Germany is not doing enough to stop the economy’s ‘free fall’, industry body says

The German government must do more to save industry from a “free fall” in the country’s economy, sector association BDI said on Tuesday, as it cut its output forecast for this year.

Europe’s largest economy contracted in 2023 and 2024, and is expected to grow only slightly, by 0.2%, this year as higher investment kicks in next year.

German Chancellor Friedrich Merz, who came to power promising rapid change for German industry, won approval in March for a special fund of 500 billion euros ($580.20 billion) to spend on infrastructure.

“Germany, as an economic location, is experiencing a downturn, but the German government is not reacting decisively enough,” BDI said in its biannual industry report published on Tuesday.

BDI cut its 2025 industrial production forecast to a decline of 2.0%, down from a 0.5% decline forecast in March.

“Every month without decisive structural reform will cost more jobs and prosperity, and severely limit the government’s room for maneuver in the future,” said the BDI, calling for more investment and less red tape.

The government did not immediately react to the criticism.

PROMISED ECONOMIC REFORMS ARE STILL LACKING

In a similar vein, engineering association VDMA said on Tuesday that promises of reform were still lacking.

“The signals needed to kick-start global trade are still lacking, as are promises of economic reforms that would truly ease the burden on business,” said VDMA chief economist Johannes Gernandt.

The group reported that overall engineering orders increased slightly in October, mainly driven by a surge in contracts from outside the euro zone, while domestic orders and those originating from within the currency bloc stagnated.

“The slight increase in orders in October is encouraging, but unfortunately it is only a consolidation at a low level because last October was one of the weakest months in 2024,” said Gernandt.

“The mechanical engineering industry continues to experience stagnation,” he said, pointing out that orders for the first 10 months of 2025 were down 1% year-on-year.
Source: Reuters