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Germany: reservations on far reaching economic stimulus
Despite the EU “umbrella” fiscal package of € 200 bn agreed on 11Dec, German political decision makers remain reserved on broad based fiscal stimulus leading to higher deficits.
Domestically the debate is going on between the parties and political decision makers, who will convene 14Dec.
Public stimulus most likely to be administered through government agencies with limited impact on deficit and debt.
Asset conclusions: the small scale and delay in fiscal stimulus can be seen as a key boon to German bonds, exacerbating intra EMU government spreads, neutral to slightly negative for stocks.