The cost of borrowing Germany It has increased to the largest percentage of 28 years on Wednesday, as investors bet on a major boost of the country’s economy by the historic agreement to finance the military and infrastructure.

The yield of 10 years bond It increased by 0.25 percentage points to 2.73%, in the highest daily change since 1997, with markets preparing for additional government lending, according to the Financial Times.

The upcoming chancellor Friedrich Mertz He agreed late Tuesday with the Social Democrats (SPD) the defensive costs of the regular budget exceeding 1% of GDP being exempt from the limitations provided by the debt brake. If this proposal passes, there will be no longer any limit on defense spending.

In the meantime, a special fund of 500 billion euros is established by new borrowing (government bonds), which will finance actions for the next 10 years to modernize critical infrastructure. And here is a revision of the Constitution to institutionalize the Fund and not being able to be politically disputed or appealing to the German Supreme Court of Constitutional Court. Today’s “debt brake”, guaranteed in the Constitution, stipulates that new lending may not exceed 0.35% of GDP per year.

Deutsche Bank economists described the agreement as “one of the most historic changes in Germany’s post -war history”, adding that both “the speed at which this and the magnitude of the future fiscal expansion is reminiscent of German reunification”.

Goldman Sachs analysts said the package could boost German economic growth by up to 2% next year – from 0.8% today provided by the bank – if approved and applied quickly.

Mertz plans to promote changes to parliament this month, before the new MPs take over their positions. The far -right and far -left parties won a minority of exclusion in the February 23 elections and could prevent any constitutional change in the following legislative period.

The agreement between Mertz’s CDU/CSU and SPD still requires the support of the greens to achieve a two -thirds majority to change the Constitution. The Greens have long been demanding the reform of the so -called “brake debt”, but senior party executives said they must first assimilate the details of the plan. Analysts expect the party will eventually consent.

“A significant enhancement of growth could be expected already in the second half of the year,” said Sebastian Dullien, Research Director of the Düsseldorf Macroeconomic Institute. He also predicted that “the normal 2% growth rates could be possible again”.

Economists had previously predicted continuing economic stagnation. Germany’s GDP has shrunk for two consecutive years, as it is facing high energy costs, weak corporate investment and weak consumer demand.

“This fiscal change will permanently change the way the bonds are negotiated,” said Tomasz Wieladek, head of European economist in the T Rowe Price.

Investors have said the sale of bonds did not reflect concerns about Berlin’s debt sustainability, which with about 63% of GDP is much lower than the level of other major western economies, such as France, the United Kingdom and the US.

In contrast to recent borrowing costs in countries such as the United Kingdom, which threatened their budget plans, markets invoice a better growth course that boosts risky assets, such as shares, at the expense of extremely secure state debt.

“Performances are increasing due to the perception that Germany opens the growth faucet. It is very positive for risky assets, “said Karen Ward, an analyst at JPMorgan Asset Management.

Jump on the German stock market

The German DAX index, which had fallen on Tuesday after imposing US duties on some commercial partners, rises more than 3%.

German infrastructure companies are among the largest winners, with Heidelberg Materials is 15%, while Siemens Energy adds almost 9%. Thyssenkrupp, Germany’s largest steel industry, earns more than 13%.

Meanwhile, Rheinmetall’s shares, Germany’s largest defense company, are more than 5%. Deutsche Bank’s stock wins over 9%.