BERLIN (Reuters) -The prospect of a military spending boom by Germany unprecedented since the Cold War sent Europe's defence stocks soaring after Reuters reported the likely next government was mulling a fiscal sea change for Europe's biggest economy.

Defence contractors including Thyssenkrupp, Hensoldt, Renk ( RNKGF ), Rheinmetall, BAE Systems and Leonardo saw their shares jump by double-digit percentages on news that the election-winning conservatives and the centre-left Social Democrats were contemplating debt-financed defence and infrastructure funds jointly worth just under a trillion euros.

Neither party has confirmed that a special fund for defence worth 400 billion euros ($417 billion) and for infrastructure worth as much as 500 billion euros were under discussion, a sum which combined would amount to 20% of German GDP.

But senior officials from both sides talked of pressing needs.

"There is an enormous need for investment and we won't create consent for it if we just invest in defence," said SPD General Secretary Matthias Miersch on Monday. "The two need to be considered together."

The discussions are the latest fall-out from the United States' cooling attitude towards backstopping Europe's defence since President Donald Trump returned to the White House, of which Friday's clash between Trump and Ukrainian President Volodymyr Zelenskiy was the most dramatic illustration.

"Even if spent over 10 years, this would be about as much as the country has invested in East Germany since reunification," Deutsche Bank wrote in a note. "It would be a fiscal regime shift of historic proportions."

Bild newspaper reported that an extraordinary session of parliament might be called for next Monday, which would allow the measure to be passed with the backing of the Greens.

After the new parliament is seated this month, the defence-sceptical Left party's support will be needed to reach the necessary two-thirds majority.

For decades, Germany has been a defence laggard, until 2023 spending less than NATO's target of 2% of economic output on defence, with Russia's invasion of Ukraine and Chancellor Olaf Scholz's defence "Zeitenwende" or sea change only bringing modest results.

The use of a special fund - effectively a credit line - reflects the difficulties in circumventing a constitutional spending cap that limits the amount of new debt German governments can take on each year.

The soaring shares reflect investor confidence that the makers of military vehicles, ammunition and other battlefield kit will be big winners from the bonanza.

Scholz's previous attempts to boost military spending also relied on a special fund, formally separate from Germany's 2 trillion euros in public spending.

They are legally tricky: a court ruling against his use of another fund paved the way for the collapse of his government and the election he lost last month, while the state auditor has called for their use to be reined in.

The economic impact of the defence fund would be modest in the short term, Deutsche Bank wrote, since much of it would be spent on imports.

The infrastructure fund, badly needed after years of frugality have left much of Germany's public realm, from bridges to railways, in a ragged state, would have a bigger impact.

"Assuming they were spent and smoothed over 10 years, the fiscal impulse would be worth up to 2% of GDP," Deutsche Bank wrote.

($1 = 0.9602 euros)