Germany's economic crisis: Merz under pressure ahead of economic forecast!

Germany's economic crisis: Merz under pressure ahead of economic forecast!

The German economic sector is facing a critical turning point, and not for the first time. On Thursday, Chancellor Friedrich Merz will expect the long-awaited economic figures from the Federal Statistical Office for the third quarter. This result could be seen as an unofficial interim report for the Merz government. The German economy is currently in its longest crisis, which is causing worry lines on the faces of investors and the population. According to Bild.de, production has fallen steadily since 2023 and unemployment reached a ten-year high of 3 million in August. These alarming figures are the result of stagnating gross domestic product (GDP), which has remained at the same level since 2018, with a brief dip during the Corona pandemic.

The results of the economic institutes paint a bleak picture: The Kiel IfW has lowered the growth forecast for 2025 to a meager 0.1%, while the Ifo Institute provides a similar picture and assumes growth of just 0.2% for the same year. A very clear indication that the economic circumstances will not simply take care of themselves. The calls for comprehensive reforms are getting louder - a concept that should be presented by spring 2026 at the latest, as Ifo President Clemens Fuest demands.

Alarming developments

According to the Bundesbank, the need for comprehensive investments in an emissions-neutral economy is evident. In order to achieve climate neutrality by 2045, additional investments of around 130 billion euros are necessary annually, which corresponds to around 4% of GDP. That may seem like a lot, but the political framework is unclear and could further complicate the situation. In addition, increased energy costs due to CO₂ pricing can have a negative impact, which could dampen production and investments, according to Bundesbank.

Even companies' expectations are ambivalent: While over two-fifths expect investments to remain unchanged or increase between 2027 and 2029, others fear a decline. The uncertainties arising from climate-related developments could impact productivity - a worrying aspect for the entire industry.

The role of politics

The political debate revolves primarily around economic reforms and the necessary reduction of bureaucracy, especially in areas such as CO₂ documentation and strict minimum wage regulations. CDU General Secretary Carsten Linnemann emphasizes the role of medium-sized businesses and the need to give companies a good hand through less bureaucracy. Stopping mothers' pensions and avoiding rising contributions are on the agenda, as is easing the burden on companies. This could amount to up to 146 billion euros in additional prosperity if these steps are implemented effectively.

In view of the international framework, the focus is also increasingly being placed on the export industry. The USA's tariffs on goods from Germany are putting additional pressure on the situation. The USA, as the most important buyer of German goods, represents a significant hurdle with 15% tariffs, which endangers competitiveness - a circumstance that the institutes see as a central problem for the German economy, as [Tagesschau.de](https://www.tagesschau.de/wirtschaft/konjunktur/konjunkturprognosen-wir Growth-100.html) reports.

In these difficult times, the question is becoming more and more urgent: How will politicians react? The standstill could lead to further stagnation, leaving the population at a loss while uncertainty about future investment and job stability increases. The coming days, and especially Thursday, could be decisive in determining the direction in which Germany's economic future will develop.