German parties agree historic debt overhaul to revamp military and economy

Reuters was first with the historic news that Germany would create a 500 billion euro infrastructure fund and overhaul borrowing rules to unleash the biggest spending splurge in decades. The news immediately boosted the euro, pushing it to its strongest level in nearly four months. European shares, especially defence stocks, jumped on Wednesday.

Why it matters

The return of Donald Trump to the White House has put the transatlantic alliance in turmoil and underlined the urgency for Europe to strengthen its own defences.

Economists and investors have also been urging Germany for years 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.