Germany’s Fiscal Turn: Structural Challenges, Political Risks, and European Spillover Effects

Abstract Germany’s €1 trillion fiscal package marks a major shift in its economic strategy, with significant implications for both national policy and the euro area. This article critically examines the potential consequences of the fiscal expansion for debt sustainability, financial stability, and European fiscal coordination. It argues that without accompanying structural reforms – particularly in taxation, public investment, and demographic policy – the shift risks weakening long-term stability and undermining fiscal credibility across the EU.