logo
Can Germany reinvent its economy?

Can Germany reinvent its economy?

Economist12-06-2025
Germany was once the economic powerhouse of Europe. But since 2019 its economy has barely grown. The country is now under new leadership—but is Friedrich Merz the man to pull Germany out of its perma-slump?
Hosts: Ethan Wu and Mike Bird. Guests: The Economist 's Christian Odendahl; Monika Schnitzer, chair of the German Council of Economic Experts; and Philippa Sigl-Glöckner, founder of Dezernat Zukunft, a macro-finance think tank.
Listen to what matters most, from global politics and business to science and technology— subscribe to Economist Podcasts+.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

How an Israeli arms embargo divided Merz's party
How an Israeli arms embargo divided Merz's party

Telegraph

time18 hours ago

  • Telegraph

How an Israeli arms embargo divided Merz's party

Germany's decision to partially block weapons exports to Israel has opened a rift in Friedrich Merz's fledgling coalition. For decades, Germany has been perhaps Europe's most ardent supporter of Israel, a policy rooted in its guilt over the Holocaust. Elsewhere in Europe, leaders are under pressure at home to adopt a tougher stance on Israel after Benjamin Netanyahu announced plans to fully occupy the Gaza Strip. The opposite is the case in Germany. The chancellor's arms embargo has sparked a rebellion within his coalition, with some warning that the move will play into the hands of Hamas. Hastily announced last week, Mr Merz's embargo will block German exports of weapons that would be used inside Gaza, in a sign of Berlin's disapproval of the new Israeli plan to occupy the devastated enclave. 'The even tougher military action by the Israeli army in the Gaza Strip... makes it increasingly difficult for the German government to see how these goals will be achieved,' Mr Merz said, in a highly unusual public rebuke of Israel that blindsided many of his MPs, according to sources. In practice, the ban means that Germany can continue to provide Israel with around 30 per cent of its weapons – the other 70 per cent coming from the United States mainly – but they can only be used inside Israeli territory or in the occupied West Bank. Experts told The Telegraph this is an attempt to strike a delicate balance between support for Israeli security, a key pillar of the post-war German state's raison d'être, and growing public concern about the dire humanitarian situation in Gaza. The announcement, however, has caused an outcry in Mr Merz's Right-wing Christian Democrats [CDU] party. And it's not because they feel the move does not go far enough, as might be the case in Sir Keir Starmer's Labour party. On the contrary, CDU members have been left 'stunned, angry and horrified' by the embargo, which they consider a betrayal of German support for Israel and, some say, a gift to Hamas. Mr Merz was this week forced to convene a 'crisis meeting' with top CDU allies, which lasted long into the night, to justify the embargo to them, the German tabloid Bild reported. There was much to discuss. Roderich Kiesewetter, one of the most hawkish MPs in the CDU, described the embargo as 'a serious political and strategic error' which risked unravelling Germany's alliance with the Jewish state. Boris Rhein, the CDU president of the west German state of Hesse, also publicly opposed the ban. 'Hamas can only be defeated in battle, not at the negotiating table. We must continue to equip Israel to fight this battle, to defeat Hamas and to end terrorism,' he said. Support for Israel linked to 'reason of state' Even the CDU's youth wing has joined the fray, with Johannes Winkel, one of its leading figures, fuming that Mr Merz had 'broken with the basic values of CDU politics'. The Christian Social Union in Bavaria [CSU], the sister party of the CDU in Mr Merz's coalition, also distanced itself from the embargo, describing it as 'questionable.' As the CDU feverishly debates Mr Merz's decision, one concept keeps cropping up: the concept of 'Staatsräson'. Germany's unwavering support of Israel, both militarily and diplomatically, is considered to be an integral part of the state's reason for existence. That policy is largely driven by Germany's guilt over the Holocaust, which is quite literally etched into the country's foundations: the streets of Berlin are dotted with 'stumble stones,' the small brass memorial blocks in memory of murdered Jewish families At the same time, some in Germany are beginning to question if their ethos of 'nie wieder [never again]' – the notion that the crimes of the Holocaust must never be repeated – requires them to oppose the death and destruction in the Gaza Strip. This is based on the argument that 'nie wieder' should be applied not only to the Nazi genocide, but to any genocide worldwide. It is a challenging area for Germans to navigate, and not just ethically; comparing the Holocaust to other historical events in a way that plays down the former's magnitude can be a criminal offence. Mr Netanyahu's new goal of fully occupying the Gaza Strip, which human rights groups fear will lead to yet more civilian deaths, therefore presented Germany's chancellor with a dilemma. 'Domestic pressure has been mounting on Merz for some time due to the deteriorating situation in Gaza,' Dr Trevelyan Wing, a fellow at Cambridge University's Centre for Geopolitics, told The Telegraph. 'At the same time, Germany considers the defence of Israel to be its Staatsräson. So it's a balancing act for Merz,' he added. Dr Wing noted that one recent survey found 66 per cent of Germans wanted the Chancellor to put more pressure on Israel to wrap up the war, which has so far killed an estimated 60,000 Palestinians. The war itself was launched in retaliation for the Oct 7 Hamas massacre which killed more than a thousand Israelis. A recent study by the Lancet medical journal estimated that around 60 per cent of the victims in the first nine months of the Gaza war were children, women and over-65s. Experts sceptical over impact Even so, Dr Wing added, Mr Merz's arms embargo has taken many conservatives by surprise in Germany. 'You now have some saying it's a break with that reason of state,' he said. There are also practical matters to consider: Germany is said to rely heavily on the Israeli intelligence services for domestic security, to compensate for decades of underinvestment in the German equivalents of MI5 and MI6. And Germany recently signed a €4bn (£3.4bn) deal to buy Israel's highly advanced Arrow 3 missile defence system. Experts are generally sceptical about the embargo having a major impact on Israel's arms procurement, due to the United States already providing the vast majority of its weapons. But the more tangible consequences may be felt in Berlin, where Mr Merz seems to have many enemies in his own party, with some of them perhaps looking for excuses to cause political chaos. Back in May, when Mr Merz's candidacy for chancellor was put before the German parliament – in what was supposed to be a mere formality – he shockingly lost the vote. It was the first time in Germany's postwar history that a chancellor lost a confirmation vote, and was widely viewed as a warning shot by CDU MPs who disliked their new leader. While he is a veteran of the CDU, Mr Merz is a somewhat divisive figure. His Right-wing populist streak on migration has alienated the liberal wing of the party, which much preferred the understated, subtle leadership style of his predecessor Angela Merkel. Significant elements of the CDU also remain deeply sceptical of Mr Merz's security policy, which envisages Germany becoming a major new military power to rival Britain and France by taking on huge amounts of public debt to rebuild the army. 'Israel is a very sensitive area for Merz to navigate as he tries to staunch the criticism,' said Dr Wing. 'And there are a lot of people in his party who don't really like him.'

