Germany’s economic recovery remains uncertain following a sharper-than-initially-estimated contraction in the second quarter, according to prominent economist Veronika Grimm. Revised figures released by the Federal Statistical Office indicate a 0.3 percent decline in Gross Domestic Product between January and March, a downward revision from the previously reported 0.1 percent contraction.
Grimm expressed skepticism about a swift rebound, stating that current conditions suggest stagnation for the German economy in 2025. She noted a lack of growth prospects for the current quarter and highlighted a confluence of factors hindering economic momentum.
In comments to the Funke Media Group, Grimm urged policymakers to prioritize structural reforms. She criticized the current political climate, arguing that a reluctance to implement key changes across the political spectrum is stifling growth and diverting additional borrowing towards consumption-based government spending, such as maintaining current levels of statutory pension payments. She emphasized the need for reforms designed to moderate the growth of social expenditures in the medium term.
Grimm pointed to overregulation, high corporate tax burdens and escalating social spending as key impediments. She also cited subdued labor market conditions and a weakening of wage growth as factors dampening private consumption, with limited dynamism also apparent in the service sector.
The economist questioned the likelihood of a sustained recovery in 2026 without a more decisive commitment to economic policy. She suggested that current government initiatives, funded by increased borrowing, are only providing a temporary boost, rather than addressing underlying structural issues.
