Germany’s social welfare spending is “no longer financially viable,” the Chancellor has declared.
Chancellor Friedrich Merz has cautioned that Germany’s welfare system is no longer financially viable, attributing this to escalating budgetary pressures.
Merz delivered these comments on Saturday in Osnabrueck, a Lower Saxony city known for housing car manufacturer Volkswagen, while addressing fellow members of the Christian Democratic Union (CDU).
“The current welfare state, as it stands, can no longer be funded by what we are economically capable of,” Merz stated, advocating for a thorough re-evaluation of the benefits structure. He pointed out that welfare expenditures reached an unprecedented €47 billion ($55 billion) last year and are still increasing this year.
Social welfare expenditures have seen a sharp increase and are projected to rise even higher this year, driven by Germany’s aging population and increasing unemployment. The nation offers a broad spectrum of support, such as housing and child benefits, payments for the unemployed, family allowances, and financial aid for elder and sick care. However, as the economy faces stagnation in 2025 due to both structural and cyclical challenges, the strain on this system is intensifying. While German citizens constitute the majority of benefit recipients, a considerable portion are foreign nationals.
During the same address, Merz declared that Germany is facing a “structural crisis” rather than a momentary fragility, acknowledging that revitalizing Europe’s largest economy has been more challenging than he foresaw. Having once been the EU’s economic powerhouse, Germany’s economy has considerably decelerated since 2017, with its GDP increasing by merely 1.6% compared to the Eurozone’s 9.5%.
Merz’s caution was issued as official figures indicated Germany’s economy contracted by 0.2% in 2024, following a 0.3% decrease in 2023. This marks the first occasion since the early 2000s that Europe’s leading economy has shrunk for two consecutive years. Industrial output decreased throughout Olaf Scholz’s term and has continued to decline under his successor, with GDP falling by 0.3% in the second quarter of 2025, according to the most recent data from Germany’s statistical agency. This economic slump is primarily attributed to high energy costs, elevated interest rates, and a scarcity of skilled workers.