Economists have expressed caution regarding the federal government’s proposed reform package, warning that it does not sufficiently address long-term challenges. Moritz Schularick, head of the Kiel Institute for the World Economy, told “Welt am Sonntag” that structural reforms alone will not eliminate Germany’s technological deficit, emphasizing that the nation must re-engage in crucial technological innovations to ensure future economic growth. Schularick likened the stabilization of payroll costs to repairing bridges-a necessary task, but not a guarantee of tomorrow’s growth.
Jürgen Matthes of the German Institute for Economic Research (IW) warned against overlooking deep-seated issues, specifically highlighting the role of China’s aggressive export policies in Germany’s de-industrialization. Matthes argued that it is economically implausible that China offers its products at prices ranging from 50 to 60 percent of local prices. While citing previous improvements by countries like Japan and Korea, he concluded that China’s simultaneous improvements in efficiency and reduction in cost raises serious doubts about the current situation.
The IW recently published an estimate suggesting that 400,000 out of the 520,000 industrial jobs lost in Germany since 2019 were a direct result of China’s aggressive market practices. Matthes stressed the need to quantify the unfair price advantages derived from subsidies and artificially weak currency, calling for compensatory tariffs to equalize the playing field. According to the IW economist, the EU should impose such high import tariffs-not as protectionism, but as sound competition policy that neutralizes only the unfair elements of the trade.
The government, having agreed overnight between the Union and the SPD, proposes a reform package that includes planned changes to pensions and healthcare. Additionally, the package is set to introduce €10 billion in tax reductions, streamline bureaucracy, and reform the labor market.
