Merz warns of 'very critical' situation in parts of German economy

German Chancellor Friedrich Merz has placed boosting the country's economy at the top of his agenda for 2026, warning that measures taken so far have failed to sufficiently improve Germany's competitiveness.

In a four-page letter sent at the start of the year to members of his governing coalition, Merz said the economic situation remained "very critical in some areas," according to the document seen by dpa.

In 2026, Germany would therefore need to focus on taking decisive political and legislative action to substantially improve conditions for businesses, Merz wrote, adding that only then could the economy return to growth and emerge from the crisis.

In the letter, Merz also reiterated Germany's continued support for Ukraine, saying that the decision to use Russian assets frozen in the European Union had created the financial basis to support Kiev's defence against Russia over the long term.

"Russia must have no doubt about our resolve," the chancellor wrote.

At the same time, Merz stressed that the German government would continue to push for a ceasefire that preserved Ukraine's sovereignty.

"Our diplomatic work is being carried out under difficult conditions," he said, pointing to Russia's limited willingness to negotiate, Ukrainian President Volodymyr Zelensky's efforts to maintain unity at home, and what he described as profound changes in trans-Atlantic cooperation.

In closing, Merz urged lawmakers to restore confidence in politics by delivering solutions to concrete problems.

"This is how we will also convince the vast majority of our population of the value of our democracy and our market-based economic system," he wrote.