Merz states Germany’s welfare state is struggling financially
(MENAFN) Germany’s welfare state is reaching the limits of financial sustainability, Chancellor Friedrich Merz has cautioned, highlighting rising fiscal pressures.
Speaking to members of his Christian Democratic Union (CDU) in Osnabrueck, Lower Saxony, Merz stated, “The welfare state as we have it today can no longer be financed with what we can economically afford,” and called for a comprehensive review of the country’s benefits system. He noted that welfare spending reached a record €47 billion ($55 billion) last year and continues to rise this year.
The increase in social welfare expenditures is linked to an aging population and higher unemployment. Germany provides extensive support programs, including housing and child benefits, unemployment assistance, family allowances, and subsidies for elderly and healthcare services. While most recipients are German citizens, a substantial portion are foreign nationals. Economic stagnation in 2025, influenced by both structural and cyclical factors, is intensifying the pressure on the system.
Merz also described the situation as a “structural crisis” rather than a temporary downturn, acknowledging that reviving Europe’s largest economy has been more challenging than expected. Germany’s GDP growth has lagged behind the Eurozone since 2017, rising just 1.6% compared to 9.5% for other members.
His warning coincides with official figures showing back-to-back economic contraction: 0.3% in 2023 and 0.2% in 2024, marking the first consecutive annual declines since the early 2000s. Industrial output has weakened further under Merz’s administration, with GDP falling 0.3% in the second quarter of 2025. The slowdown is driven by high energy costs, elevated interest rates, and a shortage of skilled workers.
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