Market history · Fiscal policy ·
Germany loosens its debt brake
On 18 March 2025 the German parliament voted to change the constitutional debt brake and to create a large fund for infrastructure, opening the way for substantially higher defence and infrastructure spending. German government bond yields rose sharply as the plan was announced earlier in the month, and shares of defence and construction-related companies were among the beneficiaries.
For years Germany had held its borrowing tightly. The change signalled that Europe's largest economy would borrow more to invest, with implications for euro-area bond markets, for infrastructure demand and for the region's growth outlook.
The takeaway
Fiscal policy can change the outlook for bond yields and for entire sectors at once. Government spending plans are an input to infrastructure and bond markets.
Sources
This is a retrospective about a past event, provided for general information. It is not investment advice, does not describe RockLake's positioning at the time, and past performance is not a guide to future performance. Read the risk warning.