Germany Economics: April Fiscal Monitor: Spring Brings Signals of Acceleration

Research evidence excerpt

Germany Economics: April Fiscal Monitor: Spring Brings Signals of Acceleration

Update

May 21, 2026 02:31 PM GMT

Morgan Stanley Europe S.E.MGermany Economics | Europe Claire A Thuerwaechter

Economist

April Fiscal Monitor: Spring Claire.Thuerwaechter@morganstanley.comJens Eisenschmidt +49 69-21662842

Chief Europe Economist

Jens.Eisenschmidt@morganstanley.com +49 69-21662817

Brings Signals of Acceleration Jean-Francois Ouvrard

Deputy Chief European Economist

Jean-Francois.Ouvrard@morganstanley.com +49 69-21662813

Prior trends continued. The central government deficit tracks

wider than 2025 but spending in defence and infrastructure runs

below target. Signals for a potential acceleration come from

infra fund borrowing and core budget defence spending. The

print is in line with our view. Our forecasts for fiscal balance and

growth are unchanged.

Key Takeaways

The cash deficit widened to €41bn from €32bn in March. It continues to be

notably above 2025 (€24bn in Apr-25).

Extrapolated to 2026, defence trends below 2025 and 30% below target (15%

below MSe), but execution has accelerated and seasonality suggests a 4Q uptick.

Infrastructure trends above 2025 due to an acceleration in borrowing in April.

But it remains 20% below target (7% below MSe).

Regional government draws could accelerate infra borrowing but might add

limited extra spend if budgets are shifted.

We forecast a 120bp wider deficit in 2026 and +20bp in 2027, slightly above

consensus and below Bundesbank and Government. Slow execution is a

downside risk.

Defence and infra overview – Potential signs of acceleration but still running

below expectations: This morning, the Ministry of Finance published monthly cash

data of the central government for April. Exhibit 1 and Exhibit 2 summarise the