Germany's Parties Agree on Debt Overhaul, Boosting Euro Zone Markets

German Chancellor-in-waiting Friedrich Merz has reached an agreement with the Greens and Social Democrats to significantly increase state borrowing, leading to a surge in Euro zone bond yields. Following the announcement, Germany's 10-year bond yield rose to 2.932%, nearing a 17-month high, while the DAX index climbed 1.7%. The proposed reforms include a 500 billion euro fund aimed at boosting infrastructure and military spending, ahead of a parliamentary vote next week. Analysts predict further increases in yields, with expectations of the 10-year yield reaching 3.25% by the end of the year. Despite the positive market reactions, experts caution about the speed of implementation of these plans. The euro also strengthened against the dollar, reflecting investor optimism about Germany's economic outlook.