Germany’s CDU/CSU and SPD parties have reached an agreement on a substantial multibillion-dollar financing package, aimed at strengthening the nation’s defense capabilities and modernizing its infrastructure through loans.

The CDU/CSU and SPD parties are currently engaged in negotiations to form a government under the leadership of Friedrich Merz, Bild reported.

Merz stated that the parties recognize the urgent need for Europe and Germany to make substantial efforts in bolstering defense capabilities.

The parties have agreed that any defense spending exceeding 1% of GDP will be exempt from debt limitations.

Moreover, a dedicated infrastructure fund amounting to €500 billion over the next 10 years will be established, with the federal states also set to benefit from this initiative.

Next week, the CDU/CSU and SPD parliamentary groups will submit a motion to amend the Basic Law.

As previously reported, Germany’s new political leaders are discussing a €200 billion increase in defense spending.

These resources are needed to strengthen the country’s armed forces amid existing and potential threats in Europe. Also, given that the current US administration may withdraw its forces from the continent.

Parties are discussing ways to circumvent Germany’s strict borrowing limits to free up resources to strengthen the military.

One option for implementing Merz’s plans is to create a new defense fund to finance the modernization of the German armed forces and assistance to Ukraine.

The second option is to expand the existing €100 billion fund for military needs by overcoming the moratorium on government borrowing.

European Commission President Ursula von der Leyen previously outlined a comprehensive plan aimed at enhancing Europe’s military capabilities while providing continued support to Ukraine.