Germany’s recent fiscal package has sent shockwaves across Europe, with long-term yields jumping 0.3 percentage points and the euro surging. The move marks a significant shift towards internal demand and away from external factors in the European growth model. This change has implications for exporters, who are likely to be hit harder by Germany’s spending spree.
As the continent becomes more reliant on domestic consumption, concerns arise about its ability to cope with a free-spending Germany. The package represents not just increased defence spending but also a new approach to economic management that prioritizes internal demand over external factors. This could lead to a rebalancing of Europe’s economy, with far-reaching consequences for businesses and individuals alike.
The impact on European stock markets has been less severe than expected, with investors seemingly willing to adapt to the new economic reality. However, exporters will need to navigate these changes carefully to avoid being left behind. The question remains whether Europe can thrive under a Germany that is increasingly focused on its own internal growth rather than external trade.
Source: https://www.economist.com/finance-and-economics/2025/03/13/can-europe-cope-with-a-free-spending-germany