The German economy fell by 0.3% in the second quarter of 2025, according to official figures released on Friday. This result was worse than the earlier estimate of a 0.1% drop and showed the continuing problems of Europe’s largest economy. The decrease followed a 0.3% increase in the first quarter but was pulled down by weaker results in both manufacturing and construction. Household spending was also revised downward, creating more pressure on the economy. Experts explained that the decline reflected the effect of new United States tariffs and the end of earlier gains from strong German exports. Economists stressed that the downturn showed an absolute test of stability. The government under Chancellor Friedrich Merz, who entered office on May 6, 2025, identified economic revitalization as a central priority.

The administration announced a €500 billion ($582 billion) investment program to modernize infrastructure, accelerate digitization, and reduce bureaucratic delays over the next 12 years. A group of companies also promised €631 billion ($731.7 billion) in investments within three years, intended to show trust in Germany’s long-term stability. Analysts said the plan could help the economy absorb shocks from tariffs and trade disputes. Economists also pointed out that while financial targets may look abstract, the government must show concrete steps for growth. The plan was seen as an alternative to deeper austerity, but experts warned that progress may remain gradual as trade negotiations continue.