The German political stage has recently sparked an unprecedented storm of reform. Christian Democratic Union Chairman Mertz is racing against time to push for a 500 billion euro infrastructure fund plan and proposing a comprehensive reform of Germany's debt ceiling rules. This measure not only has the potential to completely change the spending structure of the German government, but also triggered a strong reaction in the financial market on Wednesday. Investors generally believe that Europe's largest economy is expected to usher in new growth opportunities. The euro has risen sharply against the US dollar for three consecutive trading days, with a cumulative increase of 4%. On Wednesday (March 5), it hit a new high since November 8 at 1.0802, closing at 1.0793.

1. Mertz's political strategy and reform background

Mertz, as a popular candidate for Germany's next leader, is attempting to pass a large-scale lending program during the brief window before the new parliament officially takes office. The background of this strategy is that far right and far left parties significantly increased their seats in last month's election, and if the two parties join forces, they may obstruct reforms in the next parliament. Although Mertz has harshly criticized the current government's fiscal policies as a member of the opposition over the past three years, he realized that Germany must strengthen its economic and defense capabilities in the face of the uncertainty brought by Trump's possible return to the White House and the potential threat from Russia to Europe.

2. Content and challenges of the reform plan

The conservative camp led by Mertz is in talks with the Social Democratic Party (SPD) to form an alliance and plans to submit a proposal to parliament next week, with a vote expected on March 17th. However, the Green Party has reservations about this plan and questions why climate friendly policies were not included. Due to the crucial position of the Green Party in parliament, its support or lack will directly affect the passage of proposals. In addition, the far right Alternative for Germany (AfD) and radical left-wing parties have threatened legal action, further increasing the uncertainty of reform.

3. Financial markets and economic impact

As soon as the news of the reform plan spread, the financial market quickly responded. The euro exchange rate hit its highest level in nearly four months on Wednesday, and the German blue chip index also jumped to near historical highs. The stock price of construction companies has risen significantly, with Heidelberg Materials, the world's second-largest cement producer, soaring by 16%. At the same time, the stock prices of European defense companies have also risen sharply due to expectations of increased government spending, with the cumulative increase of 17% to 30% in the stock prices of companies such as Rheinmetall and Hensoft this week.

4. The game between public opinion and politics

According to the public opinion survey of the National Bureau of Statistics, 49% of Germans support easing debt constraints, while only 28% oppose it. However, changing debt rules and establishing special funds require the support of a two-thirds majority of seats in parliament, which adds additional political difficulty to the reform. For decades, Germany's neighbors have criticized its overly tight fiscal policies for hindering regional economic growth, and this reform marks a historic turning point in Germany's economic policy.

summarize

The 500 billion euro reform plan advocated by Mertz is not only a major adjustment in Germany's economic policy, but also a crucial battle in his political career. Despite facing multiple obstacles from the Green Party, far right, and far left, the positive response from financial markets and public support have provided impetus for reform. If the proposal is ultimately passed, Germany is expected to usher in a new wave of investment in infrastructure construction and defense, injecting strong momentum into the recovery of the European economy. However, the success of the reform still depends on whether Mertz can win enough support in the complex political game.