Merz Addresses Germany’s “Very Critical” Economic Outlook
In a letter addressed to members of his center right coalition, Merz acknowledged that measures taken thus far have not sufficiently strengthened Germany’s competitiveness, noting that the situation remains “very critical in some areas.”
“In 2026, we will therefore have to focus on making the right political and legal decisions to radically improve conditions in Germany,” the document stated, according to a news agency.
Germany’s economy contracted in both 2023 and 2024. Winter forecasts released in December 2025 by leading German economic institutes predicted only 0.1% growth in 2025, citing weak external demand and a steep drop in exports to the United States.
Analysts highlight high energy costs, sluggish global demand, slow structural reforms, and elevated US tariffs as the primary barriers to recovery.
Since assuming office in May 2025, Merz has pledged to reinvigorate Europe’s largest economy through extensive public spending and greater investment in defense and infrastructure.
His administration has acknowledged that recovery will be gradual, introducing tax reductions and other reforms. However, business groups argue that the pace of change remains far too slow.
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