VDMA says German government is stalling reforms as output falls for a fourth year

A sharper tone at the summit

On Tuesday, 10 November, the machinery association VDMA opened its summit in Berlin with a blunt attack on the federal government. Its president, Bertram Kawlath, who has led the association for two years, put the change in tone in his own words:

“A year ago I said we were angry. Today I have to say: we are dumbfounded.”

Kawlath blamed internal coalition disputes for blocking urgent reforms and criticised what he called the whitewashing of some government statements. He pointed to what he described as the visible decline of Germany as a business location. According to him, the result is that investment stays away, bureaucracy keeps growing and social costs rise, and many companies now ask why they should still invest in Germany. He also linked the stagnating economy to recent state election results, saying voters were drifting to the political fringes because the centre describes problems without solving them.

Labour market reform and productivity

Kawlath cited a study by the Institute of the German Economy (IW), commissioned by the association. It found that one extra hour of work per week could lift economic output by 1.5% within five years, with business investment up almost 5% and about 120,000 more people in work. Kawlath said more work did not mean fewer jobs and urged the government to push through labour market reforms and bureaucracy cuts without delay. Economy minister Katherina Reiche, a CDU politician, also backed changes to labour law at the summit, arguing that competitiveness requires higher labour productivity. She said dismissal protection had to be discussed and described current rules as a very strong, rigid barrier to real change, while acknowledging employees' fears.

Output, jobs and insolvencies

The sector counted over one million employees and about 33 billion euros in tax revenue, Kawlath said. The machinery and plant engineering sector recorded a 5% rise in the first half of 2026, driven mainly by large orders from abroad. Yet manufacturing employment in Germany has fallen by 15,000 since the start of the year, and the Federal Association of German Industry (BDI) puts job losses across industry at up to 15,000 a month. The VDMA expects real production to fall 2% in 2026, the fourth consecutive year of decline, after a September forecast of stagnation was revised downward. For 2027 it projects a 3% rise, carried mainly by orders from abroad, while domestic demand is stagnating.

2026 forecast-2%

2027 forecast3%

2026 forecast

-2 %

2027 forecast

3 %

Data from the article text

Separately, the Federal Statistical Office reported that company insolvencies rose again in June, with 12,812 cases by mid-year. That is the highest first-half figure since 2013 and 6.7% above the year before. The DIHK called the trend a warning signal and said the coalition must not abandon its reform course.

Growth forecast and the coalition's next steps

The federal government expects growth of 1.3% this year after several weak years, a figure that rests largely on state spending financed by borrowing through special funds for infrastructure and defence. The black-red coalition faces decisive weeks, with a pension reform, bureaucracy cuts and more flexibility in the labour market on the agenda. Kawlath closed on a more conciliatory note.

“Germany is not a rescue case. Germany is a design project. But whoever wants to shape things must act.”

On China, Kawlath called for a firmer response to unfair competition and said Europe must defend itself appropriately if China plays unfairly. The association expects a recovery to rest on a robust global economy, rising equipment investment and state stimulus in Germany.