The German coalition government has agreed wide-ranging structural and tax reforms, which, combined with increased fiscal spending, should help boost the economy this year and next following years of economic underperformance, though trade-related headwinds will persist. Germany has suffered its longest period of economic stagnation since World War II in recent years, turning it from Europe's growth engine into an economic laggard. A surge in energy prices, caused first by the Russia-Ukraine War and then by the Iran war, has pushed the German economy into stagnation. The German economy is smaller today than it was at the end of 2022, having shrunk in 2023 and 2024 and only very modest growth in 2025. Due to its large, energy-intensive manufacturing base and, in part, an overreliance on relatively cheap Russian energy imports, Germany was more negatively affected than other European countries by the energy supply shocks. Moreover, Germany's core industrial sectors,...
