Germany’s shift in spending: a game changer for Europe?

Germany’s historic aversion to public spending is shifting as it embraces a more proactive fiscal policy to address structural challenges and drive investment. The country’s constitutional “debt brake” has long constrained budgetary flexibility, but recent constitutional court rulings and geopolitical pressures, including energy security and defence needs, are prompting a rethink. Natixis argues that Germany’s pivot towards higher spending could have positive economic spillovers across Europe.

“The need for the Europeans to rely on themselves has led to the massive ‘bazooka’ from Germany in infrastructure spending and forgetting the debt break. At last, Germany will spend, which is welcome. [Combined with] the ‘Rearm Europe’ plan from the European Commission, which is supportive for some sectors… this will lead to more bond issuances,” opines Philippe Berthelot, fixed income co-CIO, Ostrum Asset Management, an affiliate of Natixis.

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