Germany's economy has been stagnating for several years, so the new government's decision to invest €1 trillion over the next 12 years is expected to solve multiple problems.

"The security situation has changed, to put it mildly, and investments in the military must begin. The other major concern is that trains are not running on schedule or not running at all, roads are deteriorating and schools are in significantly worse condition compared to those in Estonia," said SEB economic analyst Mihkel Nestor.

In addition to improvements in roads and schools, the economy is also expected to generate higher added value.

"Energy-intensive industries such as chemicals, paper and metal manufacturing were already in decline before energy prices rose. Now, added value is seen more in Germany's key export sectors, which have long been important — machinery, electronics and potentially even newer digital services," said Peeter Luikmel, an economist at Eesti Pank (Bank of Estonia).

Although the investments will require borrowing, Nestor noted that German economic experts are already celebrating the government's decision.

"One of Germany's great advantages is that, compared to other major European economies, its public sector debt burden is relatively low. In that sense, they have room to borrow. German experts suggest that this could nearly double the country's economic growth rate," Nestor said.

"When looking at infrastructure spending alone, which accounts for about half a trillion euros under Germany's plan for the next 12 years, that amounts to approximately €6,000 per German citizen. Spread over 12 years, it's roughly €500 per person annually," Luikmel explained.

Since Germany's economy makes up one-fifth of Europe's economy, there's a saying: when Germany sneezes, the rest of Europe catches a cold. The reverse is also true. A financial injection of this scale will influence the broader European economy, including Estonia's.

According to Nestor, Estonia's defense industry stands to benefit the most from this investment.

"This is a sector where investor money is already flowing heavily. In an environment where spending is set to increase significantly, I believe this will lift all boats. And I hope Estonian companies will be among them. In the long term, anyone doing business with Germany or the Nordic countries will benefit — including Estonia's construction sector and industries supplying materials for construction," Nestor said.

However, Luikmel cautioned against assuming that Germany's rising debt will lead to an economic boom for Estonia.

"It is also unwise to ramp up investments overnight. If we consider the defense sector, for example, and demand doubles while supply remains the same, then we will simply end up paying twice as much for the same things," he added.

Nevertheless, Luikmel believes the positives outweigh the negatives.

"As the world becomes increasingly protectionist, a tariff-free single market becomes more valuable. This means that European countries will certainly strengthen their trade relations with one another," he concluded.

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