Who is Veronika Grimm and why does her view matter?

Veronika Grimm is a leading German economic adviser who assesses growth, budgets, and labor dynamics. Her warning about a fiscal squeeze by 2029 highlights rising social and interest costs. Markets heed her signals because they shape expectations for German fiscal policy, inflation, and Bund yields, all of which drive asset pricing and portfolio risk.

How could delayed reforms affect German bonds?

Delay increases uncertainty about deficits and future issuance. Investors may demand more term premium, pushing Bund yields higher. Clear consolidation plans, transparent savings, and investment protection can support bond demand and stabilize funding costs. Watch auction cover ratios, maturity choices, and official guidance on the debt brake for early clues.

What should investors watch in the 2026 union wage talks?

Focus on headline increases, one-off payments versus permanent steps, and contract length. Retail, telecom, and banking will set tone for wider settlements. Higher, longer-lasting pay deals can lift demand but also embed inflation, compress margins, and influence Bund yields. Shorter contracts add flexibility if inflation cools faster than expected.

Which German sectors are most exposed to wage pressures?

Retailers face quick margin pressure if pass-through is weak. Telecoms must balance payroll growth with network investment. Banks see higher operating costs but may offset some effects with rate income. Exporters with strong pricing power and productivity gains can absorb wages better than domestically focused, low-margin names.

How can retail investors position amid policy uncertainty?

Stay diversified and focus on balance sheets, pricing power, and productivity plans. Use earnings quality and cash conversion to gauge resilience. Keep some duration flexibility in fixed income until consolidation details are clear. Track reform milestones and 2026 wage rounds closely; adjust sector weights as margin visibility improves or deteriorates.

Law and Government

February 9: Veronika Grimm Warns of Fiscal Squeeze, Reform Rift Widens

ByDanny Kontos February 10, 2026February 10, 2026

Veronika Grimm warns that delaying Germany structural reforms could trigger a fiscal squeeze by 2029. Employer groups echo the alarm, while unions press for sizable pay rises and reject benefit cuts. This stand-off raises uncertainty for German fiscal policy and local assets. We discuss what to watch: consolidation signals, tax and labor changes, and the 2026 union wage talks in retail, telecom, and banking. For investors in Germany, the path of inflation, Bund yields, and corporate margins will hinge on policy choices made in the next 12 to 24 months.