Germany

The two political parties expected to form the next German government have agreed to loosen the country's constitution restrictions on borrowing, enabling 1 trillion euros ($1.08 trillion) or more in spending on defense and infrastructure, the Associated Press reported. It’s a major change in Germany’s debt-averse political culture, rejecting conventional economic wisdom that long dominated Europe’s biggest economy and one of the world’s wealthiest countries.

Germany should loosen constitutional borrowing limits to free up as much as €220 billion ($232 billion) of fiscal space through 2030 to boost infrastructure and military spending, according to the Bundesbank, Bloomberg News reported. In a report Tuesday discussing options for the country’s so-called debt brake, it recommends significantly higher ceilings of as much as 1.4% of gross domestic product for structural net borrowing — primarily to fund investment.

German inflation unexpectedly remained unchanged in February, highlighting the challenges for the European Central Bank in deciding how quickly and how far to cut interest rates, Bloomberg News reported. Consumer prices increased 2.8% from a year ago, the statistics office said Friday. Economists in a Bloomberg survey had expected a slight slowdown to 2.7%. The report follows earlier figures showing French inflation retreated to its lowest level in four years, while price gains in Italy surprisingly held steady.

Germany’s jobless rate held steady in February, a sign that recent workforce reductions announced at some major companies hasn’t yet significantly dented employment, the Wall Street Journal reported. The adjusted unemployment rate in Europe’s largest economy was 6.2% this month, the same as in January, according to data from Germany’s Federal Employment Agency published on Friday. Meanwhile, jobless claims ticked up by 5,000 in February, albeit slowing from the 11,000 of January. Registered job vacancies stood at 639,000, some 67,000 fewer than the same point last year.

UniCredit has asked German antitrust authorities to approve its move to take a substantial stake in Commerzbank, another key hurdle for the Italian bank to overcome as it pursues a possible takeover of the German lender, Reuters reported. UniCredit has built a web of financial transactions to secure a Commerzbank stake of just under 30%, putting it on the cusp of a full-blown takeover of one of the most important lenders to Germany's small and medium-sized Mittelstand companies.

U.S. carmaker Tesla will acquire parts of the insolvent German high-tech parts maker Manz AG , including more than 300 employees at its site in Reutlingen city in the southwest, the German company said on Tuesday, Reuters reported. The deal marks a wider presence by Tesla in Germany, where it runs a manufacturing site near Berlin, even after CEO Elon Musk endorsed the far-right party AfD, which mainstream parties have refused to work with due to its extreme positions. Tesla sold almost 60% fewer cars in Germany in January than a year earlier, as the U.S.

Germany’s economy contracted in the final quarter of 2024, the country’s statistics agency confirmed Tuesday, underlining the scale of the challenge for the next German government to turn around its economic fortunes, the Wall Street Journal reported. Europe’s largest economy shrank 0.2% in the three months to the end of December, matching a prior estimate published in January, the agency Destatis said. The country’s economy contracted for a second year in a row in 2024, also by 0.2%.

A decade ago, Germany was the model nation. Its economy hadn’t just withstood the ascendance of China; it was thriving in its wake. Its balanced public finances stood out in a world of huge government debt. And while British and U.S. lawmakers were caught up in the culture wars, German politicians continued to practice the art of compromise. Today, Germany has gone from paragon to pariah, according to a Wall Street Journal commentary. Its economic model is broken, its self-confidence shattered and its political landscape fractured.

German eVTOL developer Lilium is facing another financial crisis as the company struggles to secure a critical funding package that was expected to stabilise its operations, Zag Daily reported. After announcing a €200 million rescue deal on Christmas Eve, Lilium has so far received only a fraction of the promised funds, leaving it unable to pay salaries and forcing it to suspend operations. With time running out, the company may be forced to file for insolvency if the remaining investment does not materialise.

Germany faces major labour disputes in 2025, as an established bond between firms and workers -- long seen as a pillar of the country's economic success -- is starting to unravel in the wake of brutal competition, economic weakness and spiralling costs, Reuters reported. Labour bosses at industrial giants Bosch, Thyssenkrupp Friedrichshafen and Volkswagen - jointly representing more than half a million German workers - say that firms are showing a new level of determination to cut jobs, close factories and move staff abroad.