The director of the Institute for German Economics (IW), Michael Hütter, is urging the government to take measures that are "different from what has been done so far". He lists three points in particular that require urgent action. According to Hütter, the current business model of the German economy is under enormous pressure.
Three big problems
In front of the German second television channel ZDF, he listed three particularly critical points:
- too high production costs in Germany
- too high taxes
- too high labor costs
The economist explains that these shortcomings lead to job cuts, company failures and a wave of bankruptcies. According to Hütter, the most serious measure that could reverse the trend is to carry out a fundamental tax reform, which, however, is not on the horizon.
The Federal Union of German Industry (BDI) even believes that Germany as an industrial power is in a state of “free fall“. The president of the association, Peter Leibinger, spoke to the DPA agency about the "deepest crisis since the Federal Republic existed". At the same time, he also claims that the German government is not responding decisively enough to this situation.
"Structural decline"
A new report on industrial development for 2025 predicts a decline in production of 2%, which would be the fourth consecutive year of decline, writes ARD. "This is not just a cyclical decline, but a structural decline. German industry is constantly losing substance, Leibinger claims.
Problems in the chemical industry
The BDI report also examines the state of the chemical industry in particular. Recently, chemical industry facilities have been operating at only 70% capacity, and mechanical engineering and steelmaking are also under pressure.
Only the construction sector seems to have stabilized in the meantime, the Union's experts note. The automotive industry in Germany is expecting some growth in production, and the capacity of available production facilities is already being used more efficiently. At the same time, the report registers a problem with the available workforce.
Need for structural reforms
"Germany needs a turnaround in economic policy with clear priorities on competitiveness and growth", says the president of the Federation of German Industry Leibinger and warns: "Every month without decisive structural reforms means the loss of new jobs and welfare and significantly limits the future possibilities of the state".
The president of the BDI also has specific demands for the federal government - to prioritize investments over consumption-related spending. According to Leibinger, the special fund with financial resources should be used transparently for additional investments.
Critics of the government also express dissatisfaction with the fact that the cabinet is transferring projects from the main budget to the billion-dollar fund for extraordinary investments in infrastructure and climate protection. In this way, Berlin frees up budget funds to finance some of its clientelistic projects - for example, the expansion of pensions for mothers.