Germany is preparing a military breakthrough for a trillion euros: Lana Zerkal on the new European game

The aggravation of the economic and political situation in Germany today goes far beyond the limits of internal discussion — its consequences can directly affect the whole of Europe and Ukraine. The country, which for decades remained a symbol of financial restraint and budgetary discipline, unexpectedly for many makes a sharp turn. Germany, which a few years ago harshly dictated the rules of austerity to other EU members, today opens the door to record debt obligations in the amount of about 1 trillion euros. We are talking about a historic decision – the removal of the “debt brake”, which has been in effect since 2010 and actually prohibited the state from living beyond its means.

In this context, Ukrainian diplomat, former Deputy Minister of Foreign Affairs of Ukraine for European Integration, Ambassador Extraordinary and Plenipotentiary, adviser to the Minister of Energy of Ukraine Olena Zerkal published Facebook has its own analytical assessment of this situation, focusing on the dangers and prospects for both Ukraine and Europe in general. I publish her thoughts without abbreviations and exclusions:

She noted that CDU leader and likely German Chancellor Friedrich Merz is playing a complex political combination that resembles a chess game. This is a game with a colossal stake – 1 trillion euros, and it is not only about strengthening the subjectivity of Germany itself, but also of the entire European Union. According to her, during the next ten years, Germany, which for the first time since the 1930s undertook a large-scale rearmament of its own army, will direct these funds to strengthening the country’s defense. The diplomat emphasized that the volume of these expenses already promises to be twice as much as the financing of the Marshall Plan and the reunification of Germany in the 1990s.

Zerkal drew attention to the fact that the first “game” of this complex game was played by Mertz on March 18 on the chessboard of the Bundestag, and the second on March 21 in the Bundesrat. And both of these parties brought Friedrich Mertz a historic victory. According to Lana Zerkal, the German parliament supported his constitutional reform, which provides for the complete abolition of debt obligations to finance the country’s defense. At the same time, Zerkal emphasized that the austerity regime, known as the policy of “debt brake” (Schuldenbremse), operated in Germany from 2009-2010. He predicted that the country could spend only those funds that it actually earns, and any borrowing at the level of lands was limited to 0.35% of GDP, and at the national level – 1% of GDP.

Olena Zerkal separately emphasized the irony of this situation, because the ideologues of the policy of budgetary savings were precisely the representatives of the Mertz political force. She recalled that the CDU-CSU leader, then-Chancellor Angela Merkel and her government’s Finance Minister Wolfgang Schäuble, at the height of the Eurozone crisis and Greek debt disaster, effectively forced Greece, followed by Ireland, Italy, Spain and Portugal, to cut their public budgets. According to Zerkal, this austerity policy had a clear political basis: Merkel was solving the problem of “moral hazard” because Germany’s large financial and industrial corporations no longer wanted to pay for the well-being of other EU member states. And then the unity of the Eurozone itself was under threat.

Zerkal believes that today, on this European chessboard, Ukraine still remains in the focus of attention. At the same time, she emphasized that Friedrich Merz, who previously always opposed the abolition of debt limits, suddenly changed his position and hurried to make a political “gambit”. According to Lana Zerkal, part of his own electorate may become a victim in this difficult party, especially among supporters of German conservatives. She named several reasons for such a reversal.

Zerkal calls the first reason political. She explains that in the coming days, the German parliament will begin work in a new composition, where the “blocking shareholding” will be in the hands of the right-wing “Alternative for Germany” (AfD) and its ideological mirror on the left wing – Die Linke. It was these forces that tried to stop the rearmament of the Bundeswehr through the Federal Constitutional Court. Olena Zerkal emphasized that neither the court’s decision in favor of amending the Constitution nor the support of social democrats close to the CDU-CSU could provide Merts with the necessary two-thirds of the votes. After accusations from the “Greens” party that he was creating a “treasury for the CDU”, Merz was forced to make a major compromise that cost him 100 billion euros for the “green transition” and “carbon neutrality”. The “Greens” actually withdrew these funds from the new 500-billion dollar special fund for the modernization of Germany’s outdated infrastructure.

Olena Zerkal calls the second reason economic. She draws attention to the fact that Mario Draghi has clearly identified two fundamental weaknesses on which the comfortable and safe life of the European Union has been based until now. The first was dependence on cheap Russian gas. Zerkal emphasized that the rejection of Russian gas with the start of the war in Ukraine, as well as inflation, instability of world markets and interruptions in energy supply chains have already led to a recession in Germany. She cited data from the German Federal Statistical Office (Destatis), according to which the country’s GDP fell by almost 1.4% in 2022, and showed a steady decline of another 0.3% and 0.2% in 2023 and 2024, respectively.

Zerkal emphasizes that Mertz’s plan is to use the state’s fiscal capabilities and kill two birds with one stone: to start the growth of German industry, the products of which must compete with China and the United States, and at the same time to load defense enterprises, ensuring the rearmament of the country. According to Zerkal, the unprecedented amount of funds that Mertz plans to raise through the cancellation of debt restrictions will be directed to the development of the defense-industrial complex, infrastructure, intelligence and cyber security.

According to Zerkal, the financial markets, frightened by the foreign policy of Donald Trump, have already supported this Mertz plan. She noted that the yield of both European bonds and shares, in particular of German defense concerns, showed a new growth record for the first time in ten years. Against the background of this euphoria, as Zerkal notes, the issue of the inevitable increase in taxes has remained out of the picture for now. Likewise, the voices of German economists, who announced in the Bundestag about the threat of Germany’s public debt growing to the level of 90% of GDP within the next ten years and raising interest rates on all European bonds, remained unheard. But, according to Zerkal, Mertz understands: action must be taken right now.

Zerkal calls geopolitics the third reason for his actions. She emphasized that Europe’s second weakness, according to Draghi, is dependence on US security guarantees. The EU strategic document presented this week in Brussels on the future of the security system shows that Europe has finally clearly realized that it will have to rely mainly on its own strength, and that Russia is a real and main challenge not only for Ukraine, but also for the entire continent. The diplomat stressed that while Europe is calculating how the abolition of the policy of fiscal restrictions will increase the total debt, Mertz is using his window of opportunity. Its goal is to restore Germany’s lost position as a leader and political strategic player in the EU.

Zerkal separately notes another reason for concern in the EU — the rapid growth of the German economy, which will give Berlin non-competitive advantages over other member states of the Union. According to her, France is even satisfied with this, as it opens up new opportunities for French companies. On the other hand, Italy and Spain are categorically not happy with this development.

“But while Europe calculates how the lifting of fiscal restraint will increase the total debt, Mertz is using a window of opportunity. His goal is to restore Germany’s lost position as the leader and policy maker of the EU. There is another reason that is now causing concern in the EU – the rapid growth of the German economy will give it an uncompetitive advantage over other member countries. And if France, which sees this as an opportunity for its companies, is satisfied, then Italy and Spain – no.

On this European chessboard, Ukraine is still in the spotlight: the new strategy for the rearmament of Europe provides for an increase in military aid for us, and the Mertz plan – the allocation of an additional 3 billion euros to strengthen Ukrainian defense capabilities. But this focus of attention should be shifted from aid and expenses for the financing of joint projects and investments in the defense capability of Europe, of which Ukraine will be a part. For this, we must have our own game strategy.” – believes Zerkal.