The German economy declined by 0.3% in the second quarter of 2025, according to official figures released on Friday. This performance was worse than the earlier estimate of a 0.1% fall and highlights continuing difficulties for Europe’s largest economy. The contraction followed growth of 0.3% in the first quarter, but output in both the manufacturing and construction sectors was weaker than expected. Household spending was also revised downward, creating more pressure on the economy. Experts explained that the decline reflected the impact of new U.S. tariffs and the end of temporary gains from higher German exports earlier in the year. The government of Chancellor Friedrich Merz, who entered office on May 6, 2025, has identified economic revitalization as a central priority.

The administration has announced a €500 billion ($582 billion) investment program over the next 12 years to modernize infrastructure, accelerate digitization, and reduce bureaucratic delays. A coalition of companies has pledged €631 billion ($731.7 billion) in investments over the next three years, which was intended to demonstrate confidence in Germany’s long-term stability. Economists described this strategy as salutary, though they warned recovery might be gradual. One economist observed that the economy was experiencing the first strong impact of tariffs in the second quarter and suggested that a resilient recovery could take shape only in 2026. The government’s program was seen as an expedient step to counter problems, but analysts warned that the economy remains in a precarious position. A recent European Union–United States trade deal has provided some optimism, though its full terms remain tenuous and under negotiation.