German chancellor warns of critical economic outlook
In a message addressed to lawmakers from his center-right governing alliance, Merz acknowledged that measures taken so far have fallen short of meaningfully strengthening Germany’s competitive position. He cautioned that the outlook remains difficult, noting that conditions are “very critical in some areas,” according to reports.
Looking ahead, Merz stressed the need for decisive action, writing: “In 2026, we will therefore have to focus on making the right political and legal decisions to radically improve conditions in Germany.”
Germany’s economy has contracted for two consecutive years, shrinking in both 2023 and 2024. Forecasts released late last year by leading economic research bodies predicted only marginal expansion in 2025, estimating growth at just 0.1% as overseas demand remains weak.
Analysts have highlighted a steep fall in exports to the United States as a key factor weighing on performance.
Economists and business experts cite several challenges hindering a rebound, including elevated energy prices, sluggish global markets, delayed structural reforms, and the impact of high US tariffs.
Since taking office in May 2025, Merz has pledged to reinvigorate Europe’s largest economy through expansive public spending plans and higher investment in areas such as defense and infrastructure. While his government has acknowledged that a turnaround will not be immediate and has unveiled tax reductions along with other reform initiatives, business groups argue that progress remains far too slow to deliver meaningful results.
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