German economy is growing faster than expected – SPD relies on state “New Deal”

The German economy is growing faster than expected a few months ago. Local economic output is expected to increase by at least 1.3 percent in 2026 and by 1.1 percent next year. Some people may think that the federal government's billion-dollar debt program would work.

The SPD also believes in the miracle effect of government economic stimulus programs. Last week it emerged that the party leadership saw no point in further reforms. Instead, a “New Deal”, i.e. a large state-financed transformation program, is intended to get the German economy back on track. The problems of the local economy are to a large extent the result of previous political transformation efforts - one only needs to think of the energy transition.

Daniel Stelter discusses with Prof. Dr. what to make of the current upswing, what the potential growth is and what reforms are necessary. Stefan Kooths, director of the economic cycle and growth research group at the Kiel Institute for the World Economy (IfW).