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Germany is about to enter what its next chancellor, Friedrich Merz, calls a historic “whatever it takes” moment of significant fiscal expansion to ramp up military spending and boost its economy, which is denting the appeal of the U.S. dollar and long-dated Treasurys.
Following President Donald Trump’s
contentious meeting with Ukrainian President Volodymyr Zelensky last Friday, Europe’s largest economy is set to rearm itself. The plan, backed by the two political parties that will form Germany’s next government, involves loosening restrictions on borrowing that would enable the country to access as much as roughly 1 trillion euros (equivalent to $1.08 trillion).
