German conservative leader Friedrich Merz reached an agreement with the Green party on a debt-funded spending package for defense and infrastructure, overcoming a key hurdle ahead of a crunch vote in parliament next week.

An agreement has been reached on plans by German chancellor hopeful Friedrich Merz to massively ramp up public borrowing, a source from the Greens party said on Friday, adding: "We are satisfied." Greens' support is seen as crucial to Merz's bid to pass the debt plan with a two-thirds majority in Germany's outgoing parliament.