”The fiscal bazooka is finally loaded. Will it hit its target and deliver higher trend growth for Germany? 1. After the historic pivot from fiscal austerity to authorising enormous funds in early 2025, the big task now is execution. Germany must prove that it can spend big and spend smart. 2. The bazooka is likely to deliver modernisation and renewed confidence in Europe’s largest economy. We expect potential growth to rise to 1-1¼%, from about ½% currently. 3. Infrastructure funds are targeted at crucial needs, such as reducing transport bottlenecks and supporting digitisation. Higher defence spending could trigger technological spillover effects in civil sectors. 4. However, economic success will not come overnight. We expect the bazooka’s impact to gradually unfold from 2026, gathering speed in subsequent years.”
Morten W. Langer