Germany’s Merz Sets Sights on 1% Economic Growth with Pro-Business Reforms
Merz’s Economic Revival Plan and Government Unity
BERLIN, Aug 26 (Reuters) - Chancellor Friedrich Merz on Wednesday vowed to revive the German economy and deliver growth of at least 1% next year thanks to business-friendly reforms and a planned increase in government spending.
Government Cohesion Amid Political Challenges
Seeking to project unity, Merz and Finance Minister Lars Klingbeil, whose centre-left SPD is the junior partner in the coalition, also dismissed suggestions that government infighting was hampering efforts to reverse a slide in opinion polls.
Merz’s Optimism for GDP Growth
"I feel encouraged in my assessment that we have the opportunity to achieve a one before the comma (in GDP growth) for the next year," said Merz, leader of the conservative CDU.
Cabinet Meeting at Neuhardenberg Estate
He was speaking at a news conference after an off-site cabinet meeting at the Neuhardenberg estate, about 70 km (44 miles) east of Berlin, following the summer break.
Economic Forecasts and External Pressures
Revised Growth Forecasts
The economy ministry in April cut its 2026 growth forecast to 0.5% from 1%, citing higher energy costs linked to the war in Iran.
Coalition Strains and Political Risks
Pressure on Merz's coalition has been mounting after a cabinet reshuffle angered members of his own party and raised questions about the government's effectiveness as it seeks to fend off a far-right challenge in state elections next month.
Positive Economic Indicators
Improving Data and Business Sentiment
Merz and Klingbeil said recent economic data and business surveys pointed to an improving outlook.
Growth and Business Morale
After years of weak growth, Europe's largest economy expanded more strongly in the second quarter than initially estimated, while business morale rose to its highest level in a year in August.
Addressing International Trade Issues
EU-China Trade Imbalances
Merz also said he had asked federal ministers to develop proposals to address trade imbalances between the European Union and China.
(Reporting by Andreas Rinke. Writing by Ludwig Burger and Kirsti Knolle. Editing by Mark Potter)
