Social spending is “not financially sustainable,” the German chancellor has mentioned
Germany’s welfare state is not financially sustainable, Chancellor Friedrich Merz has warned, citing mounting monetary constraints.
Merz made the remarks on Saturday throughout a speech to fellow Christian Democratic Union (CDU) members in Osnabrueck, a metropolis in Decrease Saxony that’s house to carmaker Volkswagen.
“The welfare state as we’ve got it right now can not be financed with what we will economically afford,” Merz mentioned, calling for a elementary reassessment of the advantages system. He famous that welfare spending hit a file €47 billion ($55 billion) final yr and continues to rise this yr.
Social welfare outlays have surged and are anticipated to climb additional this yr as Germany’s inhabitants ages and unemployment rises. The nation offers a variety of assist measures, together with housing and little one advantages, unemployment funds, household allowances, and subsidies for the care of the sick and aged. However with the financial system stagnating in 2025 underneath each structural and cyclical pressures, the burden on the system is rising. Whereas most profit recipients are German residents, a major share are overseas nationals.
In the identical speech, Merz mentioned Germany was experiencing a “structural disaster” quite than a brief weak point, conceding that placing Europe’s largest financial system again on monitor has confirmed harder than he anticipated. As soon as the EU’s financial powerhouse, Germany’s financial system has slowed sharply since 2017, with GDP rising simply 1.6% in comparison with 9.5% for the remainder of the Eurozone.
Merz’s warning got here as official information confirmed Germany’s financial system contracted by 0.2% in 2024 after a 0.3% decline in 2023, marking the primary time because the early 2000s that Europe’s largest financial system has shrunk for 2 consecutive years. Industrial manufacturing fell throughout Olaf Scholz’s tenure and has continued to weaken underneath his successor, with GDP dropping 0.3% within the second quarter of 2025, in response to the most recent information from Germany’s statistics workplace. The downturn has been pushed by excessive power costs, elevated rates of interest and a scarcity of expert labor.
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