The debate over the deal cast defense spending as an issue of growing urgency as doubts increase about the U.S. commitment to European allies. Long-term strains on Germany’s debt limits, combined with the recent shift in U.S. security policy under President Donald Trump, pushed the negotiations into a deal that now goes before the parliament.

The two political parties expected to form the next German government have agreed to significantly loosen the country’s constitutional restriction on deficits, enabling 1 trillion euros ($1.08 trillion) or more in new borrowing and spending on defense and infrastructure.

LONDON (Reuters) - Euro zone shares and the euro rallied on Friday following news that German Chancellor-in-waiting Friedrich Merz reached an agreement with the Greens on a massive increase in state borrowing just days ahead of a parliamentary vote next week.