After years of economic stagnation, new Chancellor Friedrich Merz promises to boost domestic consumption – but Germans remain cautious and experts doubt the reform’s success, Reuters reports.
The future German government, led by conservative Friedrich Merz, is preparing an ambitious economic stimulus programme. The main goal is to revive domestic consumption, which has remained stagnant since 2023, and thereby bring the country out of three years of economic stagnation.
The key steps include tax cuts, an increase in the minimum wage to €15 per hour, a 7% VAT cut on food in restaurants, and tax bonuses for pensioners who continue to work.
“Reducing tax pressure and stimulating purchasing power is our priority,” Merz said on Monday.
However, a number of economists and trade representatives have expressed doubts about the ability of the new measures to change the habits of Germans, who have traditionally been among the world’s largest savers. As of 2024, the savings rate of German households reached 20%, which is significantly higher than the EU average of 15%.
Experts’ scepticism: “psychological restraint” and changing values
“I doubt that we will see a sharp recovery in consumption this year,” says Carsten Brzeski, chief macroeconomist at ING.
Analysts point out that economic incentives alone may not be enough. Germans are increasingly aware of their impact on the environment and their consumption habits are changing. Conscious consumption, recycling, and renting instead of buying are in trend.
For example, the Berlin-based startup Kleiderei offers a clothing library: for a fixed fee, customers can borrow items from a collection of more than 60,000 second-hand clothes. According to director Lena Schroeder, demand is only growing.
“Our business is about community, not about new purchases. We are slowing down the pace of consumption,” she explains.
Political challenges and internal disputes
Disputes have already erupted within the new coalition: some SPD members are demanding more social spending, while Merz stresses that tax breaks will only be possible if there is a free budget.
Deutsche Bank has already described the government’s measures as “limited short-term stimulus” that may not have a profound impact on the economy.
“The German consumer needs not only a financial incentive, but also an emotional impulse – trust in the government, a sense of stability and genuine reforms,” said Salomon Fiedler, economist at Berenberg Bank.
New generation – new priorities
According to a study by the Development Engagement Lab, 60% of Germans already practice sustainable consumption, and 71% want to increase their environmental awareness. Popular influencers and bloggers, such as Lisa Monaco from Nachhaltig4Future, are promoting the idea of abandoning excessive consumption:
“We already have enough of everything. We don’t need new things, we need a new attitude to the world,” she says.
The project to make Germans spend again is not only an economic challenge, but also a social experiment where trust, values and lifestyle are at stake. It will be extremely difficult to cope with it without understanding the internal culture of consumption.
