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Germany\u2019s likely next chancellor pledged to upend strict rules on government borrowing to drastically increase defense and infrastructure spending, a surprise move by a leader seen as fiscally conservative.<\/p>\n
Friedrich Merz, whose center-right party won last month\u2019s general election, announced a deal with his likely coalition partners to relax Berlin\u2019s stringent borrowing rules<\/a> to fund the investment.<\/p>\n \u201cEurope needs to strengthen defense<\/a>,\u201d Bloomberg quoted Merz as saying. \u201cThe necessary decisions, especially with regard to the federal budget, can no longer be postponed after the recent choices of the American government.\u201d<\/p>\n The money raised would fund 500 billion euros ($535 billion) in extra infrastructure spending and hundreds of billions more on defense, a decision Deutsche Bank economists characterised as \u201cone of the most historic paradigm shifts in German postwar history.\u201d<\/p>\n Merz had presented himself as a fiscal conservative during the election campaign. A Handelsblatt columnist described the about-face as \u201cdizzying\u201d<\/a>. Investors were wary: The yield on Germany\u2019s 10-year bond jumped the most since 2020 on the news<\/a>.<\/p>\n<\/div>\n<\/div>\n