At KeyToFinancialTrends, we note that one of the key drivers of the German economy – the Mittelstand sector, uniting small and medium-sized enterprises – has strong investment potential, yet companies continue to hold back due to the lack of real structural reforms. This was stated by Ulrich Reuter, President of the German Savings Banks Association (DSGV), while commenting on Germany’s current economic agenda.
According to Reuter, the Mittelstand has a solid financial foundation and sufficient liquidity, allowing it to expand investments, but businesses are waiting for clear signals and systemic measures from the government to strengthen the investment climate. “Companies are doing only what is absolutely necessary,” Reuter emphasized. “What’s missing are future-oriented investments.”
Our analysts at KeyToFinancialTrends highlight that despite a 16% year-on-year increase in lending, most of the funds are being used to replace previous investments rather than drive new growth. While Chancellor Friedrich Merz, who took office in May, promised to revive the economy and launch an “autumn of reforms,” the business community is increasingly skeptical about the speed and scale of these initiatives.
Reuter noted that “the government’s approaches are good, but more needs to be done.” He specifically pointed to the need for changes in the pension system: if pension levels are to be maintained without increasing contributions, Germans will need to work longer – “it’s pure mathematics,” the DSGV president said.
Germany’s cabinet recently approved a draft law allowing working retirees to earn up to €2,000 a month tax-free, but raising the retirement age remains outside the coalition’s agenda.
At Key To Financial Trends, we believe that without accelerating reforms and reducing administrative barriers, Germany’s economy risks remaining stuck in stagnation for years. The Mittelstand has the potential to become a catalyst for sustainable recovery – but as Reuter concluded, “the brake on business must be released.”
