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Germany - Cautious recovery pressured by geopolitical uncertainty
- Macro economy
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A tentative recovery remains vulnerable as energy and geopolitical uncertainty weigh on the outlook. The sharp rise in factory orders at the end of 2025 has yet to translate into higher industrial production. Still, the allocation of special defence, infrastructure, and climate funds is gathering momentum.
Global Monthly - It takes three to TACO
- Macro economy
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With the Iran conflict ongoing and the chance of a ceasefire uncertain, we update our base case for growth, inflation and interest rates. We assume severe energy disruptions last until the end of May, and this could happen even if the conflict ends relatively soon. The inflation impact of the energy shock continues to outweigh the growth hit, and central bank responses are therefore likely to tilt hawkish. We now expect the ECB to hike rates twice in Q2, and the Fed to delay cuts to Q4. Both central banks are expected to cut rates in 2027.
Global Monthly - Geopolitics bad, macro good
- Macro economy
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While the risks have certainly not gone away, economic data has been generally firming, while near term positive impulses are getting stronger. Higher AI capex spending looks to be bigger than expected, fiscal stimulus is ramping up and financial conditions remain easy. So far geopolitics has been the dog, which barks very loudly, but does not bite. That cannot be taken for granted with Iran the latest flashpoint. SCOTUS decision to scrap IEEPA tariffs may not change too much, not least because fresh tariffs have largely replaced the old ones. There is an increasing chance that the global economy may run hot in the near term but also of a future hangover further down the line.
Germany - An important year for the country
- Macro economy
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The German economy grew by 0.2% q/q in Q4, landing the annual average for 2025 at 0.3%. We expect government spending alongside other factors to drive an increase in growth to 0.9% in 2026. Recent news on delays to government investment and tariffs introduce downside risks to the forecast.
Global Monthly - Orange is the new Green
- Macro economy
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Geopolitical risk is increasingly dominating the outlook. The US-EU dispute over Greenland threatens a new tariff war – or worse. Over the next month, we will see just how far Trump is prepared to go to obtain Greenland, and whether Europe can stand its ground. We refrain from changing our base case given the fluidity of events, but uncertainty is clearly back with a vengeance, and the outlook less benign. Spotlight: We present a framework to analyse the main channels through which geopolitical risk impacts the economy.
Global Outlook 2026 - The shifting world order
- Macro economy
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The transition from one world order to another is in full swing, but it is still unclear how that new world order will look. The advent of AI, China’s rise, and the US’s relative decline offer challenges but also opportunities. The trade war weapon du jour has shifted from tariffs to chokepoints, creating new challenges for governments and manufacturers. Fiscal troubles in France and the UK are likely to remain a worry. Global growth has been remarkably resilient given the headwinds. We expect that resilience to continue in 2026, albeit with considerable risks.
Sovereignty increases EU regulatory burden
- Macro economy
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Trade between European member states is less intensive than trade between the 50 American states. Consequently, the benefits of scale and specialization remain underutilized, resulting in lower productivity growth compared to the US. One reason for the disparity in trade intensity is the complex regulations that hinder the internal market. The complexity of European regulations is not primarily due to the inferiority of individual member states' regulations compared to those in the US, but rather the lack of harmonization among the member states. Simplifying rules, as the European Commission currently aims to do, does not necessarily resolve this issue. A truly unified, common market with low transaction costs becomes feasible when member states can no longer easily negotiate exemptions or establish additional rules. Therefore, member states will need to relinquish some sovereignty. Furthermore, new regulations should be consistently evaluated for effectiveness (do the rules achieve the intended outcomes?), efficiency (are these outcomes achieved at the lowest possible cost?), consistency (do the rules align with policies in other areas?), and enforceability (can compliance be effectively monitored?). This evaluation task was previously assigned to the European Commission. However, as the Commission's role has become more political, and compromises are often required to strike deals, it is less able to perform this task effectively. Consequently, this responsibility should be assigned to an independent body.
Global Monthly - Cracks emerge amid tectonic shifts
- Macro economy
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The fracturing of the transatlantic alliance is going to mean higher defence spending in Europe over time, though the immediate macro-economic implications of this are likely to be modest. The most imminent threat still comes from higher US trade tariffs, with a host of measures due as soon as next week. Last month, Trump blinked at the last moment on the biggest tariff rises, will souring confidence in the US make him do so again? Spotlights: 1) European defence spending: We summarise the available options for an increase and the macro implications; 2) German election: We look at the likely policy agenda of the new GroKo.
Global Monthly - Buckle up – this is just the beginning
- Macro economy
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The early days of the Trump administration have been predictably chaotic. Businesses and investors had better get used to the new environment of radical policy uncertainty. An earlier end to Fed rate cuts is likely to drive the euro below parity later this year. This will take the edge off of the tariff blow to European exports, but it won’t fully offset it. Still, Europe isn’t powerless: the EU has long prepared for negotiations with Trump, while the German election could free up much-needed investment to deal with structural competitiveness challenges. We preview the German elections in the first of a series of articles in this month’s Spotlight*. Regional updates: The consumer is finally waking up in the Eurozone, helped by ECB rate cuts, while in the Netherlands, stronger domestic demand is likely to partly offset looming headwinds for trade. In the US, the goldilocks economy is back for now, but Trump policies will likely put an end to Fed cuts. China is seeing tailwinds from Beijing’s policy pivot and trade frontloading, ahead of likely US tariffs.
Preview German elections: ‘Grand coalition’ most likely result
- Macro economy
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This is the first piece on the German elections in a series of pieces until the Bundestag elections in February. In the this first piece we will dive into the polls and possible coalitions outcomes. In the second piece we will discuss the state of the economy and the Bund Market. After the elections we will publish an analysis of the election results and its future implications.
