German government raises 2026 growth forecast to 1.3%
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The German government has raised its economic growth forecast for 2026 to 1.3%, up from a spring projection of 0.5%, as the economy performs better than expected. Despite this improvement, business lobby groups continue to pressure the coalition government to implement neoliberal reforms, including cuts to social spending and taxes. In a commentary published by taz, economics editor Simon Poelchau argues that such reforms are dangerous for democracy, as they fuel insecurity among citizens and play into the hands of far-right parties. He points to the recent election of a far-right Landtag president in Saxony-Anhalt as a warning sign. Poelchau contends that the business lobby deliberately paints a pessimistic picture of the economy to push its agenda, using terms like 'on credit' or 'short-lived' to describe the upturn. He questions whether sacrificing social stability for marginal growth gains is worth the risk to democratic institutions, noting that austerity measures have historically triggered economic crises rather than growth.
Source report
Commentary by Simon Poelchau
Publication Date: October 8, 2026 — 5:16 PM
The economy is performing better this year than previously expected. Yet business lobbyists continue to push for reforms that serve their own interests.
The business lobby could finally afford to relax. This year's economic performance has exceeded earlier expectations. The German government has therefore significantly raised its forecast, now projecting economic growth of 1.3 percent—up from the 0.5 percent forecast in spring. Despite this, business leaders continue to demand reforms. This attitude poses a threat to democracy.
Neoliberal austerity measures unsettle the public and play into the hands of right-wing populists. This is well known. Yet Chancellor Friedrich Merz insists on pressing ahead with social reforms—even though, for the first time since the end of World War II, a far-right politician has been elected president of a state parliament. The question arises: Have Friedrich Merz and the business lobby learned nothing from history?
Major business associations continue to pressure the coalition to implement reforms that benefit them. To this end, they deliberately paint an overly bleak picture of the economy. The upswing is no longer something to celebrate—it is described as merely "borrowed" or "short-lived." Such terms are deployed to shift the focus to what they claim are the root causes of the crisis: taxes that are too high and labor costs that are too high. In reality, the state needs tax revenue to fund public spending, and employees need adequate wages to live with dignity. This also strengthens the economy. But business interests refuse to acknowledge this.
"What would be the loss of two or three percentage points of economic growth compared to the endangerment of an entire democracy?"
It is worth asking, as Brecht might have, whether losing a few percentage points of economic growth is worth risking the stability of an entire democracy. Moreover, it is questionable whether neoliberal reforms actually lead to higher GDP. All too often, they have instead triggered economic crises, as austerity measures end up stifling growth in the first place.
Image caption: The business lobby wants reforms, but people in this country are tired of social cuts and neoliberal austerity measures. Photo: Rainer Unkel / imago
Simon Poelchau is an editor covering economics for the taz Economy and Environment desk.
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Source
taz.de - taz.deWestern