Memento mori: Germany Unveils Steps to Overhaul Moribund Economy

“BERLIN -- Germany unveiled a broad economic overhaul on Thursday in an attempt to jolt its economy back to life and boost the government's approval ratings ahead of elections in the fall.

 

The 34 measures, including tax and welfare-benefit cuts, a relaxation of labor-market rules, the lifting of bureaucratic burdens, and steps to encourage investment in fast-growing sectors, will help "overcome Germany's structurally weak growth," Chancellor Friedrich Merz said.

 

"I understand the longing for the old, for the past, but we cannot hide in the past," Merz said. "We must start longing for the future. These reforms have one goal: We are setting off into the future."

 

Germany's export-reliant economy was hit hard by the rise of China as a manufacturing superpower, which has gobbled up market share from Germany's flagship automotive and engineering sectors. President Trump's punitive tariffs on European goods have squeezed many German companies out of another fast-growing and lucrative market.

 

But Germany's misfortunes are also partly homemade, economists said. Berlin has let regulations, labor costs, energy prices and taxes creep up and its infrastructure decay due to underinvestment over the past 20 years, eroding the economy's competitiveness.

 

The government will cut income-tax rates for those classified as low or average earners, resulting in 10 billion euros, or $11.38 billion, a year in savings for those taxpayers. This will be partly funded by tax rises for those earning more than 250,000 euros a year and cuts to various tax breaks.

 

Retirement age will rise gradually to 70 from 67 and incentives to retire early will be scrapped.

 

It will become easier for companies to fire top earners and hire workers on a temporary basis -- a longstanding demand in the startup scene. New tax incentives will encourage workers who have been laid off to find a new job quickly. The government will limit sick leave. Tech companies and sectors under pressure -- cars, steel, chemicals and engineering -- may be exempted from more labor-market rules.” [1]

 

1. World News: Germany Unveils Steps to Overhaul Moribund Economy. Bertrand, Benoit.  Wall Street Journal, Eastern edition; New York, N.Y.. 03 July 2026: A8.