EUR/USD holds strong above 1.0900 – BBH

EUR/USD is trading firmer above 1.0900. Germany’s CDU/CSU and SPD coalition are in high-stakes negotiations with the Green party to get the draft debt package passed in the current parliament, BBH FX analysts report. 

Coalition needs the support of the Green party for a constitutional amendment

"Germany's new parliament is set to convene by March 25. As part of a counterproposal, the Greens want to raise the threshold for defense spending exemptions from debt rules to 1.5% of GDP compared to 1.0% in the current plan. The CDU/CSU and SPD coalition need the support of the Green party to have the required two-thirds majority for a constitutional amendment."

"As a background, the German government could invest as much as €1 trillion over the next decade. The fiscal package introduced last week includes €500 billion for infrastructure spending and a special measure to amend the constitution to exempt defense spending above 1% of GDP from the constitutional debt brake."

"To appreciate the magnitude of this proposal, Germany invested €1.5 trillion over two decades following the reunification of East and West Germany."