Critics slam 100-day economic plan implementing mixed fiscal and monetary policies
The Black-Red Federal Government, led by Chancellor Friedrich Merz, has come under fire from German economists for its perceived lack of structural reforms in economic policy. The criticism primarily focuses on the government's approach to pension reform and the debt brake.
In a recent survey conducted by the Ifo Institute and the "Frankfurter Allgemeine Zeitung", 170 economics professors expressed their views on the government's economic policies between July 29 and August 5, 2025.
The economists are critical of the government's expansionary pension measures, such as the extension of the "mothers' pension", which credits parents (primarily mothers) for child-rearing periods. They argue that these measures are misguided and will create long-term fiscal challenges.
Moreover, the government's failure to raise the retirement and pensionable age is a concern for many economists. They consider it necessary to ensure sustainability in the long run. This pension stance, coupled with reliance on debt-financed fiscal stimulus without corresponding structural reforms, raises concerns about Germany's medium- and long-term economic growth prospects and fiscal stability.
Despite some positive fiscal initiatives, such as a 500-billion-euro special fund for infrastructure, an investment booster for companies through faster depreciation, increased defense spending, and planned cuts to corporation tax, overall, 42% of the surveyed economic professors rated the government's economic policies negatively, with only 25% positive.
The economists foresee these policies possibly supporting short-term growth but warn that without market-oriented structural reforms, sustainable growth remains unlikely. The government's lack of reforms aimed at controlling pension costs and modernizing fiscal rules, such as reforming the debt brake, is viewed as a significant omission that risks fiscal imbalances in the future.
Niklas Potrafke, an Ifo researcher, is among those criticizing the current federal government's pension policy. He highlights the need for a pension reform, particularly an increase in the retirement and pension entry age.
The respondents also believe that the debt-financed fiscal policy will primarily boost the economy in the short term. However, 26 percent of them expect negative medium-term growth prospects, while only 12 percent expect rather negative short-term effects of the federal government's current measures on the economy.
The improved depreciation possibilities for companies receive positive evaluations from economists, as do additional defense spending. On the other hand, the expansion of the mother's pension is receiving criticism from economists.
In summary, German economists criticize the current government’s economic policy for failing to implement urgently needed pension reform, neglecting to reform the debt brake, relying on debt-financed short-term stimulus without structural reforms needed for sustainable growth, and risking economic stagnation and increased fiscal pressures in the medium to long term.
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