Federal Economics Minister Reiche warns against false hopes in the upswing

Federal Economics Minister Reiche warns against false hopes in the upswing

On June 21, 2025, Federal Minister of Economics Katherina Reiche expressed cautious optimism about the economic upswing in Germany. When looking at the economic outlook, however, she warns that pull-forward effects from trade disputes with the USA should not lead to false conclusions. Reiche emphasizes that sustainable reforms are required from the new federal government in order to ensure a stable upswing.

Bundesbank President Joachim Nagel predicts that Germany may narrowly miss its third year of zero growth in 2025. Growth in the first quarter of 2023 was 0.4 percent, which turns out to be twice as strong as originally calculated. Nevertheless, economists expect that billions in spending on infrastructure and defense will stimulate the economy from 2026 at the latest.

Demand for infrastructure investments

During a visit to the USA, Reiche emphasized the importance of a quick agreement in the customs dispute, which is costing the German economy millions of euros per day. Over 6,000 German companies have locations in the USA, creating more than 900,000 jobs. The aim of her visit is to support the EU negotiations in a sensitive phase and to hold talks with US Treasury Secretary Scott Bessent and Trade Secretary Howard Lutnick. Reiche is confident that an agreement could be reached by the July 9 deadline.

Geopolitical developments since 2016, including the Trump administrations, Brexit, the Covid pandemic and the Ukraine conflict, have key implications for the security of supply chains and the need to organize critical infrastructure as a global hub. In this context, the implementation of infrastructure investments in the USA, the Eurozone and China is seen as imperative to ensure sustainable economic recovery. The Biden administration has already passed legislation to encourage infrastructure investment, including the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.

The path to more investment

In the EU, investments in digital infrastructure are planned to total 170 billion euros by 2030, with an additional 5 percent of EU GDP required to increase competitiveness. An AI project with a budget of 200 billion euros is intended to help Europe catch up with the USA. The need to replace old infrastructure in communications, energy, water and transport is identified as a further incentive for investment.

Expectations of positive economic development are further strengthened by ongoing protectionism and geopolitical change. The USA specifically relies on reciprocal trade, while measures such as import tariffs serve as negotiating instruments to locate production facilities in their own country. This development could lead to the USA becoming the preferred location for infrastructure investments.

Overall, Reiche sees an economic upturn as crucial for Germany's role as Europe's largest economic power and emphasizes that the current challenges could also represent opportunities for a fundamental realignment of the economy. Investments in infrastructure and defense appear indispensable to ensure long-term competitiveness and to respond appropriately to the challenges of the future.