European leaders to meet Trump in White House with Zelensky
European leaders to meet Trump in White House with Zelensky

Telegraph

time20 hours ago

  • Telegraph

European leaders to meet Trump in White House with Zelensky

German Chancellor Friedrich Merz will travel to Washington on Monday for political talks with Ukrainian President Volodymyr Zelensky and other European heads of state and government. The trip will serve as an exchange of information with US President Donald Trump following his meeting with Russian President Vladimir Putin in Alaska. Chancellor Merz will discuss the status of peace efforts with the heads of state and government and underscore Germany's interest in a swift peace agreement in Ukraine, the government said in a statement. The talks will address, among other things, security guarantees, territorial issues, and continued support for Ukraine in its defense against Russian aggression. This includes maintaining the pressure of sanctions. This comes around 6 weeks after Merz's first official visit to the White House, when he told Trump 'I'm here, Mr President, to talk to you later on how we could contribute to that goal [to end the war]. We are all looking for measures and for instruments to bring this terrible war to an end.'

US ready to be part of security guarantees for Ukraine, Germany's Merz says
US ready to be part of security guarantees for Ukraine, Germany's Merz says

Reuters

time2 days ago

  • Reuters

US ready to be part of security guarantees for Ukraine, Germany's Merz says

BERLIN, Aug 16 (Reuters) - The U.S. is ready to be part of security guarantees for Ukraine, German Chancellor Friedrich Merz said on Saturday, a day after a summit in Alaska between U.S. President Donald Trump and Russian President Vladimir Putin. "And the good news is that America is ready to participate in such security guarantees and is not leaving it to the Europeans alone," Merz told German public broadcaster ZDF after being briefed together with other European leaders by Trump on his talks with Putin. Ukrainian President Volodymyr Zelenskiy is due to meet Trump on Monday in Washington, after which a three-way meeting between Putin, Trump and Zelenskiy should be held as soon as possible with the aim of reaching a peace agreement, Merz said. "If that works out, it's worth more than a ceasefire," he said. Merz said Trump had indicated that Russia seemed ready to negotiate based on the front lines of the conflict, rather than the borders of Ukrainian regions it claims. "This is a huge difference because Russia is claiming territories that it hasn't occupied yet," he said. Speaking separately to German broadcaster n-tv, Merz said he did not think Zelenskiy would face as difficult a time in Washington with Trump as he had in February, when the two leaders clashed in an extraordinary exchange before the world's media at the White House. Merz said Zelenskiy would on Sunday talk to European leaders who would help him prepare for the meeting. "We'll give a few good pieces of advice," he said. Merz told ZDF that while it was important that Europe stand united, the U.S. would for the time being continue to play the decisive role in the war, which has raged since 2022 when Russia invaded Ukraine. "The American president has the power both militarily and via appropriate sanctions and tariffs to ensure that Russia moves more than it currently does," he said.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store