FDP), the latter of which tried to sabotage the package by suggesting a last-minute change.