The Bundestag has voted in favour of Chancellor Merz’s fiscal reform, with a result of 513 for and 207 against. The reform, requiring 489 votes to pass, allows for increased defence spending and establishes a €500 billion ($548 billion) fund for infrastructure and climate initiatives.
The proposal, supported by CDU-CSU and SPD, seeks to exempt certain loans from the debt brake while providing more flexibility to Germany’s states. A two-thirds majority is necessary for the package, which must also be approved by the Bundesrat on Friday.
Germanys Fiscal Strategy Shift
Fitch has warned about potential pressure on Germany’s AAA rating if spending is not balanced by consolidation or improved growth. Meanwhile, the German DAX is up 0.69% at 23,315, having peaked earlier at 23,476.
In other news, President Trump and President Putin are currently discussing a cease-fire. The Nvidia GTC Conference will feature CEO Huang speaking later in the day.
The US Federal Reserve is set to announce its interest-rate decision tomorrow at 2 PM, with market attention on the implications for GDP, unemployment, and inflation related to recent policies.
Merz’s fiscal reform securing parliamentary approval marks a shift in Germany’s budget strategy. With 513 votes backing the measure—well above the 489 required—it demonstrates strong legislative support for reshaping public finance rules. The €500 billion fund earmarked for infrastructure and climate initiatives, alongside higher defence allocations, suggests a decisive move towards bolstering both long-term sustainability and national security.
By allowing certain loans to bypass the debt brake, Berlin aims to create more fiscal leeway, especially for regional governments. The Bundesrat’s upcoming verdict will determine the reform’s finalisation, and another two-thirds majority is necessary. Should approval be granted, fiscal adjustments could influence macroeconomic projections, debt issuance plans, and investor sentiment towards sovereign bonds. Fitch’s caution regarding Germany’s AAA rating reflects concerns over expenditure levels and the extent to which consolidation measures or stronger GDP growth can mitigate the effects.
With the DAX advancing 0.69% to 23,315—even touching 23,476 at its peak—the market has responded positively. Whether this momentum sustains will depend on investor interpretation of fiscal policy impacts and broader risk appetite. Meanwhile, developments in the US and Russia could alter geopolitical stability. Trump and Putin’s discussions about a cease-fire add another variable that—depending on outcomes—could affect energy prices, defence stocks, and wider economic expectations.
Monetary Policy And Market Sentiment
As attention shifts to the US Federal Reserve’s decision, the focus intensifies on projections for growth, employment, and inflation. Any deviation from expectations may prompt shifts in yield curves and adjustments in positioning across various instruments. Jerome Powell’s commentary will play a decisive role in shaping sentiment, particularly given current policy considerations.
Meanwhile, the tech sector will turn to Nvidia’s GTC Conference, where Huang’s address may set the narrative for AI-related equities. Given recent trends in semiconductor demand and capital expenditure cycles, any strategic insights from management could steer sentiment in both the short and medium term.
