UK economy shrinks in January; stocks and euro jump on reported German debt deal – business live | Business


European stocks, euro rally as Merz reaches historic debt deal with Greens

Incoming German chancellor Friedrich Merz has reached an agreement with the Greens today on a massive increase in state borrowing, just days before a parliamentary vote next week, Reuters is reporting, citing a source close to the negotiations.

A debt deal compromise is being examined by finance ministry officials, parliamentary sources said. Merz’s conservatives and the social democrats hammered out the deal but need the support of the Green party to get the proposed reform of debt rules and massive increase in state spending through parliament, as they require a two-thirds majority for necessary constitutional changes.

News of the deal sent euro zone government bond yields, shares and the euro soaring.

The German Dax jumped as much as 1.8% and is now 345 points ahead at 22,922, a near-1.6% rise. The French and Italian markets are 1.1% and 1.3% ahead, respectively, while the UK’s FTSE 100 has climbed by 55 points, or 0.6%, to 8,597.

The euro is 0.4% higher, rising back above $1.09 to $1.0901, and bond yields jumped on the prospect of higher borrowing.

Another source said some details were still being hammered out.

Merz, a former investment banker who flies his own private plane, wants the outgoing German parliament to approve a €500bn fund for infrastructure and sweeping changes to borrowing rules – known as the Schuldenbremse, or debt brake – to kickstart economic growth and ramp up defence spending in Europe’s largest economy.

The politician whose conservatives won a national election last month is racing to secure the funds before a new parliament convenes on 25 March, where they risk being blocked by an expanded contingent of far-right and far-left lawmakers.

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‘We’re ground zero’: Canada steel town is frontline of Trump’s tariff trade war

The sprawling ArcelorMittal Dofasco steel plant in Hamilton, Ontario has in recent months become a site of pilgrimage for Canadian political leaders.

Dressed in pristine orange coveralls and hard hats, prime ministers and provincial premiers gaze at coiled sheets of steel with the stern grimaces and keen interest of generals reviewing a military parade.

And, in the eyes of many Canadians, the country is already in a state of conflict.

This week, after a string of feints and retreats, a phony trade war came to an end as Donald Trump threatened to inflict “a financial price … so big that it will be read about in History Books for many years to come”.

And so, barely 48 hours after winning the race to lead the ruling federal Liberal party, Canada’s prime minister-designate, Mark Carney, became the latest politician to head to Dofasco.

The former governor of the Bank of England and the Bank of Canada criticized the “unjustified” tariffs and said he was willing to sit down with Trump, as long as the president showed “respect for Canadian sovereignty”.

That remained in doubt: just a day earlier, Trump had restated his argument that Canada should become the “cherished Fifty First State”, adding: “The artificial line of separation drawn many years ago will finally disappear.”

Such talk might once have been dismissed as harmless trolling or perhaps a strategy to win trade concessions, but Canadians are taking Trump at his word – and readying for a worsening of relations.

Andrea Horwath, the mayor of Hamilton, said:

Nobody wants to be here. Nobody wants a trade war. But here we are and I can say one thing – we’re not going to roll over.

We’ve seen a powerful Team Canada approach across the country because at this moment, fracturing is not an option. Instead, we’re seeing Canada at its finest.

That unity has come in the form of a “buy Canada” movement, boycotts of leisure travel to the United States, cancellation of entertainment subscriptions and a rallying cry of “Elbows Up” – a reference to energetic tackles in ice hockey.

Steel workers work at the ArcelorMittal Dofasco steel plant in Hamilton, Ontario. Photograph: Canadian Press/REX/Shutterstock
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