Before an international panorama marked by geopolitical tensions, reconfigurations in strategic alliances and growing pressure on economic systems, Germany has started a significant turn in its fiscal policy this year.
The recent arrival of Donald Trump to the presidency of the United States has considerably altered international dynamics, weakening previous consensus around multilateral safety and cooperation. This article seeks to analyze the reasons behind the new German fiscal strategy, focused on increasing infrastructure and defense. I will talk about the implications that I could have both for the German economy, regional and global stability. Understanding this transformation is essential to anticipate changes in international economic and political balance.
What has motivated Germany to carry out this strategy?
In recent years, Germany had remained firm in its fiscal discipline, seeking to contain the impact of indebtedness generated during the pandemic. However, the German government has raised a strategic turn by 2025, betting on an expansion of public spending focused on infrastructure and defense. This change responds to a new geopolitical context marked by Russian invasion to Ukraine in 2022 and the increase in international tensions, which has led Berlin to rethink its traditional security position. The government plans to make the “debt brake” more flexible in the Constitution in the face of the need to strengthen European military capacity and modernize its infrastructure.
This will allow additional indebtedness to finance a stimulus package that includes a special fund of 500 billion euros for infrastructure in the next 12 years – which is equivalent to almost 12% of its GDP – and more than 100 billion euros destined for the strengthening of the defense sector. The conflict in Ukraine, in addition, has taken an unexpected turn after the arrival of Donald Trump to the United States Presidency on January 20. Its ambiguous position towards NATO and changes in dynamics with European countries have weakened the cohesion of the transatlantic alliance, while signaling signals from possible negotiations between Ukraine and Russia emerge, adding new layers of complexity to the German security strategy.
The implementation mechanisms
The new German fiscal approach would imply a deep change in its traditional austerity policy, with possible effects on public finances. The Special Fund of 500 billion euros for infrastructure – to deploy over a period of 12 years -, together with the 100 billion for climatic initiatives, would place Germany in an active phase of strategic investment. These measures are designed not only to modernize key sectors, but also to strengthen long -term economic and energy competitiveness.
As a result, the fiscal deficit is expected as a proportion of GDP passing 2.6% in 2024 to levels greater than 3% of GDP in 2025. It could even range around 4.5% in the following two to three years, exceeding the traditional limit of 3% of the European stability pact. Likewise, the public debt, which in 2024 was around 64% of GDP, could approach 70% towards the end of 2025 if projected expenditure levels are maintained. The execution of these investments will be supported by constitutional reforms and the creation of special funds with the aim of avoiding administrative bottlenecks and ensuring transparency and efficiency in the use of resources.
The implications for Germany and the rest of the world
These decisions will not only redefine the economic course of Germany, but will also have relevant implications for the growth of the European region as a whole. By adopting a more active strategy in public investment and strengthening its defense capabilities, Germany seeks to assume a firmer leadership role within the European Union, at a time when regional stability is challenged by multiple fronts.
This reconfiguration is inserted into a global environment characterized by growing geopolitical tensions, disruptions in supply chains, intensified technological competition and an energy transition that advances unequally. The current situation demands a deep review of economic and security policies at the international level, and Germany seems to be taking a decisive step by recognizing that sustainable growth and political stability require strategic investments oriented to infrastructure, climatic resilience and common defense.
Last week, the German Parliament voted in favor of the huge package of expenses, in addition to approving a historical amendment to the Constitution that will allow unprecedented public spending levels. The fiscal strategy adopted by Germany in 2025 will mark a turning point in its role within Europe and the global order. In a context of growing uncertainty, its commitment to these strategic investments reflects a determined response to the economic and geopolitical challenges that define this new international stage.
About the author:
Alejandro Padilla is president of the Economic Policy Commission of the International Chamber of Commerce Mexico and Deputy General Director of Economic and Financial Analysis of Grupo Financiero Banorte.
X account: @alexpadillasan
The opinions expressed in this document are of exclusive responsibility of the author and do not represent the opinion of ICC Mexico or Grupo Financiero Banorte or its subsidiaries or subsidiaries.
The opinions expressed are only the responsibility of their authors and are completely independent of the position and the editorial line of Forbes Mexico.
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