Germany Launches €500B Infrastructure Blitz to Spur Growth

Germany is aggressively shifting its economic strategy toward growth after a period of stagnation, with a €500 billion infrastructure spending program and constitutional reforms aimed at boosting domestic demand and innovation. Finance Minister Lars Klingbeil emphasized the importance of strategic investments, structural reforms, and budget consolidation to revive Europe's largest economy, which has struggled with inactivity over the past two years and faces risks from U.S. tariffs affecting its export-driven model. The reforms exempt defense spending from debt limits and enable regional borrowing, channeling over €100 billion into rail upgrades and €46 billion in tax incentives for private-sector innovation by 2029. Mid- and small-cap companies in the MDAX and SDAX indices, which derive the majority of their revenues from Germany and are embedded in local supply chains, are positioned to benefit significantly from this fiscal pivot, with analysts projecting substantial earnings growth compared to larger DAX firms. Key sectors expected to gain include construction, urban transit infrastructure, smart grid equipment, and defense subcontractors. This marks a fundamental reallocation of capital toward domestic-focused firms, highlighting the growing importance of mid-caps in Germany's economic revival.