Is German reboot the key to unlocking Europe’s Path to Recovery?

After driving the European growth in the 2010s, Germany's GDP in 2024 was at the same level as in 2019, while that of the euro area grew by 1.3% per year over the same period. Several factors explain this German economic stagnation, among which feature a weak private consumption (due to a disappointing evolution of purchasing power) and weak private public investment. Considering a growing competition, even more with the emergence of China on industrial market, and while the U.S administration’s trade policies lead to high uncertainties, t he German economy must boost its productivity and its competitiveness , especially in its industrial sector. The new coalition led by F. Merz, seeks the revival of German growth, with clear investment objectives, through the reduction of bureaucracy and the ease of the debt brake. The legislative package also includes for a development plan for German defense. While studies do not agree on the magnitude of the multiplier effect of this plan in Europe, the impact should remain limited. This is due to the weak capacity of European manufacturers to meet an increase in demand in the short term, and the central place of the United States in armament industry: between 2010 and 2024, the United States accounted for 58% of German arms imports .