German Lawmakers Approve Constitutional Reform to Increase Defense Spending, 10-Year Yield Held Near 14-Year High

Bridgette Randall
18 Mar, 2025
Frankfurt

Stock market indexes in Europe advanced as investors welcomed the historic debt reform vote in Germany and awaited possible developments in the Ukraine conflict.

Benchmark indexes in Frankfurt, Paris, Milan, and London advanced after the lower house of the German parliament approved the constitutional change, paving the way for additional government spending. 

A total of 513 members of the Bundestag voted in favor of increasing the debt brake, higher than the 489 needed for the two-thirds majority, and 207 voted against.

The bill now goes to the upper house of the parliament, the Bundesrat, where members are expected to pass the bill on Friday.

With the higher federal and state debt limit, Germany plans to set up an additional €500 billion fund, or about 11% of GDP, to invest in its faltering infrastructure and pay for the arms production.

With the latest revision, only 1% of defense spending will be financed under the structural deficit spending limit of 0.35% of GDP, and any additional spending with no limits could be financed with additional borrowings.  

 

Europe Indexes and Yields

The DAX index increased by 0.9% to 23,367.06, the CAC-40 index edged higher 0.5% to 8,111.97; and the FTSE 100 index advanced by 0.3% to 8,709.17.    

The yield on 10-year German bonds inched higher to 2.84%, French bonds increased to 3.51%, the UK gilts moved up to 4.69%, and Italian bonds edged higher to 3.88%.

The euro increased to $1.09; the British pound was higher at $1.30; and the U.S. dollar was lower and traded at 87.96 Swiss cents.

Brent crude increased $0.78 to $71.85 a barrel, and the Dutch TTF natural gas was higher by €0.12 to €41.34 per MWh.

 

Europe Stock Movers

Trustpilot Group PLC soared 9.8% to 303.50 pence, and the Danish review management website operator expanded its stock buyback plan by £20 million. 

Fresnillo plc jumped 1.8% to 954.50 pence, and the gold miner advanced after the gold price rose 1% and touched a new record high of $3,031.50 per ounce.

Deliveroo plc decreased 1.1% to 120.98 pence, and the food delivery company extended its stock repurchase program. 

Volkswagen AG increased 1% to €109.35, and the company's luxury division Audi announced it would eliminate 7,500 jobs, or about 8% of its global workforce, by the end of 2029.