Ok so Merz plans to spend a little more on infrastructure and defence for a few years... Big deal...? Will it be enough to support the stagnant economy? A few charts explain how we're thinking about this. 1/n

The sums are vast: up to 900bn spread out over 10+ years. As for the impact on GDP... 2/n

Crowding out affects hurdle rates for privates on the margin, but the infrastructure fund benefits from relatively high multipliers, also crowding in activity to some extent. In the short run, low capacity utilization juices up the multiplier. 3/n

An "additionality" clause prevents using the fund to replace regular government investment, but some spillage is bound to happen. Some of the spending will be "unproductive", with no long run benefits (legal or bureaucratic obstacles, cancellations, weather, etc...) 4/n

Ultimately though there is a non-negligible long run shift in potential. 5/n

And defence? Spending the projected sums will be a better Zeitenwede. However the sector has a lower multiplier due to imports, aid and foreign deployments. A fighter jet doesn't lift potential as much as better infrastructure, unless you use it to invade another c... 6/n

A 40-50 bps shift in rates is significant, but Germany is far from losing safe-haven status. Markets have already reversed the jump in yields btw. 7/n

The fiscal forecast is set to break free of the debt rule straightjacket, reversing the 2010s obsession with the black zero. This helps Germany out of its slump. 8/n

Read the complete article on http://economy.com/economicview Also, big shout out to @Kamil Kovar, this was a collaborative effort