The Weekly Brief
17-02-2025
Thought of the week
German voters go to the polls on 23rd February to elect a new parliament. On the campaign trail, the challenge of how to revive a stalling economy has been a hotly debated topic. Manufacturing is suffering from Chinese weakness, higher energy costs and tight regulation, while private consumption has stalled since 2023. Yet although the need for economic stimulus is clear, currently the constitutional debt brake (“Schuldenbremse”) limits the German government’s ability to provide support. Increasing defense spending needs are another factor that the new government will need to consider. Germany does have the financial means to ramp up spending, with government debt-to-GDP having fallen from 75% to 63% over the past decade. Whether a new coalition government may be willing to modify the debt brake will therefore be key to how markets respond to the election outcome.
Germany’s debt levels leave scope for fiscal expansion
%, government debt-to-GDP

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