The German government’s increased spending on infrastructure and defense is forecast to boost economic growth above its potential and above the prevailing consensus among economists for the next several years, according to Goldman Sachs Research. The government of Friedrich Merz, who became Chancellor after elections earlier this year, plans to increase infrastructure spending by €500 billion over the next 12 years and has created room for higher defense spending by amending the country’s constitutional debt rule. Our economists expect German GDP growth to rise from 0.3% this year to 1.4% in 2026 and 1.8% in 2027. ... (full story)