German spending plans could stabilise expectations, says economy ministry

BERLIN (Reuters) - Germany's economic weakness carried over into the start of 2025, but fiscal policy plans by the country's future government could help stabilise expectations and provide planning security, said the economy ministry in its monthly report on Monday.

"Even if foreign and geopolitical uncertainties are unlikely to diminish in the foreseeable future, the fiscal policy plans currently being discussed by the future governing coalition could have a stabilising effect on expectations and increase planning certainty for private households and the economy," said the ministry in its report.

German chancellor-in-waiting Friedrich Merz said last week that he had secured the crucial backing of the Greens for a massive increase in state borrowing, clearing the way for the outgoing parliament to approve the historic deal this week.

Merz's conservatives and the Social Democrats, who are in negotiations to form a government after an election last month, had proposed a 500-billion-euro ($544 billion) fund for infrastructure and sweeping changes to borrowing rules to bolster defence and revive growth in Europe's largest economy.

(Reporting by Miranda Murray, editing by Thomas Seythal)

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