Germany's turbulent political situation shakes faith in DAX growth in 2025

The benchmark DAX index fell 2.1% on Monday after Friedrich Merz failed to win the first parliamentary vote to confirm him as Germany's chancellor. German 10-year bond yields rose slightly, following their European counterparts.

As noted by Bloomberg, the turbulent political environment in Germany could undermine Europe's strong investment appeal just at a time when investors are beginning to shift away from US assets and look for alternatives.

According to Jan Holthusen, head of research and economics at DZ Bank, yesterday's events have created risks for both the German economy and the situation in Europe in general. In case of renewed political fluctuations, hopes for the country's economic recovery will be undermined, the expert believes. 

Earlier this year, the DAX index rose by 17% due to optimism about Germany's plans to implement the necessary fiscal reform.