Chancellor Friedrich Merz on Wednesday vowed to revive the German economy and deliver growth of at least 1% next year thanks ​to business-friendly reforms and a planned increase in government spending.

Seeking to project unity, ‌Merz and Finance Minister Lars Klingbeil, whose centre-left SPD is the junior partner in the coalition, also dismissed suggestions that government infighting was hampering efforts to reverse a slide in opinion polls.

"I feel encouraged in my ​assessment that we have the opportunity to achieve a one before the comma (in GDP ​growth) for the next year," said Merz, leader of the conservative CDU.

He ⁠was speaking at a news conference after an off-site cabinet meeting at the Neuhardenberg estate, ​about 70 km (44 miles) east of Berlin, following the summer break.

The economy ministry in April ​cut its 2026 growth forecast to 0.5% from 1%, citing higher energy costs linked to the war in Iran.

Pressure on Merz's coalition has been mounting after a cabinet reshuffle angered members of his own party and ​raised questions about the government's effectiveness as it seeks to fend off a far-right challenge ​in state elections next month.

IMPROVING ECONOMIC OUTLOOK

Merz and Klingbeil said recent economic data and business surveys pointed to ‌an ⁠improving outlook.
After years of weak growth, Europe's largest economy expanded more strongly in the second quarter than initially estimated, while business morale rose to its highest level in a year in August.

Klingbeil said about €50 billion from a special 12-year €500 billion infrastructure fund — agreed in early 2025 — had been ​allocated.

"That is currently the ​strongest trend driving growth. ⁠We'd be in a recession without this investment push," the finance minister said.

But the debt-fuelled spending drive comes as German 10- and 30-year ​borrowing costs hit 15-year highs last week, with bond yields of major ​Western economies ⁠including the U.S. and Japan also on the rise.

Klingbeil, who on Monday attributed the higher borrowing costs to more expensive energy in the wake of the U.S.-Israeli war on Iran, stressed that ⁠Berlin's creditworthiness ​and ability to refinance were fully intact.

Merz also said ​he had asked federal ministers to develop proposals to address trade imbalances between the European Union and China.