GBP Monitor August: German Businesses Remain Skeptical After First 100 Days of Chancellor Merz

Press release from 13 August 2025
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How are German businesses faring after the first 100 days of the new government? And how do corporate decision-makers evaluate the economic and tax policy proposals presented by the government? According to the latest GBP data, the government’s initial months have been strongly influenced by foreign policy tensions linked to the U.S. trade conflict, and overall satisfaction with the coalition agreement remains lukewarm: on a scale from 0 (“very dissatisfied”) to 10 (“very satisfied”), the average rating of economic policy measures is 3.6. 

Skepticism despite timetable for corporate tax reform
This cautious assessment may be due in part to doubts about whether certain announced reforms will actually be implemented. Thirty-nine percent of surveyed companies believe it is unlikely that the corporate tax rate will in fact be reduced as outlined in the coalition agreement. Lowering the rate from 15 to 10 percent by 2032 was one of the Merz government’s flagship pledges.

“Businesses are not questioning the timeline itself, but rather whether implementation is realistic under current conditions—such as securing funding, coordinating legal frameworks, and ensuring practical execution between federal and state levels,” explains GBP project lead Professor Dirk Simons. Criticism is particularly strong in agriculture and forestry as well as in the health and social services sectors, while transportation, manufacturing, and construction report more favorable views.

Top priority: income tax relief
From the perspective of corporate decision-makers, the top priority is reducing income tax rates for low- and middle-income earners. Unlike corporate tax reform, however, this measure is only vaguely scheduled for the middle of the current legislative term. “Businesses expect that lowering income tax rates will also benefit sole proprietors and partnerships, boost domestic demand, and help stabilize order books,” says GBP project lead Professor Davud Rostam-Afschar.

Second and third on the wish list are cutting the electricity tax and digitizing tax administration. “If processes like tax returns, VAT pre-filings, or reimbursement claims are fully digitized and automated, companies can save considerable time and administrative costs,” Rostam-Afschar adds.

Strain from the U.S. trade conflict
Nearly three-quarters of companies (71.2 percent) report being directly affected by the trade dispute with the United States. The main impact is uncertainty: 61.5 percent of affected businesses say unclear demand trends are a significant burden. “Such uncertainty typically shapes concrete business decisions—ranging from freezing investments to raising prices or refraining from new hires,” notes Simons. Whether the recent EU–U.S. tariff agreement will ease these reactions remains to be seen in the months ahead.

GBP data also reveal how foreign policy tensions have dampened the economic upswing seen in the first 100 days of the Merz administration: Right after the federal election, sentiment in the German business community improved noticeably. However, the trade conflict with the United States led to a sharp drop in growth expectations. Following the latest tariff deal, forecasts have risen slightly again, now standing at 0.6 percent for the next twelve months and 1.7 percent for the coming five years.

Read the GBP survey on the first 100 days of the Merz government here: https://www.accounting-for-transparency.de/wp-content/uploads/2025/08/gbp_monitor_2025_08.pdf 

Further information on the GBP monitoring report
The German Business Panel interviews more than 800 companies per month and in March 2024, also more than 250 researchers, on the economic situation in Germany and collects data on 1) any expected changes in revenue, profit and investments, 2) economic decisions, 3) the expected shutdown rate in the sector, and 4) the satisfaction with the economic policy. Furthermore, GBP reports on particularly relevant questions every three months. 

Background information on the German Business Panel
The GBP is the long-term survey panel of the trans-regional Collaborative Research Centre “Accounting for Transparency” (www.accounting-for-transparency.de). The Collaborative Research Center (CRC) “TRR 266 Accounting for Transparency” was established in July 2019. In May 2023, the German Research Foundation (DFG) approved the extension of four additional years. It is the first CRC with a focus on business administration. More than 100 researchers from the following nine universities are involved in the CRC: Paderborn University (host university), Humboldt-Universität zu Berlin, University of Mannheim, researchers of Ludwig-Maximilians-Universität München, Goethe University Frankfurt am Main, Frankfurt School of Finance & Management, University of Cologne and Leibniz University Hannover. The researchers examine how accounting and taxation affect the transparency of companies and how regulation and firm transparency impact our economy and society. The CRC is funded with approx. EUR 18 million.

Contact:
Professor Dr. Davud Rostam-Afschar
Professor of Accounting
University of Mannheim
Telephone: +49 621 181-1645
E-mail: rostam-afscharmail-uni-mannheim.de

Professor Dr. Dirk Simons
Chair of Business Administration and Accounting
University of Mannheim
Telephone: +49 621 181-1663
E-mail: dirk.simonsmail-uni-mannheim.de

Yvonne Kaul
Research Communication
University of Mannheim
Phone: +49 621 181-1266
e-mail: kaulmail-uni-mannheim.de