(Finance) – According to the European rating agency Brooms Ratings there Germany it needs a stable, reform-oriented government to respond to the impact of the newly elected President’s potential policy changes Donald Trump. In fact, Scope Ratings analysts underline that the measures that Washington will take with the second Trump administration will have repercussions on the country’s trade, fiscal and defense policies.
In its latest research the European rating agency considers it “probable” that some of the implications unfavorable of a second Trump presidency will manifest themselves at the beginning of his mandate, in January 2025. For this reason, the inability of the German government to respond quickly to some of the incoming measures could accentuate the persistent vulnerability structural of the country which have slowed growth in the last two years.
“We see significant downside risks to German GDP growth, which is already projected to be weak. We estimate economic output to stagnate at -0.1% this year and continue to stagnate next year, with growth of GDP of around 0.1%, down from our previous forecast of around 0.9% for 2025,” they highlighted Eiko Sievert And Elena Klarefrom Scope Ratings’ Sovereign and Public Sector division, in their report.
Analysts claim that “the increase in protectionism global and the growing risk of one trade war between the United States and China will test the resistance of German supply chains in the coming years. In 2023, almost 10% of German exports went to the United States, the highest share in 20 years. At the same time, the share of exports to China fell from an all-time high of 8% in 2020 to 6% in 2023.”
In particular, Berlin will have to face important problems of politics tax. “The additional expense for the defense will be difficult to manage despite the margin of maneuver tax of Germany, with fiscal deficits expected to average 1.2% of GDP in the coming years and a debt-to-GDP ratio expected to fall below 60% by 2029.” Sievert and Klare argue that more public investment will be needed, to the defense but also for the transition greenwhich could lead to further debates on reforms of debt brakeon the potential use of extra-budgetary funds or on the shifting of at least part of the spending to a European level.
But the growing fragmentation parliamentarian it could favor the advance of far-right and far-left parties. A situation that would not help Germany to address the critical issues of its fiscal policy given the position taken by the two parties which “could further complicate discussions on changing the debt brake”.