Chancellor Friedrich Merz has sounded an alarm over the long-term viability of Germany’s welfare state, citing ongoing economic stagnation and unsustainable social spending. During a speech to fellow Christian Democratic Union (CDU) members in Osnabrueck, a city in Lower Saxony known for its automotive industry, Merz declared that the current system of social benefits cannot be maintained with the current economic resources. The country’s social welfare costs reached a record €47 billion last year, and with Germany’s population aging and unemployment increasing, the financial strain on the system is set to grow further. Merz called for a fundamental reassessment of the benefits system, emphasizing the need to address the country’s structural economic crisis.
In the same speech, Merz described Germany as experiencing a ‘structural crisis’ rather than a temporary weakness, conceding that putting Europe’s largest economy back on track has proven more difficult than he anticipated. Once the EU’s economic powerhouse, Germany’s economy has slowed sharply since 2017, with GDP growth of just 1.6% compared to 9.5% for the rest of the Eurozone. Merz’s warning came as official data showed Germany’s economy contracting by 0.2% in 2024 after a 0.3% decline in 2023, marking the first time since the early 2000s that Europe’s largest economy has shrunk for two consecutive years. Industrial production fell during Olaf Scholz’s tenure and has continued to weaken under his successor, with GDP dropping 0.3% in the second quarter of 2025, according to the latest data from Germany’s statistics office. The downturn has been driven by high energy prices, elevated interest rates and a shortage of skilled labor.