Markets bet German fiscal policy could loosen after election
Higher growth would support European stocks and the euro
Analysts uncertain about how much spending could rise
LONDON, Nov 12 Reuters The collapse of Germany39;s government could have a silver lining for the euro zone39;s ailing economy with potentially higher spending likely to support its currency and stock markets, even if the path remains uncertain.
Markets are already moving in anticipation of more government borrowing that would help stimulate the economy, pushing a closelywatched bond market gauge of debt issuance to a record.
One reason for the collapse of the ruling coalition was disagreement on whether to suspend Germany39;s debt brake, which limits borrowing, and the early read out from markets is that fresh elections in February could bring more certainty for an economy that just dodged recession.
German stocks outperformed European peers on news that the government collapsed last Wednesday, another sign of a more positive mood taking hold just hours after Donald Trump39;s U.S. election win raised the threat of tariffs in a fresh blow to Europe39;s biggest economy.
The German growth dynamic has been anaemic and a large part of that has been selfinflicted as Germany has stuck with the debt brake at a time when the economy needs support, said Zurich Insurance Group39;s chief markets strategist Guy Miller.
The collapse of the coalition is constructive and we hope there could be more fiscal…