The parties hoping to form Germany's next government have agreed to create a 500 billion euro infrastructure fund and overhaul borrowing rules, a tectonic spending shift that jolted markets on Wednesday on hopes of reviving Europe's largest economy.

French President Emmanuel Macron and Germany's conservative chancellor-in-waiting Friedrich Merz agreed during a meeting in Paris to open a new chapter in Franco-German relations, a source close to Merz told Reuters.

Germany's next leader, conservative Friedrich Merz, has raised the alarm over European defence but the clock is ticking for him to muster the funds needed to refurbish the armed forces.

European Union foreign policy chief Kaja Kallas, right, greets Friedrich Merz, leader of the Christian Democratic Union, prior to a meeting in Brussels, Wednesday, March 5, 2025. (AP Photo/)

Wall Street struggled for traction on Monday, ending mixed after slumping last week, while German election results buoyed German shares and Europe's single currency as investors waited for midweek results from artificial intelligence chip leader Nvidia.

Germany will unlock hundreds of billions of euros for defense and infrastructure investments in a dramatic shift that upends its ironclad controls on government borrowing.

The Christian Democrats won with 28.6% of the vote while the far-right Alternative for Germany came second with 20.8%.

Tuesday on the RealClearPolitics Podcast, Carl Cannon spoke with historian and Council on Foreign Relations fellow Liana Fix about the recent election results in Germany, where the mainstream conservative party led by Friedrich Merz captured the most votes and the further-right Alternative For Deutschland (AfD) party took second place.

Germany's likely next chancellor, a conservative, Friedrich Merz warned Europe should seek "independence" from the US as it grapples with the Trump administration's lack of support for Ukraine. France's Prime Minister Emmanuel Macron made very clear he believes Putin was "the aggressor" in Ukraine.

Merz prioritizes Ukraine and US, vows to tackle migration and economy after German election win BERLIN (AP) — Provisional results confirm that mainstream conservatives led by Friedrich Merz won Germany's national election,

Germany is set to rearm in a way not seen since World War II after the likely next chancellor Friedrich Merz said his government would vastly increase defence spending.