The German banking sector’s leadership is issuing a stark warning to the current coalition government, urging a significant acceleration and expansion of economic reforms to secure Germany’s long-term competitiveness. Christian Sewing, President of the Bundesverband deutscher Banken and CEO of Deutsche Bank, voiced his concerns in a recent interview with Funke-Mediengruppe, asserting that the government’s current trajectory is insufficient to achieve its stated goal of consistently exceeding one percent economic growth.
Sewing acknowledged initial efforts by the “black-red” (conservative-social democratic) government but stressed the criticality of pursuing a more aggressive reform agenda. The government committed upon taking office to boost long-term growth and Sewing argues that further structural changes are now “indispensable” to fulfilling that pledge. His commentary suggests a growing impatience amongst key financial players regarding the pace of change.
Perhaps more controversially, Sewing anticipates that these necessary reforms will necessitate difficult compromises and increased working hours. Drawing a parallel between a national economy and a corporation, he indicated that “transformation does not succeed without unpleasant decisions”. This implicit suggestion of potential austerity measures and a shift in work-life balance is likely to draw scrutiny and resistance from labor unions and segments of the population.
Looking ahead, Sewing predicts a slow economic recovery in 2025, with an anticipated growth rate of up to one and a half percent in 2026. He forecasts a slight easing of the labor market, projecting unemployment to fall below three million – a hundred thousand less than expected in 2025. This cautiously optimistic outlook, however, hinges on the government’s willingness to implement substantial and potentially unpopular structural reforms. The pressure now mounts on Chancellor Scholz and his cabinet to demonstrate a commitment to these changes and navigate the political complexities that inevitably accompany them, lest Germany’s economic competitiveness continues to be imperiled.
