回头看，刚刚过去的这一天或将载入欧洲史册

Core Viewpoint - The article discusses a significant shift in Germany's fiscal policy, marked by a call from the incoming Chancellor Friedrich Merz for expansive economic and defense spending, which has led to unprecedented volatility in the German bond market and broader European financial markets [1][2][23]. Group 1: Market Reactions - On March 5, 2025, Germany's bond market experienced its largest upheaval in 35 years, with the 10-year bond yield rising by 30 basis points, the highest single-day increase since March 1990 [4][6]. - The DAX index surged over 3%, achieving a year-to-date increase of 15% [5]. - Following the announcement, bond yields in France, Italy, and Spain rose by more than 25 basis points, indicating a ripple effect across Europe [7]. Group 2: Implications for European Economy - Analysts view Germany's fiscal policy shift as a potential "game changer" for European defense and economic policy, with implications for other Eurozone countries [2][9]. - The euro's exchange rate strengthened significantly, with market sentiment reaching a five-year high regarding the euro's performance against the dollar [7][8]. - The market is reassessing the European Central Bank's monetary policy, reducing expectations for further interest rate cuts from 84 basis points to 67 basis points by year-end [8]. Group 3: Long-term Economic Outlook - The fiscal expansion plan is seen as a response to long-standing calls for loosening Germany's strict fiscal discipline, which has historically constrained economic growth [6][11]. - If domestic investment stimulates GDP by 1% annually, combined with 1%-1.5% foreign defense spending, Germany's economic growth could approach 1.5%-2% by 2027 [13]. - However, the short-term economic outlook remains uncertain, with challenges such as labor market decline and geopolitical uncertainties still looming [11][12]. Group 4: Risks and Concerns - High debt levels in Europe raise concerns about the sustainability of rising bond yields, which could lead to increased financing costs for already indebted countries [2][16]. - The disparity between German bond yields and swap rates has reached a record high, indicating market expectations of increased bond issuance by the German government [17][18]. - Potential scenarios include some countries struggling with high financing costs, Germany possibly needing to bail out other nations, or a return to market stability [19][20][21].