A German economic revival?

It's a fascinating moment for the German economy. A new government is in place, and Germany plans to dramatically increase its spending on defense. Meanwhile, US tariffs could have a significant impact on the world's largest exporter. So what's ahead for Germany? And how are investors and business leaders making sense of this historic moment? I'm Alison Nathan, and this is Goldman Sachs Exchanges. Today, I'm sitting down with Wolfgang Fink, the head of Goldman Sachs' Germany and Austria businesses. Wolfgang, thanks for joining us today. Great

to see you again, Addison. It's

very nice to have you actually in New York the last time we did this. I think you were in Europe and I was here, so it's great to have you in person. So, Wolfgang, as I just said, our listeners may be aware that there is a new German government. It's been in place for a month or so. What has that meant for the business environment?

Well, I think the government, that is now in place and and actively working is is quite a change. They call themselves a working coalition, and they wanna tackle, many of the problems, some more structural long term, some more short term, that the country faces. Among them, importantly, the infrastructure of the country, and lots has been written about that. The defense, in light of the war we have in Europe, strengthen the defense capabilities of the country and also Europe and NATO, in particular, as to the European part. The other parts are clearly to for a country to regain its competitive

Yes. I mean, we recently spoke with John Waldron, our president and COO, and he was pretty optimistic that we could be at a turning point when it comes to some of that spending. He made the point that there's a lot of fiscal room in Germany. It's been, you know, a standout in that sense, but there has been historically not that much willingness to use it. And if that's now changing, that could be quite important. So where does that really stand at this point? And, you know, is it something that could have really wide ranging implications as as John thinks it might?

Yeah. Indeed, it will. Because if you think about, Germany, the GDP the debt to GDP was still in a range that was quite, that that offered the government quite a lot of flexibility compared to other industrialized countries. And so far, there has been a hesitation to use that headroom, if I may call it this way. Now they do that. They have changed legislation in order to be able to spend up to $500,000,000,000 in infrastructure and also amended legislation in a way that they can go and do defense spending outside the constraints of the regular budget, which would hopefully allow them to get up

Right. So these are the positive developments in policy Right. Tailwinds potentially for growth. Yeah. But as we've just you just mentioned, I mentioned, there is the tariff headwind that could potentially be coming. So, you know, how are leaders thinking about US trade policy at this point and the uncertainty around it?

Yeah. I think it has as you say, it has a massive impact, so we shouldn't kid ourselves. The tariffs in the current form our economists think about, hit the Eurozone with between o point 51% of GDP. Germany clearly has been hit more than the average of the EU given its propensity to exports and to trade deficits, especially with The U. S. So it has a massive impact, and it will be a drag to growth, on the Eurozone. Now, how is it this happening? There's obviously discussions both on a supranational level with the EU. There are discussions, on a national level, as we see, every day. And th