Critics Slam Centuries-Long Economic Strategy of Mixed Government Intervention and Free Market Approach over a 100-Day Period
German Federal Government's Economic Policy Faces Criticism from Economists
The German black-red federal government, led by Chancellor Friedrich Merz, is facing significant criticism from economists regarding its economic policy. A recent survey by the Ifo Institute and the "Frankfurter Allgemeine Zeitung" revealed concerns about the government's approach to pension policy and structural reforms.
Pension Policy Concerns
Economists have expressed concern over the government's expansionary pension measures, such as the "mothers' pension." Ifo researcher Niklas Potrafke criticized the federal government's pension policy, stating that the measures taken are going in the wrong direction. The expansion of the mother's pension and the lack of an increase in the retirement and pension entry age are specifically criticized in the pension policy.
Critics argue that current measures are not conducive to sustainable economic growth. There is a call for more structural reforms in the pension system, including raising the retirement age. The lack of meaningful pension reforms and the absence of plans to raise the retirement age are seen as major issues.
Debt Brake and Fiscal Policy Criticism
Economists also highlight that while the government's debt-financed fiscal policies may boost the economy in the short term, they do not provide a sustainable foundation for long-term growth. There is a demand for market-oriented structural reforms to ensure sustainable economic development. Beyond pension policy, economists criticize the government for not implementing sufficient structural reforms to address issues like bureaucracy reduction and climate protection, which are seen as crucial for long-term economic success.
Positive Assessments
Despite the criticism, there are some areas where the government's economic policy is positively assessed. The announced reduction in corporate tax is positively assessed by the economists. Additionally, the strengthening of public investments and the so-called "investment booster," i.e. the improved depreciation possibilities for companies, are positively assessed by the economists.
Short-term and Medium-term Economic Outlook
Half of the respondents expect the government's current measures to have rather positive short-term effects on the economy. Looking at the medium-term growth prospects, 34 percent expect rather positive prospects, while a total of 26 percent expect negative medium-term growth prospects. Only 12 percent of respondents expect rather negative short-term effects on the economy.
Call for Market-oriented Structural Reforms
Overall, the perception among economists is that the government's economic policy lacks the depth and structural reforms needed to secure sustainable economic growth. Sustainable economic growth will require market-oriented structural reforms, as stated by Potrafke, but such reforms are currently not in sight.
The survey involved 170 economics professors who participated in the 52nd economist panel of the Ifo Institute and the "Frankfurter Allgemeine Zeitung" between July 29 and August 5, 2025. Additional defense spending is positively evaluated by the economists.
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- Business leaders and politicians have been urged to address concerns about the lack of market-oriented structural reforms in the German pension system, as economists argue that this is necessary for sustainable economic growth and long-term success.
- The German Federal Government's economic policy is under fire for its approach to finance and politics, as economists criticize the expansionary pension measures, while simultaneously highlighting the need for structural reforms in areas like bureaucracy reduction and climate protection.
