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"We are in crisis"/ Merz: Dealing with Germany's economic problems is more difficult than expected

2025-08-24 12:44:00, Kosova & Bota CNA

"We are in crisis"/ Merz: Dealing with Germany's economic

German Chancellor Friedrich Merz said that tackling the country's economic challenges is turning out to be a much bigger undertaking than he initially anticipated.

"I say this also in a self-critical way - this task is bigger than anyone could have imagined a year ago," Merz said in a speech in the northern German city of Osnabruck on August 23.

"We are not just in a period of economic weakness, we are in a structural crisis of our economy."

Europe's industrial powerhouse and biggest exporter is grappling with persistently high energy costs following Russia's invasion of Ukraine and the turmoil of U.S. trade tariffs. Data released on Aug. 22 showed the German economy shrank more in the second quarter than initially forecast.

“No one should have any illusions about how deep and broad the challenges we face are,” Mr. Merz told members of his Christian Democratic Union party in Lower Saxony, the state of carmaker Volkswagen.

He highlighted Volkswagen's 36% drop in after-tax profits in the second quarter as just "one of many messages".

“Large parts of our economy are no longer truly competitive and this is a question of price competition,” Mr. Merz said, without naming any firms.

"The quality is still good and company leaders recognize these challenges. But the fundamental conditions in Germany simply haven't been good enough over the last decade."

Since taking office in 2025, Mr. Merz has pledged sweeping reforms aimed at cutting bureaucracy, modernizing infrastructure and stimulating domestic demand. His government plans hundreds of billions of euros in investment in roads, bridges and the armed forces to boost productivity.

On August 23, he highlighted new tax incentives for business investment and reiterated his opposition to tax increases for mid-sized companies.

He also acknowledged that the 15% US tariffs on German exports will be a burden on the economy, although he warned that an open trade war with Washington could have been much worse./ CNA





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