German economy on the abyss: stagnation and urgent need for reform!

German economy on the abyss: stagnation and urgent need for reform!

The forecasts for the German economy are anything but optimistic. According to the Vol.at , the economy has drastically reduced their expectations for 2025. The earlier forecast of GDP growth of 0.4 percent was almost corrected to zero.

The experts around Monika Schnitzer found a pronounced phase of weakness in the German economy in their spring report. The short-term prospects appear similarly dark as that of the EU Commission, in particular on the basis of the continuing geopolitical uncertainties and the US trade policy, which is considered a burden on export-oriented companies.

causes of economic stagnation

studies indicate structural weaknesses in the German economy. Long approval procedures and bureaucratic requirements are recognized as obstacles to economic development. According to the Finanzmarktwelt , the German Industry and Industry is alerted and demands noticeable measures at the turn of the trend.

The DIHK emphasizes that the challenges are not only economic nature, but also include structural problems such as high energy prices and administrative hurdles. In view of this urgency, quick fiscal impulses are required for investments.

Financial package offers opportunities

Nevertheless, there are glimmer of hope. The new financial package could contribute to the modernization of the infrastructure and from 2026 positive impulses for construction and equipment investments as well as state consumption. Economists expect private consumption to grow more in 2026 because the available income increases price adjusted. The forecasts indicate GDP growth of 1.0 percent for 2026 after being expected in the current year.

Nevertheless, the way there is difficult. The IFO warns of high prognosticism, which are primarily due to economic policy decisions in Germany and the USA. While structural change in Germany accelerates, it remains unclear which measures the new federal government will take. The uncertainty about economic development influences the mood in industry and reduces the trust of the companies in an early recreation.

Recovery could be influenced by various factors, including the high inflation that affects the purchasing power of consumers. Despite an increase in the available household income of 2.0 percent, the increase in consumer prices of 2.3 percent will dampen the net wages. The savings rate could also drop, which has a negative impact on consumption.