Germany was invoiced as a development driver in Europe. Now economists will not be satisfied

German Chancellor Friedrich Merz appealed to the Bundestag during a debate about the federal budget of 2025 on September 17, 2025 in Berlin.

Nadja Wohlleben | Getty Images News | Getty pictures

Huge promise of investment and great fiscal changes had strengthened the hope that Germany could give the euro of the euro zone an urgently needed thrust, but the economists begin to ask whether and when will happen.

Germany was a center of excitement at the beginning of this year. Many politicians, analysts and economists shared great hopes for an economic rebound – in Germany and all over Europe.

It had moved to change its long -term debt brake rule, which limits, how much debt the government can take over, and dictates the size of the Federal Government’s structural budget deficit. Certain defense and security costs above a certain threshold are freed from the debt brake according to the new rules.

The country also decided to create a euro infrastructure and climate inventment fund of 592 billion US dollars (592 billion US dollars).

At that time, the shift was considered a potential player and was widely charged to change the sluggish economy in Germany.

The country recorded annual contractions both in 2023 and 2024, whereby 2025 also acted a steamed start. While the gross domestic product rose by 0.3% in the first quarter, it shrank by 0.3% after the latest data in the following three months.

The Euro zone economy is also fighting 0.6% in the first quarter, although this slowed down to only 0.1% in the following three months.

Martin’s Kazaks, member of the Central Bank Council member, told CNBC at the beginning of this month that “The Big Hope in Germany” when it comes to increasing the economy of the euro zones next year.

But it always looks more unclear whether this will come into play.

“In Germany it takes time to spend money.”

Holger Schmieding, chief economist at Berenberg, told CNBC that a “big increase” in defense contracts and infrastructure investments had started in Germany.

“[But] We don’t see it very much in actual initial data, ”he said.

“All in all, everything is progressing as we expected after the reform of the great debt brakes. The actual expenses are slower than many of the excited experts expected. In Germany it takes time to spend money.”

In the meantime, Franziska Palmas, Senior Europe Economist at Capital Economics, made a “much higher deficit” in the coming years in the coming years – together with some potentially unforeseen results.

“Something that may have remained a bit unnoticed is that the government not only increases defense and infrastructure expenditure, but also uses some of the additional control room to finance other expenses,” she said.

This includes, for example, the financing of electricity tax cuts for companies, but also the costs for higher pension, health and social benefits, emphasized Palmas.

“Things like electricity tax reductions will still have a positive effect on the economy, but the additional expenditure for healthcare and pensions will not increase the economy, since they mainly reflect increasing costs due to demography,” Palmas remarked.

While Palmas said that the changes will help Germany’s economy in 2026, she warned that the expansion may not be as strong as many economists expect.

A minimal thrust?

Large German business institutes have recently reduced their economic projections for the country and are now expecting a little more than 1%growth next year.

The European Central Bank now expects 1%in 2026.

Berenberg’s Schmieding calculates that the fiscal incentive in Germany will add around 0.3 percentage points to the country’s own growth rate, which would increase the economy of the euro zones by 0.1 percentage points.

Palmas recorded Germany’s growth in 2026 around 0.2% of the euro zone.

In addition to Germany, several other factors will affect the growth of the euro zone next year. According to Palmas, this includes the recent interest rate cuts of the ECB and strong growth in Spain, which has been reinforced by immigration and employment growth.

“On the other hand, US tariffs are probably a low burden on the economy (we believe that they will be pulling around 0.2% from GDP,” she said. “And in France, fiscal tightening will also weigh on growth.”

But Germany’s rebound should have striking effects that go beyond GDP, as Schmieding emphasized.

“The transition from its mini recession by mid-2024 to a significant growth from the end of 2025 will have a modest positive effect on its neighbors. After all, Germany is usually its most important trading partner,” he said.