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UBS On-Air: Market Moves

Across the Pond: Is Germany’s chancellor-in-waiting Merz the comeback kid?

Mar 6, 2025
Paul Donovan, Chief Economist for UBS GWM, dives into Germany's political and economic landscape, focusing on chancellor-in-waiting Friedrich Merz's push for independence from the U.S. and plans for increased defense and infrastructure spending. The discussion highlights the surprising resilience of Germany's DAX index amid geopolitical tensions and examines consumer confidence despite recent economic challenges. Donovan also explores broader Eurozone dynamics and the potential impact of demographic trends on Europe's economic future.
24:46

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

  • Friedrich Merz's commitment to increased defense and infrastructure spending highlights Germany's shift towards greater autonomy from the U.S. amidst geopolitical uncertainties.
  • Despite long-term challenges like aging populations, the rise in domestic consumer spending and technological advancements may enhance Europe's economic recovery and overall quality of life.

Deep dives

Implications of the German Elections

The recent German elections are poised to bring significant changes as they likely result in a grand coalition government, where the social democrats transition to a junior partner role under the more conservative Christian Democrats. This shift aligns with a broader global trend of incumbents being ousted and reflects potential uncertainty regarding established political norms. The implications of this change may resonate beyond Germany, especially with Friedrich Mertz's emphasis on seeking greater independence from the United States and responding to perceived neglect. Such a stance is expected to influence Germany's defense spending and infrastructure development, marking a considerable pivot for the historically frugal nation.

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