Hopes for an upswing are fading.

The German government has halved its growth forecast for the current year and now expects an increase in gross domestic product of only 0,5 percent. The German Confederation of Skilled Crafts (ZDH) says that the stalled reforms threaten small and medium-sized enterprises (SMEs) and the skilled trades.

Federal Economics Minister Katharina Reiche (CDU) has released the spring forecast of the Federal government The government presented its revised forecast, expecting only a slight increase in gross domestic product (GDP) of 0,5 percent for the current year. In January, the government had still predicted growth of 1,0 percent. "At the beginning of the year, the economy already showed signs of slowing down." The war in the Middle East and the closure of the Strait of Hormuz have led to shortages and price increases for energy and other raw materials, affecting businesses and private households in Germany. This has resulted in the downward revision of the forecast.

"The economic recovery expected this year is once again being hampered by external geopolitical shocks," the minister explained. The relief measures already adopted by the federal government will provide short-term relief, but they do not address the structural causes of Germany's weak growth. "For a growing and competitive economy, we also need far-reaching structural reforms. We must tackle the tax and contribution burden, which is far too high by international standards, reduce energy costs, and cut red tape." Reiche anticipates GDP growth of 0,9 percent for next year. However, this is contingent on the conflict de-escalating quickly and the associated burdens diminishing. 

"War exposes structural weaknesses"

Jörg Dittrich, president of the German Confederation of Skilled Crafts, also sees the war in Iran as only a superficial explanation for the weak economic performance. "The stalled reforms are massively endangering Germany's small and medium-sized enterprises (SMEs) and skilled trades, and thus the backbone of the German economy. Further delays in reform threaten to bring this already weakened backbone dangerously close to breaking." The war, he says, primarily exposes the structural weaknesses that make Germany vulnerable in international competition. While the government has provided positive incentives such as improved depreciation allowances for investments, a construction stimulus program, and a modernization agenda, "these measures so far are clearly insufficient to stimulate growth and achieve a self-sustaining upswing."

Many political decisions already made and those still planned are actually weakening the trades and small and medium-sized enterprises (SMEs). "The planned reduction in corporate tax bypasses sole proprietorships, even though two-thirds of craft businesses are structured this way. The industrial electricity price excludes many craft businesses and worsens their competitive position. New regulations such as the law on adherence to collective bargaining agreements and pay transparency will create additional bureaucracy. And the so-called relief bonus was the final straw, because it obviously doesn't provide any relief for businesses, but on the contrary, further increases their financial burden."

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If the current course of the black-red coalition continues, the foundations of the German economy are at risk of further erosion. Dittrich demands: "Political decisions must no longer be made without considering the needs of the skilled trades and small and medium-sized enterprises (SMEs). If a change of course is not taken now and the necessary structural reforms are not finally implemented, the skilled trades and SMEs, and thus the economic substance of Germany, will be jeopardized. This will not only lead to a lack of growth, but also to a sustained decline in the economic performance of this country."

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