Friedrich Merz’s 500-billion-euro recovery plan is stalling as reforms move too slowly

Friedrich Merz promised action when he became chancellor of Germany in ￰0￱ launched a 500-billion-euro spending package, pushed for economic reforms, and vowed to reignite growth in Europe’s largest ￰1￱ four months later, the numbers are turning on him, voters are angry, and his own coalition is slowing him ￰2￱ latest sign of trouble came in August when unemployment passed three million for the first time in a ￰3￱ to Reuters’ polling, what was supposed to be a fast-moving recovery plan has become a waiting ￰4￱ of the money is stuck in pipelines and the reforms are moving slower than ￰5￱ frustration is growing fast, and 61% of Germans now believe the economy will get worse, up from 50% in ￰6￱ shift in mood is boosting support for the far-right AfD party, which is already ahead in several national ￰7￱ stalls reforms as unemployment hits decade high Inside Merz’s coalition, things aren’t smooth.

He’s a conservative, but he’s stuck working with the centre-left SPD, who are dragging their ￰8￱ SPD’s labor minister, Baerbel Bas, started a commission to look into jobless benefits and work ￰9￱ instead of speeding things up, her plan delays reform until year-end, followed by long debates in ￰10￱ say it’s just too ￰11￱ had also pledged to scrap the supply chain law, which companies say is expensive and ￰12￱ instead of removing it, the cabinet watered it down last ￰13￱ energy, grid fees will be lowered, but not by ￰14￱ electricity tax will be cut, but only for selected sectors, not for ￰15￱ half-measures aren’t what people were ￰16￱ government had also announced tax cuts for businesses and households, but those haven’t landed ￰17￱ are getting tired of ￰18￱ are ￰19￱ Merz’s credibility is wearing ￰20￱ signals worsen as investor mood turns sour Some economists were hopeful when business sentiment ticked up in August, reaching a 15-month ￰21￱ that number was mostly built on expectations, not current ￰22￱ actual reading on how businesses feel right now got ￰23￱ the rest of the data is just as ￰24￱ economy contracted in the second quarter, dimming hopes of any serious ￰25￱ June, industrial output fell to the lowest level since ￰26￱ from abroad dropped, and competition from China is ￰27￱ EY study shows 245,500 factory jobs have been lost in Germany since 2019.

Meanwhile, new U. S. tariffs, introduced under President Donald Trump, are hitting German exporters just as they try to bounce ￰28￱ confidence took another hit in August after the ￰29￱ deal fell short of ￰30￱ has managed to pass budgets for this year and next, which shows the coalition can work when ￰31￱ that hasn’t helped ease the fighting over welfare, taxes, and even whether to bring back mandatory military ￰32￱ are now comparing Merz to former Chancellor Olaf Scholz, who also failed to get big reforms ￰33￱ are still some positive ￰34￱ backed the investment booster approved in ￰35￱ package includes better depreciation rules for companies and a plan to cut corporate ￰36￱ government also boosted defense ￰37￱ a survey by Ifo Institute showed only 25% of 170 economists gave the government’s actions a positive review. 42% gave a negative rating, pointing to rising pension costs and the lack of any real long-term ￰38￱ is another ￰39￱ August, the eurozone inflation rate crept up to 2.1%, just above the expected 2%.

Andrew Kenningham, chief Europe economist at Capital Economics, said the rise won’t push the European Central Bank (ECB) to hike interest rates anytime soon. “ECB policymakers look certain to leave interest rates unchanged at next week’s meeting and probably for several months beyond that,” he said Tuesday. “This should provide some reassurance for policymakers that domestic prices pressures are continuing to subside.” Irene Lauro, eurozone economist at Schroders, agreed that the ECB would move cautiously. “With trade uncertainty easing, the Eurozone recovery is set to gain momentum as firms ramp up borrowing and ￰40￱ this environment, the ECB is likely to hold rates cautiously steady in September,” she ￰41￱ also said that the resilience in core inflation supports their view that policy normalization has ended, and the ECB will closely track growth before deciding what to do ￰42￱ your project in front of crypto’s top minds?

Feature it in our next industry report, where data meets impact.