German Economic Council Urges Policy Shift Amid Stagnant Growth Forecasts

Economic Experts Present Annual Report, Call for Reforms

Berlin, Germany – Germany's Council of Economic Experts, commonly known as the 'Wirtschaftsweise,' released its annual report on Wednesday, November 12, 2025, urging the federal government to implement significant changes to its economic policy. The independent advisory body highlighted Germany's prolonged period of stagnant growth and presented revised, modest economic forecasts for the coming years.

Revised Growth Forecasts Reflect Persistent Weakness

The Council's report painted a sobering picture of Europe's largest economy. For 2025, the experts slightly raised their GDP growth forecast to 0.2%, an increase from a previous projection of 0.0%. However, the outlook for 2026 saw a downgrade, with the forecast cut to 0.9% from an earlier 1.0%. Council Chair Monika Schnitzer emphasized that Germany has experienced near-stagnation for the past five years, with real GDP growing by only 0.1% overall. The report noted that the German economy has endured two consecutive years of recession in 2023 and 2024, lagging significantly behind other advanced economies and the global average. Industrial output, a crucial component of Germany's export-driven economy, remains 5% below 2019 levels.

Criticism Over €500 Billion Special Fund Utilization

A central point of criticism from the Council was the federal government's handling of the €500 billion special fund, established for infrastructure and climate neutrality. The experts warned that the government risks 'squandering opportunities' by using these substantial funds for day-to-day public spending and what they termed 'dubious measures,' rather than for additional, growth-boosting investments. Specific examples cited included pension supplements, reduced VAT rates in the hospitality sector, and diesel fuel subsidies for agriculture and forestry, which the economists deemed not 'future-oriented.' Monika Schnitzer stated, 'The opportunities arising from the special fund for infrastructure and climate neutrality must not be squandered.' The Council argued that the impact of the fund would be significantly greater if the resources were entirely dedicated to additional expenditure and investment.

Addressing Structural Challenges and Policy Recommendations

The 'Wirtschaftsweise' identified several deep-seated structural problems hindering Germany's economic dynamism. These include:

• Excessive bureaucracy and lengthy approval procedures, which impose unnecessarily high costs on businesses.
• A persistent lack of future-oriented public investment in critical areas such as infrastructure, education, and defense.
• Challenges posed by demographic aging and a shrinking workforce.
• External pressures from US tariff policies and global trade disruptions.

To counteract these issues, the Council recommended comprehensive reforms, including consistent administrative modernization, digitalization of processes, and a clear prioritization of future-oriented public spending. They also advocated for a reform of inheritance and gift tax to ensure more uniform taxation across all asset types. The report underscored that while the government's financial package offers potential, its effectiveness is being undermined by current implementation, necessitating a decisive shift in economic policy to foster sustainable growth.