On March 19, 2025, the German Bundestag approved a new budget package designed to reinvigorate the country’s economy following two years of recession.

The decision marks a significant shift in fiscal policy, as it allows for increased government spending and marks the suspension of the country's constitutional debt brake, which limits federal borrowing.

The new budget will enable Germany to exceed one percent of its GDP in defense and security spending, amounting to approximately €45 billion, effectively bypassing the constitutional borrowing limits set by the so-called debt brake.

Additionally, a special off-budget infrastructure fund is established, permitting the country to take on €500 billion in loans over a period of twelve years.

The new fiscal framework also grants Germany's 16 federal states greater financial flexibility, allowing them to borrow additional funds equivalent to 0.35 percent of their GDP, totaling around €16 billion.

Péter Koncz, a leading analyst at Századvég Economic Research Institute, highlighted that the relaxation of the debt brake is a welcome development, arguing that excessively stringent budget policies have hindered Germany's ability to return to a growth trajectory since the onset of the Ukraine war.

Germany, recognized as the strongest economy in the European Union, plays a crucial role in the economic recovery of the entire bloc and nations such as Hungary.

A rebound in Germany's economy is anticipated to have positive medium-term effects on the overall European economic climate.

The €1 trillion support program announced focuses mainly on infrastructure development and enhancing defense capabilities.

However, Koncz noted that Hungary's participation in these supply chains may remain limited, indicating that significant direct impacts are not expected, while indirect effects could assist Hungary in meeting GDP growth targets in the coming years.

The recovery of Germany's automotive industry is particularly crucial, having been one of the sectors hardest hit by inflation and the challenges stemming from the disruptions in the German economic model.

Following the outbreak of the Russian-Ukrainian war in 2022, Germany has sought to reduce its reliance on Russian energy sources.

This transition continues to affect German manufacturing, with rising energy costs adding to production expenses and leading to competitiveness challenges.

Such environmental and economic factors are also reflected in consumer behavior, which remains cautious across Germany and other European countries, including Hungary.