Economy under pressure: Government urgently needs to find solutions!

Economy under pressure: Government urgently needs to find solutions!

On July 4, 2025, the discussion about Germany's economic future will become increasingly urgent. Experts and business representatives are increasingly expressing concerns about the federal government's policies, particularly when it comes to promoting economic growth and investment. A current analysis makes it clear that urgent relief is required for the entire economy, instead of additional social promises that could be financed on credit. So reported the-german-economy that doubts about the ability of the governing coalition to ensure the competitiveness of the German economy are growing.

A central point of criticism is the impact of rising social security contributions on employees and employers. While the welfare state is continually being expanded, the working people who finance it with their contributions often remain neglected. A higher burden of social security contributions is accepted, which leads many family entrepreneurs to demand decisive measures to relieve the economic burden. The need for a broad reduction in electricity taxes and energy costs is emphasized in order to ensure competitiveness.

Criticism of government policy

The SPD Federal Finance Minister is exposed to harsh criticism. Critics criticize the use of budgetary flexibility for social democratic projects, while tax incentives for investment are seen as too timid. There is also a clear contradiction between the announced tax cuts and the measures actually implemented. In particular, the Finance Ministry's prevention of the reduction of the electricity tax to the EU minimum level is causing dissatisfaction. Experts warn of the economic and social dangers that could result from current policies.

The demand for credible and sustainable action by the government is becoming louder. There is an urgent need to set clear priorities and establish an honest regulatory policy for Germany as a business location. The tax wedge, i.e. the difference between gross and net wages, plays a crucial role in this context. Studies show a connection between a high tax wedge and a rising unemployment rate, which puts additional strain on the financing of social policy. According to the OECD, a higher tax wedge correlates with greater difficulties in financing social policy, which endangers international competitiveness.

Long-term consequences

In addition to the current discussions, the overload thesis is highlighted with regard to the long-term consequences of social policy. Historically, this thesis was already present in the Wilhelmine Empire, and it states that too extensive a social policy can reduce global economic competitiveness. The Nairu, the level of unemployment at which the inflation rate does not accelerate further, is also seen as a critical element in the current debate. Exceeding the Nairu leads to faster increases in inflation and increasing costs of fighting inflation.

Overall, it is clear that a fundamental rethink is required in order to meet the challenges of the present and future. The current economic policy landscape urgently needs reforms that go beyond short-term solutions and can offer a sustainable perspective for Germany. The challenges are complex, but crucial for positive economic development.