The DIW, Ifo, and IfW institutes have halved their growth forecast for this year to 0.6 percent after the Iran war caused energy prices to surge.Katherina Reiche noted that the energy price shock and the blockage of the Strait of Hormuz are severely hampering the recovery of the national economy.Inflation is expected to rise toward 3 percent while unemployment is projected to increase to 6.4 percent as industrial production capacity stagnates.Chancellor
Friedrich Merz faces mounting pressure to implement structural reforms while government spending on defense pushes budget deficits higher.