How big is the German “whatever it takes”?

The fiscal package proposed by CDU/CSU and SPD , the likely new coalition partners, to boost infrastructure by €500bn over 10 years and increase defense spending by exempting all defense expenditures exceeding 1% of GDP from the national debt brake , mark s a major shift from Germany's traditional fiscal cautious stance . According to our estimates, the additional GDP growth coming from the infrastructure investment plan amounts to around 0.3% in 2025 and 1.3 % in 2026 . The level of GDP would be in 2030 1% above the baseline level, as investments would start to slow down in 2029. It is also likely that the significant infrastructure spending will also lift potential growth, though this is difficult to assess without further details . Inflation would increase by a 0.1% vs. the baseline scenario in 2026 and by 0.2% in 2027. Prices will increase by a cumulated 2.5%vs. the baseline in 2030. Predicting the future evolution of defense spending is more challenging. We took the assumption that additional defense spending would rise by 0.5% of GDP every year and reaching a plateau in 2027. Depending on how the reform is implemented, t his could range from [ 0. 5-1 . 1 p . p . ] of GDP in 2026 compared to the baseline . All things being equal, a dding estimates from new infrastructure and defense expenditures would lead to a significant revision of the German GDP growth forecast, potentially adding a round 0.5 p.p. in 2025 and around 2.4 p.p. by 2026 . However, timing of the implementation will ultimately determine when these growth effects materialize .