Prosperity in danger: Ifo boss calls for immediate reforms for Germany!

Prosperity in danger: Ifo boss calls for immediate reforms for Germany!

The economic situation in Germany is causing worried faces: Ifo boss Clemens Fuest warns of a *dramatic* decline in the economy and an acute loss of prosperity that will affect millions of citizens. In a current assessment, he announced that Germany has been in an economic decline that has been ongoing for years. While government spending continues to increase, private investment suffers significantly, undermining the basis for economic growth. Fuest emphasizes that the average standard of living is stagnating and many citizens are experiencing a decline in their quality of life.

A new study by the Ifo Institute shows that government consumption has increased by over 25 percent since 2015, while corporate investments have fallen back to 2015 levels. “Decreasing private investment endangers our prosperity in the long term,” warns Fuest and calls for urgent action from the federal government.

Urgent need for reform

To solve the pressing problems, Fuest proposes a comprehensive reform concept that goes beyond the coalition agreement and should be completed by spring 2026 at the latest. He calls on the government to develop clear proposals within six months. He also mentions a drastic measure: stopping the mother's pension and preventing planned increases in contributions.

In addition, companies should be freed from bureaucratic hurdles, in particular by eliminating documentation requirements in connection with CO2, supply chains and minimum wages. “These measures could bring up to 146 billion euros in additional prosperity annually,” explains Fuest.

Current framework conditions and economic indicators

The challenges described by Fuest go hand in hand with current economic data: Gross domestic product (GDP) fell by 0.3 percent in the second quarter of 2025, which was more than expected. The reasons for this are brought forward exports to the USA and weaker domestic demand. However, sentiment indicators show signs of an economic recovery in the corporate sector, while private households' spending mood is declining.

In the manufacturing sector there was an increase in production of 1.3 percent in July, particularly in the mechanical engineering, automotive and pharmaceutical sectors. At the same time, retail sales fell by 1.5 percent, although there was a real increase of 1.8 percent compared to the same month last year. Unemployment remains high at over three million, but is showing slight signs of stabilization.

Corporate bankruptcies rose 12.2 percent in the first half of 2025 compared to the previous year, underscoring the fragile economic circumstances. Fuest warns that less private investment will lead to lower growth and therefore lower tax revenue in the medium term, which could have negative consequences for government services.

The situation in Germany is therefore serious and requires decisive action by the federal government to prevent the economy from further decline and to ensure sustainable prosperity.

For more information read the reports from Süddeutsche.de, The press and the statement of the Federal Ministry of Economics.