German Economists Warn of Rising Inflation and Slower Growth

Germany’s economy faces weaker growth and mounting pressure on its welfare system, according to the country’s Council of Economic Experts.

Analysts at the council warned that the war involving Iran has driven up energy prices, fueling inflation and eroding household purchasing power. Germany’s economy is now expected to grow by just 0.5% in 2026 and 0.8% in 2027.

The economists also warned of a sharp increase in social security contributions. Without reforms, combined payments for health, pension and long-term care insurance could approach 50% by 2040.

Higher payroll contributions would raise labor costs, reduce household net income and further weaken economic growth, the experts said.

They identified the healthcare and long-term care systems as the main sources of pressure. Proposed measures include limiting growth in hospital spending, reforming pharmaceutical financing and targeting care benefits more narrowly toward the most vulnerable patients.

(mja)