Investing.com - Germany’s lower house of parliament, the Bundestag, has voted in favor of several changes to the country’s constitution that would allow for a loosening in fiscal rules and pave the way for new investments on defense and infrastructure .
The closely-monitored vote on Tuesday passed with 513 MPs in favor of the amendments and 207 against them. A required 489 votes, or a two-thirds majority, was required for the reforms to go ahead.
Chancellor-in-waiting Friedrich Merz’s conservatives as well as the center-left Social Democrats and the Greens party backed the measure. The three had hashed out an agreement in principle last week, with the window to pass the legislation before a new parliament begins its first session on March 25 closing.
The amendments now go to Germany’s Bundesrat, the upper house of parliament, for a scheduled vote on Friday.
Merz has argued that the moves, which mark a shift away from Germany’s longstanding "debt brake" that placed a cap on borrowing, were particularly necessary to help Europe’s largest economy increase military spending.
Recent comments from President Donald Trump have fueled recent concerns in Europe that the U.S. may not be willing to provide a reliable security backstop in the future.
Optimism about Germany’s fiscal reset plan has helped spur a jump in European stocks, especially the DAX, which has gained more than 16% year to date. On Tuesday, the average moved up by 0.6%.
Germany’s benchmark 10-year bond yield climbed as traders weighed the impact of higher borrowing and spending on inflationary pressures. Yields typically move inversely to prices.