When Friedrich Merz became chancellor in May 2025, business leaders greeted him with high hopes. A veteran of the corporate world who once chaired BlackRock’s supervisory board in Germany and authored a book advocating greater capitalism, Merz campaigned on delivering an economic turning point and placing competitiveness at the center of policymaking.
Early applause at the CDU Economic Day reflected that optimism. The event, organized by the CDU’s Economic Council — a lobbying association of roughly 13,000 business figures that advises the party — celebrated Merz’s pledge to prioritise efficiency and growth. Merz had himself served as a vice president of the Economic Council from 2019 to 2021.
A year into his government, however, many in industry say those expectations have not been met. The Federation of German Industries warns that the structural reforms urgently required to boost growth and competitiveness have largely not materialised, leaving Germany’s role as an industrial centre at risk. The Association of German Chambers of Industry and Commerce, representing small and medium-sized firms, has criticised the country as having cumbersome and costly bureaucracy, noting that investment and innovation conditions are more attractive elsewhere.
Representatives of the skilled trades express similar dismay. Jörg Dittrich, president of the German Confederation of Skilled Crafts, has described the mood as one of reform frustration rather than recovery, saying operational pressures on businesses have persisted or even increased. Across the sector, the initial hope for an upturn has given way to palpable disillusionment.
Economic indicators underline the unease. Insolvency filings are at levels not seen since the aftermath of the financial crisis a decade ago. The economy is stagnating, growth is elusive, and confidence in the German economy has fallen to depths comparable to the peak of the COVID-19 crisis in May 2020.
Surveys by the ifo Institute show business sentiment weakening across industries, with expectations turning pessimistic. A key factor is geopolitical turmoil: the war in Iran and the broader Middle East crisis have pushed oil prices up and disrupted fuel supplies, while the blockade of the Strait of Hormuz has created bottlenecks in multiple sectors. Rising inflation and shortages of critical inputs, including jet fuel, have further dampened hopes of a near-term recovery.
Merz has acknowledged the difficult mood. Speaking at this year’s Economic Day, he accepted that public sentiment is grim and said he understands impatience in the business community. He also emphasised the limits of quick fixes, noting that long-standing structural issues cannot be resolved overnight and pointing to the challenges of governing within a coalition.
The chancellor’s need to compromise with the center-left Social Democratic Party has constrained the pace and direction of reforms. Policy differences over labor, social policy and redistribution mean the coalition often struggles to move decisively on the pro-business agenda Merz campaigned on. He has ruled out snap elections and says he is determined to make the existing coalition work, but confidence in a fast turnaround has eroded.
Public polling reflects the waning trust; voter belief in a swift economic recovery has fallen sharply, and the business community’s message is similarly skeptical. Industry groups note that when investment is made, it is increasingly directed abroad rather than at home.
One year after Merz’s inauguration, the combination of unmet reform expectations, geopolitical shocks and coalition constraints has left many companies frustrated and uncertain about Germany’s economic direction. Policymakers face the task of restoring confidence while grappling with problems that advisers say will require sustained, concrete reforms over the long term.