German savings banks chief says growth could curb political polarisation

German Savings Banks Chief: Economic Growth Can Reduce Political Polarisation

Economic Recovery and Its Impact on Political Polarisation in Germany

By Maria Martinez

Germany's Economic Growth Forecasts

BANGKOK, Oct 15 (Reuters) - Germany's nascent economic recovery could curb the polarization seen in recent state elections, the president of the country's savings banks association said on Thursday.

The government has raised its forecast for economic growth to 1.3% in 2026 and 1.1% in 2027, up from 0.5% growth for 2026 and 0.9% respectively in its April projections.

Any pickup would be welcomed by Chancellor Friedrich Merz after Germany's sluggish economy proved a sore point in September's regional elections that resulted in big gains for the far right and far left.

Link Between Growth and Extremist Parties

"If people feel that more of the growth we are currently seeing is reaching them, the drift toward extremist parties will subside to some extent," Ulrich Reuter, president of the DSGV, said on the sidelines of the IMF meeting in Bangkok.

Startups and Investment Trends

Record-Breaking Startup Boom

One of the most positive signals was the boom in startups, he told Reuters. More than 3,000 startups were founded in Germany in the first half of 2026, according to economy ministry data, an all-time record and a 52% increase from the previous six months.

"Investments in existing business models and the creation of new companies are the foundation of the future," he said.

Rising Loan Approvals and Business Optimism

In the first half of 2026, the savings banks approved 5.8% more new loans for companies and self-employed people than a year earlier, which Reuter said showed that businesses were again more willing to invest not only in replacing equipment, but in the future.

Reuter expects demand for loans to continue to rise over the next two years.

Maintaining Reform Momentum

He said the fundamental direction of the reforms must be maintained and should not be slowed down.

Challenges for the Ruling Coalition

The investment push and economic reforms announced by the ruling coalition of conservatives and Social Democrats have failed to win over voters, and the SPD will now re-elect its leadership at a party congress around the turn of the year, potentially delaying planned reforms.

Reducing Bureaucracy for Economic Growth

To unlock the full potential of startups and established businesses, the government's priority should be a bold reduction in unnecessary bureaucracy, Reuter said.

"We need to take our foot off the brake," he said. "Businesses live by being able to do things."

(Reporting by Maria Martinez; Editing by Alison Williams)