Germany: No recovery in sight for the economy

Published 7 June 2026 · health

The war in Iran has dashed hopes for economic growth. Germany's pension and healthcare systems are also feeling the strain. It was certainly not a

The war in Iran has dashed hopes for economic growth. Germany's pension and healthcare systems are also feeling the strain. It was certainly not a joyful meeting for Chancellor Friedrich Merz: On Wednesday (May 27), the chancellor and several ministers from his cabinet met with the five economics professors who make up the German Council of Economic Experts — an independent advisory body to the federal government. The Council's latest report provides no cause for the German government to celebrate. On the contrary, it underscores just how poor the state of the German economy is. Stagnation rather than growth in Germany "Unfortunately, we've had to lower the growth forecast we gave in this year's report," said Chairperson Monika Schnitzer ahead of the meeting at the Chancellery. "We now expect the gross domestic product (GDP) to grow by just 0.5% this year and 0.8% next year." The GDP measures the total value of all goods and services produced, and serves as the measure of a country's economic strength. Meanwhile, the inflation rate — that is, the rise in prices — is expected to climb to 3% in 2026. These are disastrous figures. In fact, they are the exact opposite of what the chancellor promised as his top priority in May 2025 when his government took office: to quickly get the economy back on track. Lazy Germany: Is more work the way back to the top? To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Frustration among German companies Business leaders are voicing their increasing discontent with the government.

Leading industry associations are expressing concern that since the end of World War II, Germany's competitive position in the global economy has never been more precarious. One in four jobs in Germany is linked to the industrial sector. For decades, German exports of cars, machinery, chemical and pharmaceutical products flourished, and the country prospered as a result. Since the prolonged economic downturn that began in 2019, however, German companies have been losing their global competitive edge, and companies that export goods are openly questioning whether it is possible to turn things around. Germany between U.S. and China: Who is the better partner? To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Energy prices have risen dramatically As recently as last fall, there was at least some hope that the economy might finally start to pick up again in 2026. But the war in Iran threw a wrench in those plans. Heating oil prices have risen by 40% and gas and electricity prices are also expected to continue climbing. Before the Iran war, 20% of global oil and liquefied natural gas consumption was transported through the Strait of Hormuz off the Iranian coast. Just like US President Donald Trump's tariff policy, the blockade has been affecting the whole world. The US is by far the world's largest importer. "Tariffs and the energy crisis are hitting the German economy particularly hard because it is both an exporter of goods and an importer of fossil fuels," explained Austrian economist Gabriel Felbermayr, who was recently appointed to the German Council of Economic Experts.