Germany's Future Fiscal Policy: A Stabilizing Force?

The German economy has shown signs of weakness as 2025 begins, but potential fiscal policy changes by the country's future government may offer stability. Chancellor-in-waiting Friedrich Merz has garnered support from the Greens for significant state borrowing, aimed at fostering growth and revising infrastructure investments.

Germany's economy has entered 2025 with lingering weaknesses, but relief may be on the horizon with proposed fiscal policies from the incoming government. The economy ministry outlined these possibilities in its latest monthly report, emphasizing that stability could come from the future coalition's economic plans.

Despite ongoing foreign and geopolitical uncertainties, the anticipated fiscal agenda might stabilize expectations, ensuring planning security for German households and businesses. This positive outlook comes amid a backdrop of uncertainty but holds promise for economic revitalization.

In a significant political move, Chancellor-in-waiting Friedrich Merz announced securing the Greens' support for a substantial increase in state borrowing. The proposed measures, including a 500-billion-euro fund for infrastructure, are designed to bolster Germany's defense and spur growth within Europe's largest economy, pending parliamentary approval.

(With inputs from agencies.)