The fiscal package is a cyclical support measure that will help us maintain higher growth for two to three years. It has two components: defence spending, which is also being ramped up in other EU countries, and the infrastructure package. We believe that the fiscal package will boost German growth by around 60 basis points next year, and similarly again in 2027. The fiscal package is therefore a good basis for economic development from next year onwards. However, if it is not accompanied by fundamental economic policy reforms, structural factors will subsequently regain the upper hand. These factors have also caused our trend growth to be weaker than it was ten years ago.

Basically, three factors: First, demographics. Germany is aging more rapidly than any other G7 country this decade. It was predictable that our working population would shrink when the baby boomers retired. This factor will continue to affect us until at least the end of the decade. The second factor is competition from China in third markets, especially – but not only – for the automotive industry. This is a factor that has become particularly serious in the last ten years and is difficult to counteract. The third factor is the rise in energy prices. The fiscal stimulus is likely to increase long-term growth by around 20 basis points, which would give us potential growth of 0.7%, perhaps 0.8%. That is only half as much as in the 2010s. However, it is noticeably more than in the past five or six years, during which we have seen no cumulative growth at all.

Since demographics are currently the main headwind, the first step should be reforms that lead to more people entering the workforce and longer working hours. This is also important for the implementation of the fiscal program. In addition, we need reforms that support private investment. The main focus here is on reducing bureaucracy, but also on internationally competitive corporate taxes. We also need reforms that enable structural change. This is a key point, as we have fallen far behind in recent years, particularly in terms of corporate investment.

One problem is that skilled workers now have a wide range of choices worldwide, which means we are competing with many other countries. Another problem is that many other countries around us, such as those in Eastern Europe, which used to be sources of large numbers of immigrants, now need more skilled workers than they have due to demographic factors. Wages have also risen in these countries, so the incentive to emigrate is no longer as great. Germany should therefore lower the barriers to skilled worker immigration as much as possible. Ideally, these initiatives should have been launched ten years ago, because demographic change was foreseeable. The challenge now is to ensure that the measures take effect quickly.

This requires fundamental reforms in the tax and social security systems. Reforms that create positive incentives to work. In addition, the availability of good childcare also plays an important role. I believe now would be a good opportunity for this because demand for workers is high. At the same time, although the unemployment rate is no longer at an all-time low, it remains very low.

The industrial sector is currently facing headwinds from two sides. First, there are the US tariffs, which have risen from around 2% at the beginning of the year to around 15% and are contributing to the current slowdown in growth, production, and exports. This can be seen in the figures. Secondly, there is the uncertainty that has increased, not least as a result of tariff policy, and which is inhibiting willingness to invest. In the longer term, it remains to be seen how companies will adapt to tariff policy. Some production could be relocated, for example in the automotive industry. However, I would focus on next year and not be too negative at the moment. After all, we haven't seen 1.4% economic growth – as we forecast for 2026 – for a long time.

…which should benefit the defence and construction industries in particular. The underlying hope is, of course, that the additional demand will lead to capacity expansion in these sectors, thereby compensating for shrinking capacity in the automotive industry. One positive factor that is often underestimated is the ECB's interest rate cuts in recent years from 4% to 2%. The stimulating effects are gradually becoming apparent, for example in the construction industry: building permits are no longer falling, and according to the Ifo index, the mood in the construction industry is slowly brightening. In my opinion, the discussion does not sufficiently emphasise that we currently have a fairly positive cyclical economic outlook, which is better than what we have had over the last five to six years.

From the perspective of the next one to two years, definitely yes. Over the past five years, Germany has been the underperformer among the major countries in the eurozone. France, Italy, and Spain have grown significantly faster than we have for a variety of reasons. With this fiscal package, even if it may only be cyclical, we believe that Germany will at least catch up with the eurozone next year. That is a positive sign.

The political problems, including the disputes over the budget, have been around since the middle of last year and are definitely a risk factor. Against this backdrop, however, economic growth in France has remained relatively strong so far. This is partly because the trend growth rate among our French neighbors is above 1%. The country is also in a slightly better position demographically. In addition, the share of industry in France is only half that of Germany, so the economy there is less affected by US tariffs. The question is rather how much French consumers are unsettled by the volatile political environment. In any case, they are saving more than Germans, which is definitely slowing down the economy. In addition, the financial markets could become nervous. If the French government fails to agree on a budget, as it did last year, capital markets interest rates could rise.

Our consumption forecast of 1.2% this year and 1% next year is reasonable. Private consumption is influenced by three factors: the labour market, which is still in good shape despite a slight rise in unemployment; wage growth, which is slowing down but is still reasonable by historical standards; and the savings rate, which was well above the long-term average in the last two years but is now returning to that level. And by the savings rate, which was well above the long-term average in the last two years but is now returning to it. If consumption, which accounts for more than half of GDP, remains stable, then we are already halfway there. The momentum in the economy is coming more from investment, which depends on the fiscal package and the prospects for economic policy reform.

In 2026, investment in equipment will rise to 3.3%, which we haven't seen in a long time. And investment in construction will rise to 2.2%, which is respectable. The question now is how high the multiplier effect from government investment in infrastructure and defense will be. We lack experience in this area, as the last massive German infrastructure program was a long time ago. We assume that some defence equipment will be imported into Germany and will therefore not directly boost German GDP. We are more optimistic about infrastructure, believing that it will really benefit the domestic economy to the full extent. The question is whether this will spark a boom in private investment that will then carry the economic momentum forward. We are somewhat more sceptical about this, but we are only forecasting for 2026 and are happy about the increase for now. After 2028/29, it will probably go down again.

Tariffs are like sand in the gears – they mean that you don't necessarily invest where you would otherwise. They are negative for everyone involved, especially for export-oriented industries – in other words, for countries that are heavily dependent on exports. Germany is one of these countries. However, companies will adapt to this. In the short term, US growth will slow down because tariffs fuel inflation and weigh on consumption. In addition, monetary policy in the US is currently still slowing down the economy and the labor market is weakening.

Yes, the big difference between the Fed and the ECB is that the ECB has already cut its key interest rates by 200 basis points, while the Fed is still in what is known as restrictive territory. At 2%, the ECB's key interest rate is at a so-called neutral level that neither slows down nor boosts the economy. This is in line with the inflation rate, which at around 2% is now close to the ECB's medium-term target. There is therefore no pressure on the ECB to take action at present. Especially since a further interest rate cut would only have an impact on the economy two quarters later and even later on price developments. If the fiscal stimulus in Germany has the desired effect next year, this will also have an impact on the eurozone. Then there will be no need for monetary policy support.

Yes, at least in our base scenario. It would be different if the Fed were to cut interest rates much more sharply, causing the euro to strengthen much more than we currently anticipate. If, in addition, the economic recovery in Germany were to fail to materialise, contrary to our forecast, then one might consider whether the ECB would cut interest rates further.