Financial strategies in America and Germany
German Fiscal Program: Modernizing the Economy and Addressing Infrastructure Gap
Chancellor Friedrich Merz has unveiled a comprehensive fiscal program aimed at modernizing the German economy, bridging the country's infrastructure gap, enhancing its competitiveness, accelerating the transition to a greener economy, and addressing security concerns.
The program, still under discussion within the new German coalition (CDU/CSU and SPD), includes a special fund of 500 billion euros to finance infrastructure renewal and the green transition by 2036. This fund will support the "Made for Germany" program, which plans to re-industrialize the country over the next three years with an investment of 630 billion euros.
To stimulate private investments, the budget focuses on investments, modernization, and economic recovery. Businesses will benefit from the reinstatement of the 100% immediate tax deduction for investments made by 2027. Wealthier households will benefit the most from the tax cuts, while lower-income households may face significant losses starting in October 2026.
In contrast to the US program, the German fiscal program includes funds from a special reserve and additional funds for the Bundeswehr, but it does not eliminate subsidies for environmental protection or reduce social benefits.
US Fiscal Program: Large-scale Stimulus and Increased Defense Spending
President Donald Trump's fiscal program, known as the "Big Beautiful Bill," includes substantial tax cuts and spending increases. The program, enacted in 2017, includes maintaining and extending the tax cuts, a tip and overtime tax exemption, senior tax breaks, and an increase in the cap for the deduction of state and local taxes (SALT) from $10,000 to $40,000.
Over a decade, the tax cuts in the US program are estimated to total $4.5 trillion, while only $1.5 trillion in spending cuts are planned. The program approves increased spending on border security ($170 billion) and defense ($150 billion).
However, the economic boost from the US program is expected in the second half of 2025 and the first half of 2026, but the budget's cuts won't start until October 2026. The debt from these tax cuts is likely to increase by more than $3 trillion, which could influence bond yields unfavorably, increasing government borrowing costs.
Comparison of the Programs
A direct comparison between the German and US fiscal programs cannot be completed without further information on Friedrich Merz’s economic stimulus policies. For Trump, large-scale stimulus increased debt but supported economic reopening amid volatile trade policies, which might challenge long-term growth. German public debt will increase but remain moderate at 70% of GDP in 2030, while US policy is expected to lead to an unsustainable increase in public debt, with the debt-to-GDP ratio expected to rise to almost 130% by 2034.
Note: The information provided in this article is based on the facts given in the bullet points and does not include any opinions or unrelated information.
References: 1. CARES Act 2. Trump's Tax Policies 3. Economic Effects of CARES Act
Businesses in Germany will benefit from the reinstatement of the 100% immediate tax deduction for investments made by 2027, which is part of the fiscal program aimed at modernizing the economy, as stated in the text.
The German fiscal program, under discussion within the new German coalition, includes a special fund of 500 billion euros for finance, earmarked for infrastructure renewal and the green transition by 2036, demonstrating a focus on this sector.
