Member of the German Council of Economic Experts Veronika Grimm Speaks at Frankfurt School

Germany’s economy is under pressure: growth has stagnated for years, geopolitical tensions have heightened uncertainty, and structural challenges demand clear priorities. How can new perspectives be opened up under these conditions without compromising future opportunities? This question was at the heart of a lecture delivered by Professor Dr Veronika Grimm, member of the German Council of Economic Experts, at Frankfurt School of Finance & Management. The event took place as part of the Centre for Central Banking (CfCB) Guest Lecture Series. 

Jens Weidmann, Professor of Practice in Central Banking and Co-Director of the Centre for Central Banking, opened the guest lecture and underlined the importance of independent, research-based advice at a time when multiple crises, geopolitical tensions and economic transformations are shaping political decision-making. 

At the core of the lecture was a clear assessment of the current economic situation. Grimm emphasised that Germany has effectively recorded no real growth since 2018. The potential growth rate estimated by the Council currently stands at around 0.3 per cent and could decline further as a result of demographic change. As the baby boomer generation retires, the overall volume of labour is decreasing noticeably, while immigration is unable to fully offset this decline. At the same time, industrial production in Germany is falling across sectors, despite growth in global industrial output. Employment gains are occurring primarily in the public sector and in healthcare, rather than in highly productive private or technology-driven sectors. For Grimm, these developments reflect structural weaknesses rather than a mere cyclical downturn. 

Fiscal policy formed another key focus. Additional funding for defence, infrastructure and climate protection expands the government’s room for manoeuvre in the short term, but increases interest and social expenditure in the medium term. Simulations conducted by the Council indicate that the debt-to-GDP ratio could rise significantly in the coming years. Grimm stressed that higher debt alone will not generate sustainable growth momentum if underlying potential growth remains low. Without structural reforms or clear prioritisation of public spending, fiscal space risks becoming increasingly constrained. 

Against this backdrop, Grimm presented key elements of the current Annual Economic Report. Sustainable growth requires stronger dynamism in the private sector, particularly in technology-intensive industries. Germany must create better framework conditions for innovation, start-ups and scaling. Regulatory hurdles and complex approval procedures impede the development of competitive business models in many areas – including artificial intelligence applications, data-driven medicine and biotechnology. A targeted review and adjustment of existing regulation is therefore as necessary as deepening the European Single Market, particularly by reducing internal trade barriers in the services sector. Grimm also advocated stronger integration of European capital markets to facilitate investment and improve financing opportunities for growth companies. Reform of corporate taxation could likewise form part of a comprehensive reform agenda, although it alone would not trigger a growth surge. 

The lecture was followed by a lively discussion moderated by Emanuel Mönch, Professor of Financial and Monetary Economics and also Co-Director of the Centre for Central Banking. Key themes included political incentives for implementation, European competitiveness and long-term reform strategies. At the subsequent get-together, participants had the opportunity to explore the issues raised in greater depth in an informal setting. 

The next CfCB Guest Lecture will take place on Wednesday, 11 March 2026, from 4.00 to 5.00 pm: Professor Isabel Schnabel, Member of the Executive Board of the European Central Bank, will speak on “Navigating Inflation and Employment in an Era of Supply Shocks and AI”.