Friedrich Merz, Germany’s chancellor-in-waiting, has struck a deal with the Greens party to back a €500 billion borrowing plan, targeting infrastructure and military upgrades.

The agreement, reached a short while ago, aims to amend Germany’s "debt brake" borrowing limits before a new parliament convenes on March 25. Merz’s conservatives, fresh off last month’s election win, need a two-thirds majority in the outgoing Bundestag—requiring Greens and Social Democrat (SPD) support—to pass the constitutional changes.

A Greens source expressed satisfaction, hinting at concessions possibly tied to climate goals alongside Merz’s focus on growth and defense. The deal comes ahead of a key vote next week, as Merz seeks to lock in funds before far-right and far-left lawmakers, set to gain seats, could block it.

Markets cheered the news, with euro zone bond yields, shares, and the euro rising, reflecting optimism about Germany’s economic revival after years of stagnation.

Merz’s plan addresses urgent needs: modernizing crumbling infrastructure and boosting military spending amid European security concerns. Germany’s "debt brake," capping deficits at 0.35% of GDP, has long constrained such investments.

The €500 billion fund could shift that, aligning with NATO calls for higher defense budgets—potentially adding €30 billion annually. Critics, including the AfD, decry the move as a fiscal overreach, while supporters argue it’s vital to break Germany’s economic slump.

Finance ministry officials are now reviewing the compromise, which balances Merz’s priorities with coalition demands. If approved, it could redefine Germany’s fiscal stance and global role.

For Merz, the deal showcases his coalition-building skill, navigating a tight timeline to secure Germany’s future before opposition strengthens. The vote next week will test whether this bold vision becomes law.