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Published on Thursday, August 22, 2019

Approaching fiscal stimulus in Germany

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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