Fiscal stimulus outshines tariff clouds, German investor confidence reverses exceeding expectations.

German investor confidence has rebounded higher than expected, with the upcoming surge in public spending offsetting concerns about US tariffs. The European Economic Research Center (ZEW) June expectations index jumped from 25.2 in May to 47.5, far exceeding the median forecast of 35 in the survey. Indicators reflecting the current situation also strengthened. The ZEW president, Achim Wambach, stated in a declaration on Tuesday, "This seems to confirm that the fiscal stimulus policy announced by the new government is expected to boost the economy," "Combined with the recent interest rate cuts by the European Central Bank, this may end Germany's nearly three-year economic stagnation." Although the largest economy in Europe has exceeded expectations in growth at the beginning of the year, there are differing opinions on whether its momentum can be sustained. The recent economic recovery has been partially driven by businesses rushing to export before the US tariffs take effect, but private consumption and investment have also shown significant growth. Analysts predict that Germany will recover and achieve growth in 2025 after contracting for two consecutive years, with a GDP growth of 0.2%. This outlook is more optimistic than the recent forecasts of zero growth by most institutions. Economists predict that Germany will achieve growth again this year Mark Schattenberg, an economist at Deutsche Bank, said, "The German economy has surprisingly started the year strong." However, he also cautioned that while Tuesday's data "significantly exceeded expectations," the impact of the escalating Middle East military conflict has not been reflected in the index and could bring potential risks. Jens Weidmann, president of the German central bank, stated on Monday that a revised upward adjustment of first-quarter output data could push the economic growth rate for 2025 into positive territory. Currently, the central bank still expects economic stagnation. Weidmann further pointed out that if the political sphere can decisively address structural issues, Germany could become a "success story." The bank predicts that the economy will grow by 0.7% and 1.2% in 2026-2027, mainly benefiting from increased defense and infrastructure spending. Some institutions are more optimistic. The Ifo Institute for Economic Research raised its growth forecast by 0.7 percentage points to 1.5% last week, while the Kiel Institute for the World Economy predicts a growth of 1.6%.