European Economic Comment: Germany: A significant reform package - first assessment

Research evidence excerpt

European Economic Comment: Germany: A significant reform package - first assessment

Global Research

2 July 2026ab

European Economic Comment Economics

Europe including UKGermany: A significant reform package - first

assessment Felix Huefner

Economist

felix.huefner@ubs.com

+49-69-1369 8280

Government announces reform package with 34 measures Reinhard Cluse

As we have noted in the takeaways from our recent Berlin trip, more policy progress is Economist

happening in Germany than is generally appreciated. Today, the government reinhard.cluse@ubs.com

+44-20-7568 6722

announced a reform package with 34 measures focussing on pension reform, income

tax cuts, labour market flexibility and the easing of bureaucracy hurdles. In our view, this Franziska Fischer

is the most significant structural reform initiative since the fiscal package in March 2025. Economist

Our initial assessment is threefold. First, the measures could help to improve business franziska.fischer@ubs.com

+41-44-239 2054

sentiment and hence support the view that the economy (helped by substantial fiscal

stimulus) may exit its multi-year stagnation, as we project. Second, the measures are Anna Titareva

broadly fiscally neutral and do not constitute an additional fiscal stimulus. Third, while Economist

the measures go a long way to what could reasonably be expected (or rather what anna.titareva@ubs.com

+44-20-7568 5083

appears politically feasible), the impact of the package on Germany's potential growth

rate (which we see at ~0.6%) is likely to be limited. The key limitation is that Germany's

most important structural growth headwinds remain largely unchanged. Demographic

ageing will continue to constrain labour supply, competition from China will remain