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Germany’s next prime minister may promise to overturn strict rules on government lending to significantly increase defence and infrastructure spending, a surprise move by a leader seen as a fiscal conservative.
Friedrich Merz’s centre-right party won last month’s election and announced a deal with his possible alliance partners to relax Berlin’s strict lending rules to fund the investment.
“Europe needs to strengthen its defense,” Bloomberg quoted Melz as saying. “After the recent choice of the U.S. government, it is no longer possible to postpone the necessary decisions, especially the necessary decisions regarding the federal budget.”
The funds raised will fund €500 billion ($535 billion) with additional infrastructure spending and hundreds of billions of dollars in defense spending, a decision by German bank economists characterized by “one of the most historic paradigm changes in German history after the war.”
During the campaign, Meers made himself a fiscal conservative. Handelsblatt’s columnist describes about “dazzling faces” as “dazzling agning.” Investors are wary: Germany’s 10-year bonds have the highest yields since 2020.
