German Chancellor-in-waiting Friedrich Merz was set to make a last-ditch attempt on Friday to convince the Greens of his plans for a massive increase in state borrowing to bolster defence and infrastructure ahead of a parliamentary vote next week.

Optimism was already building among economists on German and euro zone growth in a Reuters poll taken just before key political parties in Germany agreed a historic deal on debt, suggesting bigger revisions to forecasts in coming days.

Germany’s next chancellor, Friedrich Merz, struck a deal to loosen borrowing limits, unleashing €500 billion for defence and infrastructure. Markets surged, while analysts debated its impact on inflation and ECB rate policy.