An agreement has been reached on plans by German chancellor hopeful Friedrich Merz to massively ramp up public borrowing, a source from the Greens party said on Friday, adding: "We are satisfied."

German conservative leader Friedrich Merz reached a tentative agreement with the Green party on a debt-funded spending package for defense and infrastructure, people familiar with the discussions said.

The future chancellor of Germany, Friedrich Merz, confirmed on Friday that the CDU/CSU Christian Democratic parties and Social Democrats have reached an agreement with the Greens to increase Germany's debt to allocate additional funds for defence purposes.

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.

Germany’s chancellor-in-waiting Friedrich Merz reached an agreement with the Greens party on a fiscal reform package for large investments on infrastructure and defense, according to a report by newspaper Handelsblatt.

The agreement between centrist parties, led by the likely next chancellor, Friedrich Merz, was billed as a response to America’s shrinking security guarantees.