German Chancellor Friedrich Merz has brought his ministers together for a two-day cabinet retreat at Schloss Neuhardenberg in Brandenburg, with the central objective of accelerating reforms and returning Europe’s largest economy to stronger growth. Merz has described growth and employment as among the country’s most important challenges and wants measures agreed before the summer recess to be implemented much faster. The government’s agenda focuses on taxation, pensions, reducing bureaucracy and accelerating digitalisation. Particular attention is being given to small and medium-sized companies and skilled trades, which Merz says should receive rapid and tangible relief. Ministers are also consulting representatives from major industrial companies, technology businesses, start-ups and skilled trades, while artificial intelligence, defence technology and ways to improve German industrial productivity are among the issues under discussion. Merz argues that Germany still possesses a powerful industrial base, highly skilled workers, strong research capabilities and a substantial network of medium-sized businesses, insisting that the country has no reason to underestimate its ability to compete internationally.
The pressure on the government is nevertheless considerable. Germany has experienced an extended period of weak economic growth, while its traditional industries face high energy costs, stronger international competition, demographic pressures and the need for enormous investment in modernisation. Business and labour organisations are demanding that Berlin move from promises to concrete action, while the government has already unveiled a broader programme for growth and employment involving tax relief and structural reforms. The economic challenge is increasingly becoming a political one as well. Merz’s conservative CDU/CSU alliance and its Social Democratic coalition partner face weak public support, while Alternative for Germany has been gaining ground. The cabinet retreat therefore has two objectives: accelerating economic decisions while demonstrating that the government is capable of acting more decisively. Merz is promising rapid relief for businesses, but the real test will be whether the reforms can increase investment, productivity and employment and return Germany to sustainable growth without creating additional pressure on public finances and the country’s social system.
