Germany updates: Economy expected to see growth boom in 2026

The leader of Germany's Social Democratic Party (SPD), Lars Klingbeil, has distanced himself from a policy paper published by several members of the center-left party that calls for changes to Germany's defense policy and stance towards Russia. 

Klingbeil, who serves as a Vice Chancellor and Finance Minister in Germany's coalition government, said he disagrees with several statements included in the so-called "manifesto."

In a live-streamed conversation on Instagram with SPD member Kevin Kühnert on Wednesday evening, Klingbeil said Germany does not "need a U-turn when it comes to supporting Ukraine."

He added that Germany does not need to choose between military power and backing Ukraine over diplomacy, insisting that "it is not 'either/or', but two sides of the same coin."

While Klingbeil disagreed with the SPD manifesto, he said the party and the country should be able to have the freedom to debate and "tolerate" discussions on such issues.

In the "manifesto", which made headlines in Germany on Wednesday, more than 100 SPD politicians call for direct talks with Russia and criticize the "compulsion to increase armaments and prepare for an allegedly imminent war."

"Military alarm rhetoric and huge armament programs do not create more security for Germany and Europe. Rather, they lead to destabilization and a strengthening of the mutual threat perception between NATO and Russia," they warned.

Germany's Foreign Minister Johann Wadephul is visiting Rome Thursday to attend an international conference on the war in Ukraine and European Union security.

The meeting, hosted by Italian Foreign Minister Antonio Tajani, is being held as part of the Weimar Plus format, a group which is an extension of the Weimar Triangle of Germany, France and Poland.

According to the German Foreign Office, both NATO Secretary General Mark Rutte and Ukrainian Foreign Minister Andrii Sybiha will also attend the meeting, alongside representatives from Spain, the United Kingdom and the European Union.

The meeting in Rome comes one month before the fourth Ukraine Recovery Conference, a major international gathering slated for July 10 and 11. Some 2,000 representatives from various political, international and business organizations are expected to attend.

Wadephul also met with the Vatican's Cardinal Secretary of State Pietro Parolin and Archbishop Paul Richard Gallagher, who is in charge of the Vatitcan's international relations.

After his Rome meetings, Wadephul is set to head to the Middle East on Thursday evening, where he will visit Egypt, Lebanon, Jordan and Israel. 

The Munich-based Ifo Institute has raised its economic growth forecast for Germany for 2026.

Gross domestic product (GDP) is expected to grow by 1.5%, which would be almost twice as high as the originally forecast 0.8%.

The institute said new government measures and a spending surge should boost the country's sluggish economy.

The economic institute also adjusted its growth forecast for 2025, raising it to 0.3% from the previous outlook of 0.2%.

"The crisis in the German economy reached its low point in the winter half-year," said Timo Wollmershäuser, the Ifo's head of forecasts. 

"One reason for the growth spurt is the fiscal measures announced by the new German government," he added.

Germany's cabinet last week approved a €46 billion ($52.94 billion) tax relief package to support companies and boost the economy from 2025 through 2029.

That came after Germany's parliament, the Bundestag, approved a massive spending surge in March when it made a historic decision to amend a national fiscal rule known as the "debt brake."

Defense spending above 1% of GDP will no longer be subject to any borrowing limits.

In its forecast, the Ifo Institute estimated those measures to boost the economy by €10 billion in 2025 and €57 billion in 2026.

Wollmershäuser also warned, however, that the improved forecast was largely based on assumptions that the trade war between the European Union and US President Donald Trump would be resolved.

"The increasing optimism is probably also fueled by the hope that the new coalition will end the economic policy stalemate and that an agreement will be reached in the trade dispute with the US," he said.

The institute also predicted an uptick of one percentage point this year. Wollmershäuser pointed out that "the crisis in the German economy has been over for some time, but the recovery is still very weak." 

"The economy is still struggling with the effects of the pandemic and the high inflation rate."

Guten Tag from a beautifully sunny Bonn! DW will bring you the latest development from across Germany, where the Ifo Institute for Economic Research is due to release its summer forecast for 2025.

Germany's growth forecasts have been dented by the disruption to global trade caused by US President Donald Trump's tariffs.

Meanwhile, Foreign Minister Johan Wadephul is headed to Rome to meet with his European counterparts to discuss the war in Ukraine.

Recent pledges by European powers to apply more pressure on Russia to agree to a ceasefire have failed to yield any sort of lasting truce.

The meeting in Rome coincides with German Defense Minister Boris Pistorius' trip to Kyiv, a visit which Pistorius says is evidence of the new government's commitment to continue supporting Ukraine in the war against Russia. 

Elsewhere in Germany, an appeals court is expected to rule on whether to uphold a ban on Compact, a magazine that was banned in 2024 after being classified as a "mouthpiece for the right-wing extremist scene."

The ruling on the far-right publication is expected to come on the same day that Germany marks Anne Frank Day, a commemoration of the Holocaust which often sees demonstrations and actions denouncing antisemitism and racism.

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