Germany Economic Outlook: 1 Year Post-Coalition | Oxford Economics Webinar
Germany’s economic trajectory is under scrutiny as a webinar scheduled for later this week will assess the impact of last year’s significant fiscal policy shift. The session, led by Oxford Economics Senior Economist Alexander Valentin, will focus on the progress of easing measures implemented by the new coalition government and their effect on growth, particularly within the industrial sector.
The German coalition government, formed in early 2025, unveiled a sweeping fiscal package that included the creation of a €500 billion infrastructure fund and a relaxation of debt constraints on defense spending, representing a departure from the country’s traditionally conservative fiscal approach. This move, exceeding 12% to 18% of GDP, signaled a recognition of the necessitate to prioritize domestic investment over its long-held “Exportweltmeister” model, according to analysts.
The shift was prompted, in part, by a changing geopolitical landscape and a reassessment of European security needs. Germany’s Chancellor-in-Waiting, Friedrich Merz, emphasized the need for increased defense capabilities in light of evolving political developments in Europe and globally. The agreement included exempting defense spending above 1% of GDP from the country’s strict debt brake, a rule established in 2009 that limited annual budget deficits to 0.35% of GDP.
The infrastructure fund, totaling €500 billion ($535 billion) over ten years, is intended to modernize Germany’s transport, energy, and digitization infrastructure. Analysts at XTB described the move as “huge,” noting that it addressed long-standing calls for Germany to alter its spending rules to stimulate economic growth. The decision to dismantle the debt brake was as well influenced by pressures stemming from Russia’s invasion of Ukraine and the resulting energy price increases.
The webinar will also address potential delays in military and infrastructure spending, as well as the prospects for further structural reforms. Alexander Valentin, specializing in macroeconomic forecasting for the Eurozone at Oxford Economics, previously worked at Deutsche Bundesbank, EY, and Commerzbank, bringing a diverse background to the analysis. He holds a Ph.D. And M.Sc. In Economics from Goethe University Frankfurt.
The fiscal changes are expected to have a significant impact on the Eurozone, with some analysts suggesting that the strengthening of European resolve has already provided a boost to the region. The coalition agreement also included plans for comprehensive tax reforms, including new investment incentives in the form of declining balance tax depreciation for equipment investments, announced in April 2025.
The webinar, hosted on the ON24 platform, is scheduled to deliver insights into the dynamics and risks shaping Germany’s economic trajectory, but a specific date for the release of the findings has not been announced.