Approaching fiscal stimulus in Germany

Summary

Faced with a 0.1% GDP contraction in the second quarter and the possibility of a third-quarter repeat—as raised recently by the Bundesbank—there is speculation that the German government may approve a stimulus package of up to EUR 50 billion (1.5% of GDP).

Key points

• Key points:
• An economy that has been growing for a decade, with a GDP 20% higher than in 2009 and unemployment at 3.1%, lows not seen since 1980.
• Germany has fiscal margin for stimulus of the proposed magnitude.
• Furthermore, the German 10-year bond yield is in negative territory (-0.65%).

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