BERLIN

German Chancellor Friedrich Merz on Tuesday lamented his country’s “very critical” economic outlook as his government is prioritizing restoring economic growth this year.

In a letter to lawmakers of his center-right government coalition, Merz wrote that all decisions made so far have not yet been able to sufficiently improve Germany's economic competitiveness, and the situation is “very critical in some areas.”

“In 2026, we will therefore have to focus on making the right political and legal decisions to radically improve conditions in Germany.” German news agency DPA quoted the document as saying.

Germany's economy downsized in both 2023 and 2024. Winter forecasts published in December 2025 by several major German economic institutes projected growth of merely 0.1% in 2025 amid sluggish external demand, including a sharp decline in exports to the US.

Business analysts point to high energy costs, weak global demand and slow structural reforms as well as high US tariffs, as the main obstacles for Germany’s economic recovery.

Since becoming chancellor in May 2025, Merz has vowed to rejuvenate Europe's largest economy through large-scale public spending and increased investment in defense and infrastructure.

His government has made clear that recovery will take time and has announced tax cuts and other reforms, however, business organizations stress that the pace of change remains simply too slow.