By Indradip Ghosh BENGALURU - Optimism was already building among economists on German and euro zone growth in a Reuters poll taken just before key political parties in Germany agreed a historic deal on debt,

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

Germany’s next chancellor, Friedrich Merz, struck a deal to loosen borrowing limits, unleashing €500 billion for defence and infrastructure. Markets surged, while analysts debated its impact on inflation and ECB rate policy.

By Samuel Indyk, Harry Robertson and Dhara Ranasinghe LONDON (Reuters) -European stock markets rallied on Friday as news of an agreement between German political parties on a historic debt deal added to optimism that has swept across the region,