(de-news.net) – Minister of the Economy Katherina Reiche (CDU) has called for quick, extensive structural reforms to boost growth in the face of deteriorating economic prospects and rising prices in light of the spring economic projection. Research organizations suggested specific social compensation measures while attributing the slowdown primarily to energy price shocks connected to geopolitical concerns.
Reiche called for a comprehensive and far-reaching program of structural reform aimed at restoring Germany’s economic competitiveness following the publication of the spring outlook by leading research institutes. In her assessment, the findings of the joint economic diagnosis underscored the urgency of prompt and decisive policy intervention. She argued that, as growth expectations had weakened relative to earlier projections, intensifying geopolitical tensions in the Middle East were adding further pressure on policymakers to expedite reform efforts, thereby necessitating what she characterized as bold and far-reaching policy measures. At the same time, she stressed that reforms long under discussion—extending beyond the parameters of the current coalition agreement—should now be implemented, framing this as essential to reviving both political resolve and broader economic dynamism.
Proposals had already been advanced by the Chancellor and the Finance Minister, which, in her view, ought to be integrated into a more cohesive and comprehensive reform framework. Within this context, particular emphasis was placed on reducing structural rigidities in the labor market, extending overall working lifetimes, and ensuring the long-term sustainability of social security systems without imposing additional burdens on labor costs. Strengthening investment in research and innovation was likewise identified as a central priority. In addition, measures aimed at addressing persistently elevated energy costs were reportedly under consideration as part of a broader package of reforms expected to be pursued over the coming months.
Institutes cite energy shock and inflation risks as key drags on recovery
The joint diagnosis produced by the consortium constitutes a key analytical foundation for the Federal Government’s official economic forecast, scheduled for presentation in late April. Participating institutions include the Ifo Institute, the German Institute for Economic Research, the Leibniz Institute for Economic Research Halle, the RWI – Leibniz Institute for Economic Research, the Kiel Institute for the World Economy, and the Austrian Institute of Economic Research. Compared with the preceding autumn forecast—which had anticipated growth rates in the range of approximately 1.3 to 1.4 percent—the outlook has deteriorated noticeably. Analysts attributed this revision primarily to an energy price shock associated with the Iran conflict, which was assessed as constraining the pace of economic recovery. At the same time, expansionary fiscal policy was viewed as providing support to domestic demand and thereby mitigating the risk of a more pronounced downturn.
Inflation expectations have also been revised upward, with consumer prices projected to increase by an average of 2.8 percent in the current year and to rise further to 2.9 percent by 2027, developments that are expected to weigh on private consumption. In the domain of energy policy, the institutes advised against short-term interventions aimed at lowering prices, arguing that such measures would distort essential market signals. Instead, they recommended the implementation of targeted social compensation mechanisms designed to offset distributional effects while preserving appropriate price incentives.
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