The Bulletin with UBS
What’s next for Germany?
Mar 10, 2025
Sam Adams, an economist for UBS in London, shares insights on Germany's shifting political landscape. He discusses the new Chancellor Friedrich Merz's ambitious defense and infrastructure spending plans and their potential boost to investor confidence. The conversation highlights the evolving pro-growth policies in German equity markets and explores how these changes may impact economic relations with trading partners. Adams also emphasizes the increased focus on small and mid-cap stocks as investment opportunities in this new environment.
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Quick takeaways
- The new German coalition's significant investment in defense and infrastructure signals a reform-oriented approach that enhances investor confidence.
- Despite an optimistic economic outlook, Germany still faces structural challenges such as high energy costs and an aging workforce that require attention.
Deep dives
Post-Election Economic Outlook
The political landscape in Germany has shifted following the recent general election, resulting in a clearer economic outlook. A significant fiscal package has been introduced by the newly formed coalition between the Union and the SPD, aimed at boosting defense and infrastructure spending, exceeding initial market expectations. This development signals a more reform-oriented approach that could enhance economic growth, with analysts projecting a positive impact on both domestic and Eurozone investor confidence. Overall, this transition brings a sense of optimism as the government gears up to implement policies that could stimulate activity in the economy.
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