German parties agree historic debt overhaul to revamp military and economy – Reuters
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The parties hoping to form Germany’s next government on Tuesday agreed to create a 500 billion euro infrastructure fund and overhaul borrowing rules in a tectonic spending shift to revamp the military and revive growth in Europe’s largest economy.Friedrich Merz’s conservatives and the Social Democrats (SPD), who are in negotiations to form a coalition after a national election last month, will put their proposals to the German parliament next week.Germany’s likely next chancellor, Merz, has seized the moment after the return of Donald Trump to the White House put the transatlantic alliance in turmoil and underlined the urgency for Europe to strengthen its own defences.Trump froze military aid to Ukraine after a bitter clash last week with its President Volodymyr Zelenskiy, reinforcing fears he could strike a deal with Russia to end the war in Ukraine while disengaging from Europe.Economists and investors have urged Germany to reform its constitutionally enshrined state borrowing limits – known as the “debt brake” – in order to free up investment and support an economy that has contracted for the past two years.
