The President of the Ifo Institute, Clemens Fuest, has launched a blistering critique of Chancellor Friedrich Merz’s government, accusing it of timidity and a reluctance to confront pressing economic challenges. In an interview with “Süddeutsche Zeitung”, Fuest expressed deep concern that the administration is consistently deferring difficult decisions, a strategy he warned is unsustainable and risks plunging Germany into a prolonged period of stagnation.
“Difficult issues are repeatedly pushed aside” Fuest stated, arguing that the Chancellor has so far avoided directly addressing the core challenges facing the German economy. He criticized the current approach of attempting to resolve problems through financial injections, dismissing it as a “lack of courage” and a simplistic solution to complex structural issues.
Fuest specifically highlighted the government’s handling of pension policy and the potential for future tax and levy increases as examples of how political decisions are exacerbating problems for the private sector. He cautioned that Germany risks entering an era of permanent economic stagnation, emphasizing that “there is no guarantee of a return to growth.
Beyond economic concerns, Fuest’s commentary also addressed the escalating geopolitical risks. He forcefully advocated for a significant shift in Germany’s approach, arguing the nation requires a rapid transformation akin to a “war economy” in light of the increasingly imminent threat of conflict. “We need to produce the things that were previously undesirable – quickly” he urged, acknowledging Germany’s historical aversion to such measures.
Acknowledging Germany’s deeply ingrained pacifist traditions, Fuest underscored that such a stance is only viable when security is assured. He argued that the necessary investments in defense will inevitably shrink overall resources, a reality he believes the populace must accept. He sharply rebuked the political promises made during the last election cycle – including pledges of support for the hospitality industry, maternal pensions and guaranteed pensions – as “a denial of reality”. The current expectation that the state will shield citizens from all adversity, he concluded, is no longer tenable. The economist’s remarks underscore a mounting tension between a desire for social welfare and the stark realities of a rapidly changing world demanding fundamental economic and strategic adjustments.