00:00First of all, I guess we're in trade chaos, not really understanding what happens to this trade
00:05and tariffs from the U.S. What kind of implication does this mean for Germany?
00:12Yes, it's a problem. So there are people who hope that tariffs will be lower in the future. But
00:18what's happening is that uncertainty increases significantly. There is now uncertainty about
00:24whether the U.S.-EU trade deal will hold up. And that is, of course, a burden on the German export
00:30industry. And this is a problem. So is the German recovery happening? Are you confident that the
00:39way from now on is up? I mean, it is the case that the German economy is showing signs of
00:46life,
00:46but these are coming mostly from domestic demand. If we look at the companies reporting improved
00:56expectations and data, it's mostly companies related to fiscal stimulus within Germany, whereas
01:04exporting companies continue to have difficulties. So it's really the fiscal package that is
01:11producing some stimulus here. When you look at some of the packages, of course, as you're mentioning
01:17on infrastructure and defense, how does that help this year, but also into 2027?
01:24So what we expect is that it will help in both years. It will come, it will probably become
01:31effective in the second half of the year. But the 1% or so GDP increase we have in the
01:38forecast at the
01:39moment for Germany in 26 are mostly coming from this fiscal stimulus. And in a way, that's good
01:46because it's supporting the German economy. At the same time, it's a bit worrying because it's only
01:54driven by a public sector demand. What we would like to see is an upturn, which is broader, coming
02:01more from the private sector, from private investment. But that's not visible yet. Nevertheless,
02:05in 26 and 27, we do expect Germany to return to growth driven by fiscal stimulus.
02:14Mr. Fust, when you look at weaker dollar, it means higher euro. How problematic is this for German companies?
02:22It's not ideal. At the same time, one has to see that the US, for instance, has a share in
02:29German exports of
02:3110 percent. That's significant. It's an important export markets. But the most important market for
02:38the German economy is the European Union. And German exports are very diversified. So dollar weakness is
02:46unwelcome. But it's probably not the main issue we are facing at the moment.
02:52Mr. Fust, when you look at some of the other measures that the government could be putting in
02:56place to really fully have the biggest impact on the economy, what would be your number one and two
03:02priority? It would be to complement this fiscal stimulus with structural reforms, in particular
03:09reduction of red tape, a shift in energy policy to improve the efficiency of the energy systems,
03:19fiscal reform, tax reform. The tax burden on investment in Germany is the highest in the G7.
03:26Those would be the priorities.
03:29Is there anything else that Europe could do to basically fully help? We talk about also a higher
03:38euro may be leading to a cut from the ECB. Could that boost Germany's growth a little bit further?
03:46It could help. At the same time, the ECB needs to look at overall European growth and inflation.
03:54Of course, inflation is coming down. So there might be room for more cuts. But would they move the euro
04:01very much? I rather doubt it. So what the EU could do would be more on the structural side again,
04:09make sure that the the Mercosur and India and and more trade deals are coming along and maybe getting
04:18back to liberalizing the European internal market. The EU with internal market does have a growth machine,
04:25but it's not been used very much in the past. There are still barriers. So an agenda promising more economic
04:33integration within Europe would help Europe as a whole and Germany in particular, of course.
04:37policyasp.com
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