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(Bloomberg) — Investor confidence in Germany’s economy soared by the most in more than two years as the country prepares for hundreds of billions of euros of infrastructure and military investments under its new government.
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The ZEW institute’s expectations index rose to 51.6 in March from 26 the previous month – the highest reading since February 2022. That’s more than the 48.3 median estimate of analysts in a Bloomberg survey. A measure of current conditions also rose, but by less than anticipated.
“The brighter mood is likely due to positive signals regarding the future German fiscal policy,” ZEW President Achim Wambach said in a statement. In addition, “the sixth consecutive interest-rate cut by the European Central Bank means favorable financing conditions for private households and companies.”
The data come ahead of a crunch vote Tuesday in parliament for the debt-financed spending package that would mark a game-changing turn away from Germany’s traditional budget discipline.
Analysts reckon the measures will help drag Europe’s largest economy out of its longstanding rut, though the effects will probably only kick in next year.
In 2024, Germany’s gross domestic product shrank for a second consecutive year and prospects for 2025 remain bleak. On Monday, the OECD revised down its growth forecast to 0.4% from 0.7%. In 2026, it expects 1.1%.
The country is still suffering from flimsy global demand, the cutoff of Russian energy supplies, over-regulation and a dearth of skilled workers. US President Donald Trump’s trade threats pose additional risks. He said at the weekend that he’d impose both broad reciprocal tariffs and additional sector-specific tariffs on April 2.
Bundesbank President Joachim Nagel reiterated last week that Germany is particularly vulnerable to US protectionism and new levies. Output could even shrink again this year, he warned — a streak not seen this century.
–With Assistance from Joel Rinneby, doesn’t grow up and kristian siedenburg.
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