German economy returns to growth, so why is the country still worried?
The German economy is growing again, albeit slightly. However, economists warn that without reforms, higher productivity and solid public finances, a loss of prosperity and growing debt threaten future generations.
Germany's economy has returned to growth, but the nation remains concerned. At the 2026 Mechanical Engineering Summit in Berlin, industry leaders expressed disappointment and frustration. The mechanical and plant engineering sector, once employing over a million workers, now sees about 15,000 jobs cut monthly, with production down 20% since 2018.
Chancellor Friedrich Merz pledged quick reforms and an economic upswing, but recent economic reports have proven him wrong. The Council of Economic Experts predicted a 1.3% growth for 2026 and 1% for 2027, acknowledging strong exports and government spending. However, experts warn that the growth rates are insufficient to maintain long-term prosperity and that the public purse is under increasing pressure due to an ageing society and rising social welfare costs.
To address the budgetary predicament, the government plans to increase debt by over €118 billion, leading to a potential debt-to-GDP ratio of 100% by 2040, the highest among G7 countries. Experts recommend reducing environmentally harmful tax benefits and revising social security systems to achieve sustainable growth.
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