Business leader Gößl from the IHK implies no noticeable shift in economic trends
In August 2025, the Union-SPD coalition in Germany, led by Chancellor Friedrich Merz, unveiled a comprehensive economic reform agenda aimed at modernising the economy, infrastructure, and stimulating investment. The plan, as outlined by industry stakeholders like Manfred Gößl, CEO of the IHK Munich and Upper Bavaria, includes significant measures such as:
- A special 500 billion euro fund dedicated to infrastructure and climate investments over 12 years, allowing for large-scale public investment despite the traditional debt brake.
- Immediate tax incentives, allowing companies to deduct 30% of equipment investments per year, with the aim of boosting business investment and safeguarding jobs.
- Record federal budgets for 2025 and 2026 earmarked for modernisation of transport infrastructure, education, healthcare, new housing, digitalization, climate action, and security.
- An effort to reduce bureaucracy and administrative hurdles for businesses and citizens through a new State Secretaries Committee on State Modernisation and Bureaucracy Reduction.
- Increased defence spending to 5% of GDP to build the Bundeswehr into Europe’s strongest army, with significant investments in technology and international partnerships within NATO.
These reforms are intended to address Germany’s economic stagnation, rising rents, and structural challenges, while boosting growth and competitiveness. However, the coalition's plans have also generated controversy, particularly regarding social welfare cuts like reduced housing support in Bürgergeld welfare payments, which industry leaders like Gößl might view with concern given the social and economic impacts.
Gößl has expressed concerns about the decision to only reduce the electricity tax for around 20 percent of companies, instead of all industries as announced. He also criticises the use of special debts for non-reform-related purposes and warns that the majority of companies are still holding back on investments, as there are no signs of a genuine economic turnaround.
However, Gößl acknowledges that the coalition agreement contains some correct individual measures and that there are projects in the agreement that provide the right impetus for improving investment conditions. For instance, he highlights the temporary investment allowance of up to 30 percent for equipment investments until the end of 2027 as an example of such a project.
The planned reduction of bureaucracy by 25 percent is expected to be achieved by 2029. Gößl reiterates his stance: "No debts without reforms." He emphasises the need for urgently needed reforms in social security to prevent significantly increasing labor costs in the coming years.
Despite his concerns, Gößl also believes the swift formation of the government was a good start for the economy. However, he expresses disillusionment with the cabinet decision on the bureaucratic tariff loyalty law for federal tenders and the targeted weekly maximum working time for all businesses as points in the coalition agreement.
The federal debt is expected to increase by almost 50 percent to 2.625 billion euros by 2029. Gößl calls for the federal government to follow through on its plans for economic growth and demands that debt-financed investments are quickly and visibly implemented on the street through massive acceleration of planning and approval processes.
In conclusion, Manfred Gößl's interim report on the Union-SPD coalition's economic reform agenda presents a mixed picture. While he acknowledges the potential benefits of the proposed measures, he also expresses concerns about their implementation and impact on businesses and the economy as a whole.
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