Germany: Very low chances of a big fiscal boost – ABN AMRO

Aline Schuiling, senior economist at ABN AMRO, suggests that for the German economy, even in the unlikely event that early elections were held, the chances of a big fiscal boost seem low.

Key Quotes

“To begin with, according to current government plans, the general budget surplus would decline from around 1.2% GDP in 2019 to 0.2% in 2021. This means that, staying within the rules of the debt-brake, extra spending of around EUR 15-20bn would be possible during the next few years, which would raise annual GDP growth by roughly 0.2-0.3pp.”

“Alternatively, a bigger fiscal boost would mean that the debt-brake rule needs to be changed, which would require two-thirds majorities in each of the two chambers of parliament.”

“Looking at the current distributions of the seats in parliament as well as recent polls for new elections, the parties in favour of changing the debt-brake rule would miss the two-thirds majority by a wide margin.”

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