Germany faces complex coalition negotiations after elections as fiscal policy hangs in the balance

Germany is facing complex coalition negotiations following recent elections. Analysts note that the outcome will significantly influence fiscal policy, balancing tax relief, investment, and spending discipline amid concerns over economic stagnation. Possible coalition scenarios include a revival of the Grand Coalition, which may prioritize tax relief without cutting social spending. Alternatively, a three-party alliance with the Greens could lead to tax cuts but face challenges over energy policy. A coalition with the business-friendly FDP would focus on tax relief and spending cuts, potentially limiting investment. This scenario may also signal a return to fiscal conservatism in Germany, affecting EU-wide spending initiatives.