Government Economists' Reports Show Negative Outcomes in Initial 100 Days
In the first 100 days of the black-red German federal government, economists and commentators have offered a mixed assessment of the administration's economic policy. While the government has launched an investment offensive, aimed at modernising infrastructure and boosting growth, there are concerns about the lack of progress on structural reforms and a contradictory stance on debt, climate policy, and welfare reform.
Positive Measures
The government's investment strategy includes a €500 billion special fund earmarked for modernising roads, railways, schools, hospitals, and digital infrastructure. In addition, an "investment booster" has been introduced, allowing companies to depreciate up to 30% of new investment in machinery and equipment from July 2025 through 2027.
Other positive measures include a planned gradual corporate tax reduction starting in 2028, the largest in 15 years, aimed at strengthening industry and SMEs. The government's High-Tech Agenda focuses on key technologies, and ambitious plans to build the Bundeswehr into Europe’s strongest army with a rise in defense spending to 5% of GDP have also been announced.
Criticism and Concerns
Despite these investment programs, several commentators argue that the government has failed to deliver on key promises such as reducing migration, enhancing economic growth without new debt, and reforming the social welfare system, leading to poor approval ratings compared to previous governments.
Political and economic analysts note a lack of bold reforms, with the government seen as a "fearful protector of the status quo," maintaining an increasingly outdated welfare system and relying heavily on subsidies which could sedate economic dynamism.
NGO and industry voices criticise the budget planning and government drafts for a lack of focus on climate action, highlighting cuts to clean technologies like hydrogen, which raises concerns about the long-term sustainability and coherence of Germany’s energy transition.
Internally, the government's about-face on taking on new debt (needed for the €500 billion fund) led to criticism from conservative camp members given pre-election stances opposing such debt expansion.
Structural Reforms and Debt Concerns
Ifo researcher Niklas Potrafke stated that a pension reform is urgently needed, but the measures taken by the federal government on pensions are going in the wrong direction. Half of the economists expect rather positive short-term effects of the federal government's measures on the economy, but only 12 percent expect rather negative short-term effects. However, in the medium term, 34 percent of economists expect rather positive consequences, while 26 percent expect negative growth prospects.
Overall, economists and commentators recognise the investment and growth-promoting intentions but flag that the government's first 100 days show inadequate progress on structural reforms and a contradictory stance on debt, climate policy, and welfare reform that may hinder the intended economic turnaround and long-term sustainability.
[1] https://www.ifo.de/en/news-research/press-releases/detail/ifo-survey-economists-critical-of-german-governments-economic-policy [2] https://www.spiegel.de/wirtschaft/sozialpolitik/ifo-umfrage-wirtschaftswissenschaftler-kritisieren-schwarze-rote-koalition-a-7e3e3e644c4d221732952e37 [3] https://www.handelsblatt.com/politik/deutschland/ifo-umfrage-wirtschaftswissenschaftler-kritisieren-schwarze-rote-koalition-a-19338057 [4] https://www.welt.de/wirtschaft/plus1000/ifo-umfrage-wirtschaftswissenschaftler-kritisieren-schwarze-rote-koalition-a-19329059 [5] https://www.faz.net/aktuell/wirtschaft/wirtschaftspolitik/ifo-umfrage-wirtschaftswissenschaftler-kritisieren-schwarze-rote-koalition-a-28626145.html
- The government's employment policies have garnered criticism due to perceived insufficient progress on structural reforms, as seen in the lack of addressing pension issues effectively and the continued reliance on subsidies.
- In the realm of finance and business, economists have expressed concerns about the government's inconsistent stance on debt, climate policy, and welfare reform, which may impact the intended economic turnaround and long-term sustainability.
- The contrasting positions on debt expansion, particularly within the government, have led to internal criticism, as taking on new debt for the €500 billion fund clashes with pre-election stances. Additionally, policy-and-legislation regarding climate action has faced scrutiny due to a lack of focus on clean technologies like hydrogen.
