Germany: When needs must
To remain as German Chancellor for another term, Angela Merkel has had to make serious concessions. The most important of these is a commitment to spend budget surpluses and to support the SPD’s pro-European agenda by converting the European Stability Mechanism into a European Monetary Fund. With labour markets tightening and higher fiscal spending on the horizon, growth should remain robust. This will support the euro and exert upward pressure on bund yields.