German business, labor groups urge faster reforms as economic pressure mounts

German Chancellor Friedrich Merz on Tuesday called on his coalition government to accelerate economic reforms as business and labor groups demanded concrete measures to revive Europe’s largest economy and halt industrial job losses.

Merz opened a two-day Cabinet retreat at Schloss Neuhardenberg in the eastern state of Brandenburg, where ministers are focusing on growth, innovation and competitiveness.

“We want to emerge from the weakness in economic growth. We want to enable our economy to achieve growth and employment again,” Merz said.

He said Germany could compete globally and even serve as a model but stressed that the state must create the necessary conditions.

“There is no reason at all to underestimate ourselves,” Merz said, pointing to Germany’s industrial base, small and medium-sized enterprises, skilled trades and research capabilities.

The government will consult representatives from industry, technology companies, start-ups and skilled trades during the retreat.

Merz said the public was justified in expecting action and pledged to accelerate preparations for decisions planned for the remainder of 2026.

His conservative CDU/CSU alliance governs with the center-left Social Democratic Party (SPD). The coalition faces mounting pressure amid weak approval ratings and opinion polls showing gains for the far-right Alternative for Germany (AfD).

The government unveiled a 34-point “Program for Growth and Employment” on July 2, including around €10 billion ($11.7 billion) in annual tax relief for low- and middle-income earners.

The package also covers pension reform, stricter sick-leave certification rules, affordable housing and measures to reduce bureaucracy.

Business, labor groups demand action

Tanja Gonner, chief executive of the Federation of German Industries (BDI), called for an “autumn of action,” arguing that previously announced measures had yet to provide tangible relief for companies.

Michael Vassiliadis, chairman of the Mining, Chemical and Energy Industries Union (IGBCE), also urged the government to change course, warning that Germany was losing about 15,000 industrial jobs each month.

Germany’s economy expanded 0.3% in the second quarter from the previous three months, revised upward from an initial estimate of 0.2%, according to the Federal Statistical Office.

Exports were the main driver of growth, while investment remained weak.

Following the Cabinet retreat, the executive boards of the coalition parties’ parliamentary groups are scheduled to meet Thursday and Friday in Munster to continue discussions on the reform agenda.