German govt risks wasting spending boost benefits, say advisers
By Frank Prenesti
Date: Wednesday 12 Nov 2025
(Sharecast News) - Germany's Council of Economic Experts on Wednesday lowered its growth forecast for the economy next year and warned that the government was in danger of wasting the benefits of its massive infrastructure investment programme.
The group now expects growth in 2026 of 0.9% compared to a May forecast of 1% and government estimates of 1.3% and added that the spending boost by Chancellor Friedrich Merz's government would only have a small impact on growth. For 2025, the experts did raise their growth forecast slightly to 0.2% from 0.0%.
"In light of current challenges, Germany must develop new perspectives for growth and security policy. The opportunities arising from the special fund for infrastructure and climate neutrality must not be squandered," said council chair Monika Schnitzer.
The five-member panel of academic economists, said the plan - which also includes massive defence spending - needed "significant improvement" and criticised the government for using "substantial funds" to replace day-to-day public spending and "dubious measures" such as bigger tax incentives for commuters.
"The tentative recovery that seemed to be emerging in manufacturing in the summer of 2025 has fizzled out," Schnitzer said.
Germany's parliament in March approved an historic package of spending and debt limit reforms, clearing the way for a massive boost in defence and infrastructure spending for Europe's biggest economy.
Merz had argued ahead of the vote that the changes were needed to boost the country's troubled economy and lift defence spending in the face of a growing threat from Russia. He faced criticism that he wasn't linking what could be up to €1trln in extra stimulus to demands for reform.
Under the proposal, defence civil defence, intelligence services and cybersecurity spending above 1% of GDP would be exempt from German debt brake rules - which limit new borrowing to 0.35% - effectively writing a blank cheque on weapons purchases. The restrictions were enshrined in law after the global banking industry caused the financial crash of 2008.
There was also a pledge to establish a €500bn fund for infrastructure such as rail and roads, which would run over 10 years, and Germany's 16 states will be allowed to collectively borrow up 0.35% of nominal GDP.
Reporting by Frank Prenesti for Sharecast.com
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