German economy returns to slight growth as industry leaders and economists warn of deeper risks
Germany’s economy is expanding again, but only modestly, and the Council of Economic Experts’ autumn forecast of 1.3% growth in 2026 and 1% in 2027 has not quieted warnings about long-term decline. Chair Monika Schnitzer said the rebound came faster than expected after the energy-price shock from the war in Iran, lifted by surprisingly strong exports and high government spending. Chancellor Friedrich Merz, who turned 71 on 11 November, called the figures encouraging after taking office in May 2025 with promises of rapid reform; his CDU–CSU–SPD coalition has since been slowed by infighting, bureaucracy, taxes, and external crises.
Industry’s verdict is harsher. At Berlin’s 2026 Mechanical Engineering Summit, VDMA president Bertram Kawlath said the sector that once employed more than a million people now cuts about 15,000 jobs a month and has lost roughly 20% of output since 2018. An ageing population is lifting pension, health and care costs while the working-age tax base shrinks. Social welfare, defence and debt interest already take 80% of federal spending. The 2027 budget plans more than €555 billion ($615 billion) in outlays, over €118 billion in new debt, and almost €204 billion once special infrastructure and military funds are included. Experts warn that without far stronger productivity and tighter finances, debt-to-GDP could rise from 63.5% at the end of 2025 to 100% by 2040, and that sustaining past prosperity would require growth Germany has not seen in 50 years.
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