Germany’s "Cautious Optimism": Merz’s Stimulus Faces Structural Hurdles and Record Bankruptcies

Despite Chancellor Friedrich Merz’s massive spending promises, Germany’s economic recovery remains fragile. Forecasts for 2026 hover around a modest 1% growth, hampered by a slow federal decision-making process. Of the historic €500 billion infrastructure fund, only €24 billion was spent by last year’s end, highlighting a significant "bottleneck" in the German system.

While the industrial sector shows signs of life with rising orders, production capacity remains underutilized at 78%, and corporate insolvencies have hit an 11-year high. Merz’s push for deregulation faces resistance from his SPD coalition partners, who fear cuts to labor rights. With major reforms on pensions and taxes delayed until late 2026, economists warn that without a "total redesign" of its structural model, Germany's role as the Eurozone's growth engine remains in jeopardy.