Berlin: German Chancellor Friedrich Merz on Tuesday urged his coalition government to speed up economic reforms in response to demands from business and labor groups for concrete measures to revitalize Europe's largest economy and stem the tide of industrial job losses. Merz initiated a two-day Cabinet retreat at Schloss Neuhardenberg in Brandenburg, focusing on growth, innovation, and competitiveness.
According to Anadolu Agency, the Chancellor emphasized the need for Germany to emerge from its current economic growth stagnation and to restore its capacity for growth and employment. He expressed confidence in Germany's ability to compete on a global scale, citing the country's robust industrial base, small and medium-sized enterprises, skilled trades, and research capabilities. Merz stressed the importance of the state in creating conducive conditions for economic success and dismissed any notion of underestimating the nation's potential.
The Cabinet retreat is set to include consultations with representatives from industry, technology companies, start-ups, and skilled trades. Merz acknowledged public expectations for decisive action and pledged to expedite preparations for decisions slated for the remainder of 2026. The current governing coalition, comprising Merz's conservative CDU/CSU alliance and the center-left Social Democratic Party (SPD), is under increasing pressure due to weak approval ratings and a rise in support for the far-right Alternative for Germany (AfD).
In response to these challenges, the government announced a 34-point 'Program for Growth and Employment' on July 2. This program includes approximately £10 billion ($11.7 billion) in annual tax relief for low- and middle-income earners, along with reforms in pension systems, stricter sick-leave certification rules, affordable housing initiatives, and efforts to reduce bureaucracy.
Business and labor groups have been vocal in their demands for action. Tanja Gonner, chief executive of the Federation of German Industries (BDI), called for an 'autumn of action,' highlighting that previously announced measures have yet to deliver tangible relief for companies. Michael Vassiliadis, chairman of the Mining, Chemical and Energy Industries Union (IGBCE), also urged the government to change its course, warning of the loss of approximately 15,000 industrial jobs each month.
Germany's economy experienced a modest 0.3% expansion in the second quarter compared to the previous three months, according to the Federal Statistical Office. This was a slight revision upward from an initial estimate of 0.2%, with exports being the primary growth driver despite weak investment.
Following the Cabinet retreat, the executive boards of the coalition parties' parliamentary groups are slated to convene on Thursday and Friday in Munster to further deliberate on the reform agenda.