The grace period provided to the German government that took office in the spring is now over. Germany’s Chamber of Commerce and Industry (DIHK) sent a serious warning to Chancellor Friedrich Merz, arguing that “things cannot go on like this.”
The change of government in Berlin did not lead to an improvement in economic sentiment, even after a hundred days. Now, industry is growing desperate to change the path of the federal government, according to Berliner Zeitung.
The paper cites three recent headlines to illustrate how bad Germany’s situation is: “Germany is threatened by the third year of recession in a row,” “50,000 jobs were lost in the automotive industry in one year,” and “Steel production fell by 12 percent.”
As Remix News reported a week ago, the country has also hit bleak milestones, with both unemployment and bankruptcies hitting 10-year highs.
In its letter, the DIHK made clear demands to the federal government. DIHK CEO Helena Melnikov called on the Merz government to implement sweeping reforms in autumn 2025.
“The German economy is deeper into the crisis than many people want to see,” Melnikov wrote. As a first positive step, Melnikov mentioned investment packages and incentives for infrastructure and security.
However, this is not enough. Since the fiasco over the electricity tax, the confidence of many companies has been declining again. A clear direction is now needed: The tax burden must be reduced, the economic acceleration package must be implemented, and public administration must be modernized.
“As before, it cannot go on,” the head of the DIHK warned. After nearly four months in office, the grace period for the new government expired.
“It is crucial that productivity and economic performance grow faster than social spending,” warns Melnikov.
According to him, “this cannot be achieved through tax increases, but only through structural reforms. In a situation where billions in loans are already being taken out, the tax increase is a completely wrong signal,” said the CEO of DIHK.
He continued by stating that “even mere debate causes a significant loss of confidence in the economy,” he highlighted, giving the reforms of Sweden, the Netherlands and Denmark as examples.
“Courage is needed now for such profound changes,” stated the head of the DIHK.
The background to his warning is the ever-increasing structural crisis and growing frustration among companies. After two years of shrinking gross domestic product, Germany is still threatened with recession in 2025, a development that economic experts say will lead to a permanent loss of confidence and an increasing shift of production abroad.
According to a study by the consulting firm EY, the turnover of the industry in the second quarter amounted to slightly more than €533 billion. This represents a decrease of 2.1 percent compared to the previous year. This is the eighth consecutive quarter that a decline has been recorded. In addition, the development of exports was negative in seven of the last eight quarters.
The collapse in German industry has been ongoing for years now.
Since 2019, which predates the coronavirus crisis, 245,500 jobs have been lost in German industry, according to a new report from the Reuters news agency.
Federal Finance Minister Lars Klingbeil, also the leader of the smaller coalition party, the Social Democrats (SPD), sees tax increases as an opportunity to fill the huge deficits in the 2027 budget. However, this approach is understandably not to the liking of industrial players.
According to Germany’s business community, energy prices should be reduced, money should be provided for the construction of new gas power plants, the building energy law should be relaxed, and overall, more market and less state is needed.
“Companies are only willing to invest if the framework conditions are right for this, so this fall should be about reforms,” emphasized Melnikov.
The seriousness of the situation was acknowledged by German Chancellor Friedrich Merz himself when he convened a crisis meeting of the leading politicians of the CDU.
This is not a temporary weakening, but a structural crisis in the economy. Our country is no longer able to keep up with global development, its competitiveness has decreased significantly,” the chancellor said in his speech on Saturday.
“Germany has lost its character as a large and strong economy that drives Europe forward. Currently, it is rather holding it back, due to what are deep, structural problems,” Bence Bauer, director of the MCC Hungarian–German Institute, previously told the Hungarian Nation.
