German finance chief pledges reforms to reverse economic slump

Stephan Kahl, Bloomberg News on Aug 22, 2025

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German Finance Minister Lars Klingbeil defended the governing coalition’s economic policies and pledged to push ahead with additional reforms by the end of the year to help spur growth.

As Chancellor Friedrich Merz’s government faces mounting pressure to deliver on promises to rekindle growth, Klingbeil told Funke Media Group that the coalition has the strength for real reforms.

“We will make important decisions by the end of the year” including structural reforms in areas such as health care and pensions, Klingbeil said.

Official data published Friday showed Europe’s biggest economy shrank more than expected in the second quarter, underscoring the challenges for Merz.

The 0.3% slump in gross domestic product was far worse than the preliminary reading of -0.1%, largely because of manufacturing weakness following a surge in U.S. business at the start of the year to avoid tariffs.

Germany is trying to arrest an economic slide that gathered pace as Russia attacked Ukraine in 2022. Weak global growth, geopolitical uncertainty and long-standing structural issues such as an aging workforce pose challenges, and the Bundesbank warned on Thursday that Germany’s gross domestic product may fail to grow in the third quarter.

“We must free life in this country from bureaucracy so that it is fun again to start a business, run an association or build a house,” Klingbeil said.