'From fiscal austerity to fiscal bazooka': Economists predict German stimulus to cause seismic change for Europe

Injection of €500bn

Proposals from incoming German chancellor Friedrich Merz and his Christian Democratic Unionist (CDU) Party have caused ruptures across European fixed income and equities markets as economists and portfolio managers digest the news of a fiscal stimulus touted to be a paradigm shift in Europe.

Unveiled last week (4 March), Merz's historic proposal comprises three significant components, most notably an injection of €500bn over the next decade to invest in infrastructure, which will not be included in the calculation of the debt brake. The debt brake obliges the federal government and the 16 states within Germany to balance their books and almost prohibits them from taking out additional loans, a measure that represents the strictness of limits on borrowing of any G7 economy.  Germany's DAX rallies in build up to election After Merz's CDU/CSU became the largest party in t...