100 Days of Germany’s Black/Red government: Economists Give Initial Interim Assessment

Rather Negative Economic Policy Review After the First 100 Days

30% of the participating economists rate the economic policy measures of the new German government in the first 100 days as “rather negative”, with a further 12% even rating them as “very negative”. Around a third (32%) are neutral about the economic policy measures. A rather positive balance was drawn by 25% of the participants. In particular, the stronger focus on public investment and investment in defense are cited as reasons for a positive assessment. By contrast, the participants are critical, particularly of the lack of reform efforts in the area of social security systems. In addition, they see a lack so far of clear stimulus for further structural reforms, the reduction of bureaucracy, and progress on climate protection. 

Positive Stimulus Through Investments, but Criticism of “Mothers’ Pension”

In an open question, the participating economists were able to name economic policy decisions of the German government that they consider to be particularly successful or particularly critical. Strengthening public investment, which was made possible by setting up a special fund, was most frequently highlighted as positive. However, 29 participants also stated that they were unable to name any successful decisions. Various more minor aspects are grouped under the “Other” category, including Germany presenting itself differently on the world and European stage, the abolition of the German Supply Chain Act, and the abolition of the gas price levy. The so-called investment booster through improved depreciation options for companies, additional spending on defense, and initial steps in tax policy through the announced reduction in corporation tax were also rated positively.

Among the critically assessed decisions, the expansion of the “mothers’ pension” was mentioned most frequently, followed by the extensive reform of the debt brake, including the creation of the special fund for infrastructure. In the “Pension policy” category, the adopted pension package was viewed critically, and the overall lack of willingness to reform was criticized. In the “Energy policy” category, the dominant criticism was that the electricity tax cut only benefits the manufacturing industry. The government was also accused of focusing too heavily on fossil fuels such as gas. Various points such as the disagreements in the election of the constitutional judge or the planned budget were summarized under “Other”. Individual decisions such as the planned reduction in VAT in the hospitality sector and the planned Act on Compliance with Collective Bargaining Agreements (Tariftreuegesetz) were also viewed critically.
 

No Discernible Clear Shift in Economic Policy Under Black/Red Coalition

The participating economics professors see no significant economic policy differences between the previous traffic light government and the current black/red German government. 39% of participants see only “rather little” and a further 4% even “very little” change in economic policy compared to the previous Scholz government. 17% of respondents answer “neutral.” By contrast, 41% of economists see significant deviations from the economic policy of the traffic light government (39% “quite strongly” and 2% “very strongly”). The most important and most frequently mentioned change by the participants is the increase in the defense budget. It is also noted that although sentiment in the economy has already improved, too few concrete measures have been taken so far. In tax and social policy, on the other hand, economists predominantly see a “business as usual” approach.
 

Economic Policy Competence of the New Government Rated as Mediocre at Best 

The majority of the participating economists believe that the black/red government has only limited economic policy competence: 53% rate it as “medium”, while around a third rate it as “rather low” (26%) or “very low” (5%). Only 14% of participants attest that the government under Friedrich Merz has a “rather high” level of economic policy competence. Although some of the participating economics professors acknowledge economic policy competence – especially on the part of the German Chancellor himself – they criticize a lack of assertiveness within the coalition. Others criticize the stronger focus of economic policy on the interests of large companies, which in their view is to the detriment of SMEs.
 

Positive Stimulus for the Economy

Half of the participating economists rate the government’s economic policy measures to date as “rather positive” for economic development. In contrast, 12% of participants see a “rather low” influence on the economy. A further 34% assume a “neutral” effect. The main reason cited for a positive assessment is the expansive fiscal stimulus resulting from the additional funds for infrastructure and defense. On the other hand, the long implementation period for investments and the negative effects of the new US tariffs are cited as inhibiting factors.
 

Slightly Positive Impact on Medium-Term Growth Expected

When asked about the medium-term impact of the government measures in the first 100 days on economic growth, the picture is more mixed than for short-term economic development. 34% of the participating economics professors rate the measures as “rather positive” and 37% rate their impact as “neutral”. At the same time, the share of negative assessments is higher: 22% of participants rate the measures to date as “rather negative” and a further 4% even as “very negative” for economic growth. The economists cite too little focus on growth-promoting measures as reasons for the critical assessment. Although the increase in government spending is providing an economic stimulus, it is perceived more as a “flash in the pan”. Structural reforms to strengthen the supply of labor or promote innovation have so far failed to materialize. On the other hand, the potential growth effect of additional investment in an effective infrastructure is highlighted as positive.