Influential economic advisers in Germany have issued a stark warning about the government's massive spending strategy, stating it is being used for the wrong purposes and will fail to provide the necessary jolt to the nation's struggling economy.
The experts, who form an independent council advising the government, have consequently reduced their growth forecast for 2026. They now predict the German GDP will expand by a mere 0.9 percent next year, a downgrade from their previous estimate of one percent.
A Fund with Unfulfilled Potential
The criticism centres on a 500-billion-euro fund established by Chancellor Friedrich Merz's coalition. This substantial financial pool was designed to revitalize Europe's largest economy after it endured two consecutive years of recession.
The fund's official purpose, spread over 12 years, is to modernize Germany's aging infrastructure—including crumbling bridges and outdated trains—and to finance projects aimed at slashing greenhouse gas emissions.
However, the council of economic experts revealed on Wednesday that the money has largely been used for budget reallocations to cover existing spending and finance day-to-day operational costs, rather than for new, additional investments.
Missed Opportunity for Growth
This approach, the advisers warn, means the economic boost from the half-trillion-euro fund will be disappointingly minor. They emphasized that the effect on GDP would be significantly greater if the funds were entirely dedicated to fresh expenditure and investment projects.
Council member Martin Werding explained at a press conference that if the fund was deployed in a more targeted manner, it could potentially increase Germany's GDP growth by up to five percent by 2030. Under the current plans, however, the projected boost is less than two percent.
Adjustments need to be made, Werding stated, calling for greater transparency and more effective monitoring of how the public money is being spent.
A Glimmer of Hope Amidst Struggle
The experts also provided their outlook for the nearer future, predicting a meagre 0.2 percent GDP growth for 2025. While this figure is low, it aligns with the government's forecast and would technically mean the German economy has avoided a third straight year of contraction.
Germany's traditional economic strength has been challenged by a severe industrial slump, weak demand for its exports, and additional pressures from international tariffs. The government is also planning substantial extra outlays to modernize its armed forces, a project being financed outside of the country's strict debt rules.
