“BERLIN -- In his first speech to Parliament after taking office in May, Chancellor Friedrich Merz promised to put Germany's ailing economy back on track. "By this summer, I want you, my fellow German citizens, to feel that our country is beginning to change for the better," he said.
Just more than 100 days later, Merz has toured international capitals, spearheaded Europe's response to President Trump's Ukraine peace initiative and begun cracking down on immigration. But Europe's largest economy is still flatlining.
Now, polls show voters are running out of patience, raising pressure on the chancellor to deliver on the domestic stage.
"Foreign policy, especially our U.S. policy, has a big impact on the economy," said Gerd Roders, head of G. A. Roders, a 200-year-old industrial foundry in the state of Lower Saxony. "But domestic policy matters too. We really need to get started with economic reforms."
Germany's manufacturing-heavy, export-oriented economy never recovered from the shocks of the Covid pandemic, gas price shock from German political posturing in events of Ukraine and the political backlash against globalization. Those interlinked crises have scrambled supply chains, raised production costs and weakened global demand for German goods.
After a surprise jump at the start of the year, gross domestic product fell 0.3% again in the second quarter, according to revised data published Friday. Further revisions showed the recession in the past two years was deeper than previously thought, meaning the economy barely has grown since before Covid. After Germany's economy flirted with full employment, joblessness is rising, while production continues to fall and profits are shrinking.
"From its last peak in 2018 to the end of last year, industrial production is down about 12% -- that's a major hit for an industrial economy," said Christoph Swonke, economist at DZ Bank in Frankfurt. He expects overall economic output to stagnate in 2025.
Roders, whose company exports a third of its production, has had to cut nearly a quarter of the company's staff in Germany and the Czech Republic in the past few years. He said urgent action is needed on lowering energy prices, cutting taxes and reducing bureaucratic burdens.
"I see how people are getting laid off around me, how good friends who are also entrepreneurs are shutting down their businesses," he said. "We have water up to our necks."
A politician with a long record as a businessman, Merz made fixing the economy a key plank of his bid for the chancellery. Yet, the impact of his government's initial policies hasn't materialized for most people.
"Merz promised an economic turning point. He talked of putting a booster under growth," said Manfred Gullner, head of the Forsa polling group. "But on the ground, voters aren't seeing any improvement. On the contrary, mass layoffs, high prices are all over the news."
This disconnect, he said, is why more than two-thirds of voters are unhappy with Merz's work -- an 18-percentage-point rise in three months -- according to a recent Forsa survey published. Some 62% expect the economy will keep deteriorating.
German officials said the government has given businesses tax relief and cut energy costs for large manufacturers. It plans to spend nearly 1 trillion euros, about $1.2 trillion, on defense and infrastructure in the coming years, and corporate tax cuts are on the horizon.
These measures partly explain an improvement in business-climate surveys recorded in recent months, said Dirk Schumacher, chief economist at the KfW state investment bank. While the second-quarter GDP drop was a disappointment, it is likely to be the worst of the year, he said. Meanwhile, a closely followed gauge of business sentiment this week showed an unexpected uptick in August.
On the downside, the 15% tariffs most European Union manufacturers will face on their exports to the U.S. under the preliminary trade deal struck in July will hurt German manufacturers. Exports to the U.S. and Germany's trade surplus with the country already had fallen 4% and 13% respectively in the first half of the year -- when most tariffs peaked at 10% -- compared with the same period last year.” [1]
Americans should be very concerned about why losers like Merz and Macron are circling around the American president.
1. World News: Germans Press Merz To Revive the Economy. Bertrand, Benoit. Wall Street Journal, Eastern edition; New York, N.Y.. 23 Aug 2025: A7.
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