It is a 180-degree turnaround in fiscal policy, which will have consequences for the ECB. The development is a dampener for expectations of further interest rate cuts. We see this as a confirmation of our assessment that the window for interest rate cuts will close in the second half of the year.

Higher government spending should boost economic growth in Germany by a total of around 3% over the next two or three years. The growth outlook for the eurozone will also improve considerably as a result, and also because other EU countries will invest more in defence. An expansive monetary policy with key interest rates below 2.0%, which was priced in on the markets at times, is therefore not necessary in the near future. The effects of fiscal policy on inflation cannot be quantified at present. However, it is clear that the risk of inflation is increasing. In times of demographic change and the associated shortage of skilled labour, it does not take much to increase wage pressure again.

I currently think it is somewhat more likely that the ECB will pause interest rates than that it will ease again. A rate cut of 25 basis points could then be on the cards in June, before the window for interest rate cuts closes as I mentioned.

There are still disinflationary effects that will further reduce the inflation rate. However, I believe these will come to an end in the second half of the year. Inflation could rise again at the beginning of 2026 and settle noticeably above 2%.

If the fiscal policy plans are implemented as announced, and we don't see a tariff war between the US and the EU, then I expect that there will at least be a debate about an interest rate rise.

There are two opposing effects. US tariffs against the EU would worsen Europe's growth prospects. Depending on the level of the tariffs and which goods are affected, the ECB may have to respond by lowering interest rates. On the other hand, counter-tariffs by the EU would increase inflationary pressure in Europe.

I am quite hopeful that we will be spared a tariff war, even though you never know how far Donald Trump will go. I think he wants to reach some kind of deal, and we have to see what Europe can and wants to offer him.

I think there will probably be at least one or two interest rate cuts. It is true that the tariffs could trigger considerable inflationary pressure. However, we can also see that the US economy is currently weakening noticeably. Fears of redundancies are increasing, layoffs in the public sector will have an impact on the labour market, and consumer confidence is falling. It should not be forgotten that tariffs are a one-off effect, whereas a downward trend in the economy would have a lasting impact. I therefore assume that the Fed may cut interest rates as early as May in order to prevent this downward trend. Our indicators also suggest that the US economy will regain momentum in the second half of the year.

Trump is currently remodelling the entire country. So it would fit this if he actually tried to remove Fed Chairman Jerome Powell. However, the financial markets would react sensitively to this. Bond yields would rise significantly, which would be dangerous for Trump due to the high level of US government debt. I am therefore counting on the markets to have a disciplining effect on Trump. They have often done this in the past, even with autocrats. One example is Turkiye, where President Recep Tayyip Erdogan no longer influences monetary policy as he used to.

I'm not as critical as some of my colleagues. I also don't expect Germany's national debt to rise towards 90% to 100% of GDP in the coming years. I consider 75% to be a realistic level, which is still unproblematic. In principle, however, this financial package must not result in Germany no longer scrutinising spending at all.

The interview was conducted by Martin Pirkl.