As Germany bypasses its fiscal limits to bolster defence, Europe’s financial markets soar, with industrial stocks surging and bond yields spiking—sending ripples across the global economy.
In a seismic shift, Germany has agreed to relax its “debt brake” policy, allowing for an unprecedented increase in defence spending.
The move comes as the country seeks to raise military expenditure to support Ukraine and counter external threats.
The historic decision saw yields on German 30-year bonds surge to their highest level since 1998, a clear reflection of the market’s reaction to the new fiscal policy.
The DAX 30 jumped nearly 4%, driven by a rally in industrial stocks, particularly defence companies like Rheinmetall and BAE Systems.
Meanwhile, the euro strengthened against the dollar, while the pound gained momentum following trade war easing prospects.
This major fiscal overhaul, promising up to €800 billion for defence and infrastructure over the next decade, sends a strong message to Putin and Trump alike.
Yet, analysts caution that this surge in borrowing could strain the economy, pushing bond yields even higher.