FRANKFURT: Germany must accelerate potentially painful economic reforms, experts warned on Thursday.
This latest criticism highlights growing unease about Chancellor Friedrich Merz’s efforts to revive Europe’s largest struggling economy.
Merz has promised to boost Germany’s economy through a debt-fuelled public spending programme focusing on defence and infrastructure.
Geraldine Dany-Knedlik from the German Institute for Economic Research stated that such plans alone would only provide short-term relief.
“A renewal of the German economy remains elusive and prospects for growth are continuing to deteriorate,“ said Dany-Knedlik.
She presented updated growth projections conducted jointly by several leading economic research institutes.
“Structural problems are merely being masked,“ she added.
Dany-Knedlik warned that high costs, skills shortages and decreasing competitiveness all threaten Germany’s economic growth.
She called on the government to increase workforce participation while cutting bureaucracy and reducing employers’ welfare state costs.
Dany-Knedlik emphasised that a “broad-based” economic recovery was not yet visible.
This warning increases pressure on Chancellor Merz, who recently promised an “autumn of reforms”.
Merz stated that Germany needed “a new consensus” on the future structure of its welfare state.
The Bild newspaper reported that business associations had privately criticised Merz for his slow reform progress.
Stefan Kooths from the Kiel Institute for the World Economy joined Dany-Knedlik in expressing concerns.
He noted that early signs regarding reductions in employers’ social security costs were not encouraging.
“The situation is not getting better but, at least initially, worse,“ Kooths said.
He compared the German economy to a “junkie” receiving a temporary fix from Merz’s infrastructure spending promises.
“A junkie handed a full syringe will feel better after the shot but no one would think, certainly not a doctor, ‘Ah now the patient has recovered’,“ he explained.
Kooths warned that without “clear, growth-boosting reforms”, the effects of Merz’s spending would quickly fade.
The seven institutes collectively raised their 2025 growth forecast by 0.1% to 0.2% compared to April projections.
They maintained their 2026 growth forecast at 1.3%, attributing this to increased government spending. – AFP
