After two long days of negotiations, the German government finally presented the next phase of its unprecedented fiscal stimulus package in early June. Up until now, the German fiscal package was primarily focused on cushioning the German economy from the COVID-19 pandemic, and mitigating economic fallout throughout the country. With this new stimulus package now clearing the last remaining parliamentary hurdles, the new aim of the German government is to kickstart the economy.
Since the beginning of the COVID-19 pandemic, the German government has agreed on unprecedented fiscal support and stimulus measures, amounting to over 30% of the country’s GDP. Within these measures, cash-out fiscal stimulus amounted to more than 5% of GDP. Furthermore, the fiscal stimulus package passed in June adds an additional 4% of GDP, making Germany’s fiscal reaction to the crisis quite fascinating. It is not only the size of the packages which are remarkable, but also the fact that the German government has made a complete reversal in its approach to fiscal policy. This is not only the case for Germany, but for Europe as a whole. Just a few short months ago, such commentary on German fiscal policy would have been unthinkable. However, with Germany going from austerity champion to big spender in a matter of a few short weeks, it goes to show the extent in which the German government will go to protect its economic from any fallout (political, social, economic, or otherwise) arising from the COVID-19 pandemic.
A Fiscal Bang for the Deutschland
After two long days of negotiations, the German government finally presented the next phase of its unprecedented fiscal stimulus package in early June.
After two long days of negotiations, the German government finally presented the next phase of its unprecedented fiscal stimulus package in early June. Up until now, the German fiscal package was primarily focused on cushioning the German economy from the COVID-19 pandemic, and mitigating economic fallout throughout the country. With this new stimulus package now clearing the last remaining parliamentary hurdles, the new aim of the German government is to kickstart the economy.
Since the beginning of the COVID-19 pandemic, the German government has agreed on unprecedented fiscal support and stimulus measures, amounting to over 30% of the country’s GDP. Within these measures, cash-out fiscal stimulus amounted to more than 5% of GDP. Furthermore, the fiscal stimulus package passed in June adds an additional 4% of GDP, making Germany’s fiscal reaction to the crisis quite fascinating. It is not only the size of the packages which are remarkable, but also the fact that the German government has made a complete reversal in its approach to fiscal policy. This is not only the case for Germany, but for Europe as a whole. Just a few short months ago, such commentary on German fiscal policy would have been unthinkable. However, with Germany going from austerity champion to big spender in a matter of a few short weeks, it goes to show the extent in which the German government will go to protect its economic from any fallout (political, social, economic, or otherwise) arising from the COVID-19 pandemic.
The €130 billion (US$146 billion) stimulus package includes over than 50 different economic and social measures. From our perspective, the most relevant measures include the following:
**For those interested in looking to invest and/or trade this macro theme, check out our article “A Fiscal Bang for the Deutschland – Trade Ideas” for our trade ideas.
© 2020 Economics Global Inc.
Content Disclaimer
Any views expressed here are those of Economics Global Inc. as of the date of this publication, are based on available information, and are subject to change without notice. This document does not constitute investment advice.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.