Germany’s election-winning center-right Christian Democratic Union/Christian Social Union, led by Friedrich Merz, and the Social Democrats have reached a preliminary agreement with the Green Party on a deal to exclude defense spending from the country’s constitutional debt break and establish a dedicated $545 billion fund for infrastructure investments.

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.

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

Germany's conservatives sealed a crucial deal Friday for a historic boost to defence and infrastructure spending, with leader-in-waiting Friedrich Merz declaring "Germany is back" as Europe grapples with the upending of the transatlantic alliance.