"Germany's top economists say Chancellor Friedrich Merz's debt-fueled spending plan will give only a short lift without structural change. One expert warned that high costs, skills shortages, and heavy bureaucracy are masking deeper weaknesses, while another likened the economy to an addict "junkie" on a temporary fix. The warning piles pressure on Merz, who has promised an "autumn of reforms" and said the country needed "a new consensus" on how its welfare state should look."
"In their autumn report, the five institutes forecast economic growth of 1.3% in 2026 and 1.4% in 2027. But they cautioned that "persistent structural weaknesses" mean the momentum will not last, according to Geraldine Dany-Knedlik of the German Institute for Economic Research (DIW Berlin). For 2025, the economists expect GDP to rise just 0.2%, "barely more than stagnating," Dany-Knedlik said, noting the slight upgrade from a 0.1% spring forecast"
Leading economic institutes forecast modest German growth of 0.2% in 2025, 1.3% in 2026 and 1.4% in 2027, but warn that gains will fade without major structural reforms. High production costs, skills shortages and heavy bureaucracy are identified as underlying weaknesses that mask deeper competitiveness problems. The government’s debt-financed investment package is expected to give only a temporary boost unless accompanied by changes to labor markets, regulation and welfare arrangements. Chancellor Friedrich Merz has pledged an "autumn of reforms" and called for a new consensus on the welfare state. Arms export approvals to Israel have fallen to zero following tightened restrictions.
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