Germany's banks cautioned the government in Berlin on Thursday that the ambitious infrastructure and defense spending plans must be complemented by regulatory reforms to maximize their effectiveness.

This week, the prospective governing parties in Germany agreed to establish a 500-billion-euro infrastructure fund and revise borrowing regulations, signaling a significant shift in spending that raised hopes for revitalizing the continent's largest economy.

The positive outlook propelled German bank shares to new heights. However, senior German financial experts fear that without addressing bureaucracy, the impact of these measures may diminish and prove temporary.

Heiner Herkenhoff, the head of the Association of German Banks, emphasized, "These measures must be accompanied by comprehensive structural reforms; otherwise, they will simply be an expensive, short-lived initiative."

Christian Ricken, CEO of the German property lender Aareal, acknowledged that the spending plans could enhance financial conditions for property development to address the housing shortage, adding, "But we also require regulatory simplifications to enable sensible construction activities."