One of the more impressive stock price pops on Wednesday belonged to a somewhat under-the-radar company for American investors, Siemens (SIEGY 0.31%). The European industrial conglomerate’s shares closed the day more than 8% higher on news of a potentially significant new infrastructure program in Germany. That gain compared very favorably to the S&P 500‘s (^GSPC 0.55%) 1.2% rise.
A time to spend
In the wake of elections in Germany, the European Union’s largest economy in terms of gross domestic product (GDP), political deals are being cut among potential governing coalition partners.
Late Tuesday, the likely chancellor of the country, Friedrich Merz, and other top politicians announced several potential top-down economic measures that will be introduced once they sweep into power. A major one is the easing of the country’s so-called “debt brake”; as the name implies, this is a set of limits on how much the federal government can borrow.
The move would allow the country to spend more on defense, an item that has become more of a priority in light of the current U.S. administration’s stance on the war in Ukraine.
The politicians also announced a new initiative, specifically a 500 billion euro ($527 billion) infrastructure fund.
If these programs are introduced, it’s probable that their introductions will come soon. The current, outgoing government coalition has a better chance of securing the two-thirds majority in parliament required to pass them than any incoming political line-up.
The go-to German company
Even if only one of the measures passes into law, or if one or both survive in only diluted form, a company like Siemens stands to benefit handsomely. The company is active in both the defense and infrastructure segments, and as a German business of long standing, it is certain to win contracts in any program covering these fields.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
