German lawmakers approve 100 billion euro military revamp

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By Holger Hansen

BERLIN (Reuters) -Germany's Bundestag, the lower house of parliament, on Friday approved creation of the 100 billion euro ($107.2 billion) special defence fund that Chancellor Olaf Scholz announced in response to Russia's invasion of Ukraine.

The money is destined to top up the regular defence budget of around 50 billion euros over several years to help re-build Germany's military, which has suffered years of neglect following the end of the Cold war.

The government decided to amend the constitution to create the fund in order to exempt it from Germany's so-called debt brake that enforces fiscal restraint. It needed backing from the opposition conservatives as well as the ruling coalition in order to reach the two-thirds parliamentary majority needed for a constitutional change.

The fund should enable Germany to meet the NATO target of spending 2% of its economic output on defence each year, making it the world's third-biggest military spender behind the United States and China. The Kremlin earlier on Friday accused Germany of "remilitarization" as it moved to boost military spending and said it increased security risks.

The Bundestag also passed a budget foreseeing 139 billion euros of new debt this year - Germany's second-highest-ever level - to cushion Europe's biggest economy against fallout from the Ukraine conflict.

The budget required parliament to allow an exemption from Germany's debt brake for a third year in a row, with the new debt to go towards funding aid for households and companies struggling with high energy prices as well as support for Ukrainian refugees and Kyiv.

Finance Minister Christian Lindner wants to return to the brake next year, which according to government sources would allow the Cabinet to spend no more than 15 billion-17 billion euros in new debt.

Separately on Friday, the Bundestag approved raising Germany's minimum wage to 12 euros per hour from 9.82 euros currently - one of the key election promises of Scholz and his Social Democrats.

($1 = 0.9329 euros)

(Reporting by Holger HansenWriting by Sarah MarshEditing by Hugh Lawson and Leslie Adler)

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