German chief executives have expressed concern that Chancellor Friedrich Merz’s €10bn in tax cuts may not be enough to jump-start the country’s stagnant economy.
Merz’s coalition government on Thursday unveiled a series of measures including tax cuts for the middle class, labour market reforms, stricter sick-leave rules and initiatives to curb bureaucracy as it aims to kick-start the economy and combat rising voter discontent.
Executives welcomed the moves but warned that the measures were not enough to dispel fears among business leaders that the country is at risk of a “lost decade”.
Roland Busch, chief executive of Siemens, Germany’s biggest company by market capitalisation, said the reform package was “an important step towards restoring growth and competitiveness” but that “further action will be needed”.
He flagged non-wage labour costs — such as statutory social security contributions and other benefits — as a “significant competitive disadvantage for Germany”.
He also raised concerns over the country’s rules on maximum working time, which some companies want to shift from daily to weekly limits to increase flexibility.
The €10bn in tax relief is the equivalent of about 0.21 per cent of Germany’s GDP in 2025 — less than half of the up to €27bn in tax cuts parties in Merz’s coalition had discussed in April.
“I’m not sure if the parts are big enough to have an impact,” said Oliver Steil, CEO of German software group TeamViewer, in an interview. “But they send a positive signal.”
Privately, executives at some of Germany’s biggest companies were less diplomatic. One cautioned that the country’s businesses “are demanding change or voting with their feet”. Others said companies were cancelling planned investments at home, buying targets in the US to diversify away from the domestic market or considering moving their headquarters abroad.
Domestic drugmaker Boehringer Ingelheim last month scrapped €900mn in planned infrastructure and laboratory investments in Germany through 2030, citing healthcare reforms and budget cuts. Zalando, Europe’s largest online fashion retailer, in January announced plans to close its logistics hub in Erfurt, affecting about 2,700 employees, as part of an effort to streamline its logistics network and cut costs.
When he unveiled the package, Merz called it “a good day for Germany”, while acknowledging that “there is no single ‘Big Bang’ solution that will sort everything out”.
The ruling coalition of Merz’s Christian Democrats and the Social Democrats has been under pressure in the face of falling approval ratings, weak business sentiment and a surge in support for the far-right Alternative for Germany.
Last month, the coalition also endorsed a Swedish-style public pension fund that would invest a share of workers’ wages in capital markets.
“For me, this is the most important reform in this package,” said Bettina Orlopp, chief executive of Germany’s second-biggest lender Commerzbank, who also praised measures for mortgage lending to encourage private residential construction.
“There is still much to be done to drive more growth in Germany, but these two points are genuinely positive,” Orlopp said.
The reform package is Merz’s latest effort to boost the economy, which has in effect stopped growing since the start of the pandemic in early 2020. Adjusted for inflation, GDP hovers at the 2019 level in what economists are calling an unprecedented era of stagnation.
Despite Berlin’s multibillion-euro, debt-funded investment push, hopes that 2026 would mark the start of a rise in growth have been dashed as the sharp increase in energy prices since the start of the Iran war hit Europe’s largest economy.
In manufacturing, the German economy’s traditional strength, the situation is even worse. Industrial production peaked in late 2017 and sits 9 per cent lower than a decade ago, according to Bundesbank data.
Recent news has added to the gloomy mood in German boardrooms. Volkswagen’s plan to axe up to 100,000 jobs, which emerged last month, would be one of the biggest lay-off programmes in global corporate history, while the long-awaited listing of German-Franco tankmaker KNDS was postponed last week amid declining investor enthusiasm for the sector.
Massive job cuts and industrial setbacks are upping the pressure for Berlin to act. Several executives said speedy delivery of Merz’s reforms was crucial after previous steps to boost the economy fizzled out or were slow to be implemented.
“We really need to change things, and we need to deliver — all the way to the point where people feel the difference,” said Dominik von Achten, Heidelberg Materials chief executive, praising steps to promote housing construction and reduce red tape. “Speed and implementation will be key.”
Rail, highway and bridge projects are taking too long to complete, said von Achten, boss of Germany’s biggest building materials company, before last week’s measures were announced. “There is money in the pipeline, but the infrastructure uplift hasn’t materialised yet.”
Tanja Gönner, the head of BDI, Germany’s main industrial lobby, said last week that income tax reform would fail to stimulate corporate investment and the measures “do not provide a strong boost to growth”.
German companies have stepped up lobbying in Berlin since Merz took over the leadership in May 2025 because of the perception that the former chair of US asset manager BlackRock’s German unit might be more business-friendly.
Over 60 German companies including Siemens, Deutsche Bank and Volkswagen signed up for the “Made for Germany” initiative in July 2025, collectively pledging to invest hundreds of billions of euros to attract more investment into the country.
A spokesperson for the initiative, which has grown to 136 members, said the group will take stock of progress later this year, including a review of the more than €800bn in investments committed by 2028.
Some executives said last week’s announcement showed the pressure to reboot growth, avoid massive lay-offs and fend off the far right was strong enough to drive change.
They cited the German government’s construction in 2022 of a liquefied natural gas terminal on the North Sea in 200 days as one example where Berlin was able to overcome bureaucratic hurdles and rally at a time of crisis.
“The coalition partners seem finally ready to cross red lines and come together as a team to take tough decisions and compromise,” said TeamViewer head Steil.
The German government did not immediately respond to a request for comment.
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