Fixing the crisis of European corporate underperformance is all the more urgent as two headwinds are set to hurt the continent’s companies more than their US peers in the coming years.

While the German export model is seriously challenged, ongoing structural changes in global trade patterns also offer opportunities for Germany. We use a gravity model to show how a strategic reconfiguration of German trade could look in order to be most beneficial for future German export growth. We find untapped potential in the EU single market and the Global South.

Startups are vital for a competitive and innovative economy. Europe has a vibrant startup ecosystem, but it struggles to scale up companies due to fragmented markets and a lower penetration of venture capital. In Germany, the startup scene is showing signs of growth, although insolvencies remain elevated. Software is the leading sector for startup creation, driven by growing demand for AI. Startups often originate from universities and tend to cluster in hubs, led by Munich and Berlin. Funding is a key concern for growth-oriented startups. Government support is the most important external funding source, used by almost half of startups, while only 19% are financed by venture capital. The German VC market has grown significantly, but with annual new VC investments of 0.18% of GDP, it continues to be considerably smaller than in other similarly innovative economies. The new government aims to strengthen the startup system, particularly on the funding side, whereas the exit market is less in focus. Germany is on a long way towards becoming a startup nation.

This report discusses the outlook for central FX clearing, the process that involves confirmation, risk management, and settlement of FX trades through a central counterparty (CCP). We examine available clearing mechanisms and their impact, and identify the key challenges hindering broader adoption.

In recent years, Germany has been confronted with a rapid and marked increase in the general level of consumer prices. This inflationary shock, which even surpassed previous periods of high inflation in its intensity, has raised questions about the causes and further development of inflation. This is reason enough to take a closer look at the recent wave of inflation. Our analysis shows that the price shock in Germany has been largely, but not completely, overcome. Although the general inflation rate is only minimally above the symbolically important target of 2%, service price inflation is still significantly elevated. The short- to medium-term inflation outlook is characterized by greater uncertainty due to increased geopolitical and trade policy risks. In particular, the military conflicts in the Middle East pose a significant upside risk to further oil and gas price developments. But also in the long term, there are significant inflation risks, ranging from geopolitical risks to climate change and deglobalization.

For years, the majority of global investments in the electricity sector have flowed into renewable energies. At the same time, many countries want to reduce or completely eliminate coal's share in electricity generation. However, despite the high investments, the contribution of wind power and photovoltaics to the global energy supply is still small. It is clear that, in the foreseeable future, energy sources are needed that are less harmful to the climate than coal, but more powerful than (weather-dependent) renewables and can complement them well in terms of security of supply.

Stablecoins are on the cusp of mainstream adoption in 2025 as the US pushes forward with landmark legislation (GENIUS and STABLE Acts) by August. Despite last week's Senate resistance, we still expect progress this year.

The EU’s envisaged “Savings and Investments Union” is a renewed attempt to strengthen its capital markets and improve the growth outlook. The Draghi report estimates that additional investment of EUR 750 bn p.a. is needed to strengthen the EU’s competitiveness. The lion’s share will have to come from private, not public investment. Europe traditionally has a bank-based financial system, but bank financing has limits – capital markets will have to play a key role in facilitating the flow of funds into productive investments. This slide deck looks at where Europe’s capital markets stand today, benchmarking them against the US. It dives into various segments, notably the capacity of (1) stock markets and corporate bond markets to provide alternative funding opportunities for businesses; (2) risk capital markets to fund young, innovative companies; and (3) the securitisation market to allow banks to free up capital and lend more to the economy.

The incoming coalition government is aiming for a rebound of the German economy and stronger competitiveness following years of anaemic growth. To this end, it envisages several stimulating measures such as lowering energy prices and facilitating depreciation.1 Capital market reform is not the main focus – but some aspects of the coalition treaty, if implemented, could have a meaningful impact on capital markets. In this note, we take a more detailed look.

Germany’s sluggish economic development in recent years is in part related to the weaknesses of its energy market and energy policy framework. The coalition treaty includes some important reform measures for the German power market even though it remains vague in many instances. The agreement emphasizes the energy-policy triangle of economic efficiency/competitiveness, security of supply, and environmental/climate compatibility. In particular, the cost effectiveness of the energy transition could play a greater role in the future, as concerns for maintaining industrial competitiveness are clearly addressed. It is not unlikely that some targets of the energy transition will be adapted to the actual and expected future developments in electricity demand or the pace of grid expansion.