Germany's conservatives and Social Democrats (SPD) on Tuesday held talks on forming a coalition as hopes for buoying Europe's largest economy rose on the prospect of a nearly trillion euro borrowing boom to fund military and infrastructure spending.

Leaders of Germany's Social Democratic Party (SPD) have said they will not appear at traditional Ash Wednesday events as they focus on negotiations to form a government in Berlin. The SPD is "prepared to negotiate and talk all week,

Despite declarations by Friedrich Merz, the likely future chancellor, the future government's road to taking office looks to be long and strewn with pitfalls.

Preliminary talks between Germany's CDU and SPD have yielded an early result, with the parties agreeing on a special fund to boost defense spending, freed from the "debt brake."