Prosperity in danger: Ifo President calls for radical reforms!

Prosperity in danger: Ifo President calls for radical reforms!

In an alarming assessment, the President of... Ifo Institute, Clemens Fuest, described the economic situation in Germany as impending decline. This catastrophic development has been going on for years and has now reached dramatic proportions. Fuest warns that the decline in private investment in particular is endangering the country's prosperity.

The problem is obvious: while government spending is soaring, private investment is declining. This not only has a direct impact on growth, but also causes tax revenues to dwindle. In order to counteract this trend, Fuest is calling on the federal government to come up with a comprehensive reform concept within the next six months that goes beyond the existing coalition agreement. He even goes so far as to question the mother's pension, which is likely to be met with heated debate.

Mother's pension in the focus of the debate

The mother's pension, a topic that is hotly debated in the current budget negotiations of the traffic light coalition, could be a central lever for urgently needed reforms. Veronika Grimm, a prominent economist and member of the Advisory Council for the Assessment of Overall Economic Development, calls for a critical examination of this social issue. According to their arguments, the abolition of the mother's pension could help to increase the scope for future-oriented government spending, even if it also represents an important security for mothers who have had to leave the job to raise children. Fr reports about it.

For many, the mother's pension is a question of social justice, as it grants parents up to three years of parenting time per child without paying contributions to pension insurance. Critics, including Monika Schnitzer, rely on Grimm's assessments that the mother's pension violates the principle of equivalence of participation. Ultimately, all taxpayers and employees benefit from this, even if not everyone contributes equally to the financing.

Economic situation in tension

This debate takes place in an overall context that is anything but positive. The Federal Ministry of Economics reported a 0.3 percent decline in gross domestic product in the second quarter, due to a weaker domestic economy. The consumer mood of private households has also weakened noticeably, although there are some positive signs in industry, where certain sectors, such as mechanical engineering, have recorded some considerable growth.

The combination of a stagnating economy, rising government spending and falling private investment is increasing uncertainty among the population. Over three million people are now unemployed, and the insolvency rate rose by more than 12 percent in the first half of 2025. It is clear: more than just a good hand in reform policy is required here; ambitious measures are required to get back on the right course.

In this tense situation, it remains to be seen how the government will respond to the warnings. The coming months are crucial to ensuring Germany's economic survival. It will be exciting to see whether the traffic light coalition has the courage to introduce fundamental reforms and initiate the necessary change of course.