Germany before reunification? New tax cuts could save the economy!

In its latest report, Banque Syz has outlined ten potential surprises for 2025 that could have a significant impact on markets. There is a particular focus on possible political and economic changes in Germany, where a CDU-led coalition could seek to loosen the debt brake after new elections at the end of February. This would not only enable higher levels of new debt, but also create much-needed tax incentives to stimulate the stagnating German economy. Such a scenario was detailed in an article by finance.net explained.

Additionally, Germany plans to discuss issuing Eurobonds to finance structural investments that would drive growth in Europe. Although these measures could increase national debt in Germany, they could also increase inflation, which could ultimately lead the ECB to adjust its monetary policy measures. While economist Clemens Fuest from the ifo Institute warns that the weakness of the German economy has become chronic, Banque Syz also paints a picture of a robust global economy, which could again be burdened by a deep correction in the S&P 500 if so-called “slugflation” sets in in the USA.

Impact on the global market

“Slugflation,” slow economic growth combined with stubborn inflation, is predicted to be another surprising scenario. As Banque Syz reports, the US Federal Reserve could be forced not to lower its interest rates as planned despite rising inflation, which would have serious consequences for companies and therefore also for the global market. At the same time, the bank proclaims a positive market development, which could, however, be marked by uncertainties and challenges, as in another article by finanzen.ch indicated.