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German Chancellor Friedrich Merz addresses the Bundestag during a discussion on the federal budget 2025 on September 17, 2025 in Berlin, Germany.
Nadja Wohlleben | Getty Images | Gets the image
Huge investment promises and major fiscal changes have reinforced the hopes that Germany can give the Eurozone economy a necessary incentive, but economists are beginning to question whether it happens.
Germany was the center of excitement earlier this year, and many politicians, analysts and economists shared Great hopes Economic rebound – domestically and across Europe.
It was Moved to make in change Its long -standing debt rule, which limits how much debt the government can take over and dictate the size of the federal government’s structural budget. Some protection and security costs above a particular threshold are exempt from debt in accordance with new rules.
The country also decided to create 500 billion euros ($ 592 billion) infrastructure and climate investment funds.
The change was considered The potential change of games At the time, it was widely exposed as a way to turn the sluggish economy of Germany around.
The country recorded annual contractions in 2023 and 2024, and 2025 also went to the muted start. While the gross domestic product grew by 0.3% in the first quarter, it decreased by 0.3% in the next three months, according to the last data.
A Economy EURAZON zone To put it more broadly, it also fights, placing an increase of 0.6% in the first quarter, although in the next three months it slowed to 0.1%.
A member of the European Central Bank, which manages the Council Martins Kazaks, said CNBC earlier this month that “Great Hope lies in Germany” when it comes to financial costs that increase the Eurozone economy next year.
But it looks more and more unclear whether it will work out.
“Germany takes time to spend money”
Holger Schimiding, Chief Economist Berenberg, said CNBC that in Germany there has been a “large growth” in the order of defense and investment in infrastructure.
“(But) We don’t see it in real weekend data,” he said.
“In general, everything progresses as we expected after a big brake reform. Actual costs are slower than many more excitators awaited. In Germany, it will take time to spend money.”
Meanwhile, Frantsysk Palramov, the elder economist at the Capital Economics, stated a “much greater deficit” in Germany in the coming years as a result of spending expenses – together with some potentially unforeseen results.
“What may have become a little unnoticed is that the government not only increases protection and infrastructure costs, but also uses some additional financial spaces to finance other costs,” she said.
This includes, for example, financing the reduction of electricity taxes for business, and covers higher pension, medical and social payments, Palms noted.
“Things such as a decline in electricity taxes will still have a positive effect on the economy, but additional health and pensions will not increase the economy, given that it mainly reflects the cost of demographics,” Palma said.
While Palles said the changes would help the German economy grow in 2026, it warned that the expansion may not be as strong as many economists expect.
Minimum incentive?
Main German Economic Institutes Recently reduced them Economic forecasts For the country and now expect a slightly over 1% growth next year.
A Meanwhile the European Central Bank expecting the euro zone to grow by 1% in 2026.
Schmieding Berenberg estimates that a fiscal incentive in Germany will add about 0.3 percentage points to its own growth in the country, which, he said, will increase the euro zone by 0.1 percentage points.
Meanwhile, Palms sees that in 2026 the growth of Germany adds about 0.2% to the euro zone.
In addition to Germany, the eurozone zone is affected next year. This includes a recent interest rate from the ECB, according to palm trees, as well as a strong growth from Spainwhich was strengthened by the growth of immigration and employment.
“On the other hand, the American tariffs are likely to be small traction of the economy (we think they will subtract about 0.2% of GDP),” she said. “And in FranceFiscal delay will also weigh growth. “
But the rebound of Germany should have consequences that go beyond GDP, Schmidding noted.
“The transition of Germany from mini-recession to mid-2014 to significant growth from the end of 2025 will have a modest positive impact on the neighbors. In the end, Germany is usually their most important trading partner,” he said.
