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Submitted by Thomas Kolbe
In its most recent annual report, Germany’s Council of Economic Experts — once seen as a market-oriented counter to government overreach — has issued what appears to be a courtesy opinion. Instead of challenging the political norm, the five economists largely align with Berlin’s agenda of increased state intervention, higher taxes, and stricter regulations.
During a federal press conference on Wednesday, the council presented its annual assessment to Chancellor Friedrich Merz in person for the first time. However, the contents seemed less like independent advice and more like a collection of familiar political slogans.
At the forefront is the repeated call for “cutting bureaucracy,” a phrase often echoed but seldom acted upon. The council overlooks a fundamental issue: the German economy is being stifled by its own regulatory framework. Over the past three years, businesses have had to hire approximately 325,000 additional personnel solely to navigate the influx of new regulations, diverting resources that do not enhance productivity.
Bureaucratic Constraints and Military Keynesianism
Among the council’s primary recommendations is an emphasis on “increased joint procurement and innovation” within the defense sector, aligning perfectly with government priorities. Coupled with its uncritical endorsement of climate policies, the report demonstrates how thoroughly the economists have adopted state narratives.
Rather than scrutinizing the economic strain imposed by the artificial “green industry,” which hampers productivity across various sectors, the council now endorses the concept of a war economy as a potential growth driver. This approach raises alarming parallels. Instead of recalibrating Germany’s economic strategy, the report reaffirms the same flawed assumptions: more government involvement, increased coordination, and diminished individual accountability.
Illusory Growth and Real Debt
Regarding growth, the council once again mirrors government forecasts, predicting a modest 0.2% GDP growth for 2025. This indicates that the substantial, debt-financed stimulus measures — expected to significantly increase public debt in the coming years — have already lost their momentum.
With the state accounting for approximately 50% of GDP and net new borrowing around 4.2% (including special funds and off-balance sheet items), the implications are dire: the private economy has contracted by over 4%.
This underscores a significant failure of the government’s Keynesian approach — yet the economists respond with timid suggestions for bureaucratic reform while largely echoing eco-socialist rhetoric.
Inheritance Tax: A New Tool for Redistribution
The council’s most contentious recommendation involves inheritance taxation. Once a proponent of market-oriented principles, the body now advocates for increasing taxes on inherited business assets, criticizing current exemptions as “socially unjust.” The phrasing could easily be taken from the Green Party’s platform.
Specifically, the report proposes capping the tax exemption for business assets at €26 million and either eliminating or significantly limiting relief for larger inheritances. To prevent liquidity crises during business succession, payment deferrals would be introduced.
However, beneath the rhetoric of “asset mobility” lies a distinctly socialist vision — one focused on broader redistribution and fiscal support for the state.
Meanwhile, Germany’s real debt (considering special funds and concealed borrowing) is projected to increase by over 5% next year. Yet the council perceives no issue, as long as Berlin remains aligned with the EU’s “debt club.”
The State as a Sacred Entity
Any notion of reducing government size or halting the interventionist trend has disappeared. The council now fully endorses the prevailing political orthodoxy. In doing so, it breaks significantly from the principles of private property and free enterprise, aligning itself intellectually with Marcel Fratzscher’s DIW — a think tank known for its statist leanings.
The report even advocates for a state-directed “retirement savings fund” to steer private investments toward politically determined goals — primarily climate initiatives. Once again, the state attempts to guide private capital allocation while presenting it as “financial inclusion.”
The underlying message is clear: the state is no longer viewed as a problem, but rather as a solution.
This represents a profound paradigm shift, even by Berlin’s standards.
The Decline of the Economic Council
The council’s ideological shift — particularly its support for elevated inheritance taxes — marks a critical turning point. It confirms suspicions that Berlin’s bureaucracy has surrounded itself with compliant advisors, ensuring that no fundamental market-liberal critique can penetrate its defenses.
Now, even family-owned enterprises are to be subjected to the rigors of redistribution. This signifies a nadir for a once-respected institution that has gradually deviated from the principles of economic freedom.
The principles of private property, generational continuity, and the right to freely manage one’s already-taxed assets have been subordinated to the new orthodoxy of “social justice.”
If economists genuinely value civilizational progress, these principles should be their foundation, not their target.
It is a disheartening moment for German academia — assuming it can still be referred to as such.
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About the author: Thomas Kolbe, born in 1978 in Neuss, Germany, is a graduate economist. With over 25 years of experience as a journalist and media producer for various industries and business associations, he focuses on economic processes and observes geopolitical events from a capital market perspective. His publications emphasize individual rights and self-determination.
