German lawmakers have reached an agreement to exempt some defense spending from the nation’s tight rules on running up debt.

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.

German conservative leader Friedrich Merz reached a tentative agreement with the Green party on a debt-funded spending package for defense and infrastructure, people familiar with the discussions said.