By Miranda Murray

BERLIN, Dec 2 (Reuters) – Germany’s government must do more to save industry from the country’s economic “free fall”, said the BDI sector association on Tuesday, as it slashed its production forecast for the year.

Europe’s largest economy contracted in 2023 and 2024, and it is expected to grow only slightly, by 0.2%, this year as higher investments are set to take hold only from next year.

German Chancellor Friedrich Merz, who came to power promising a rapid turnaround for German industry, secured approval in March for a 500 billion euro ($580.20 billion) special fund to spend on infrastructure.

“Germany, as an economic location, is finding itself in a free fall, but the German government is not reacting decisively enough,” the BDI said in its biannual industrial report published on Tuesday.

The BDI slashed its 2025 industrial production forecast to a decline of 2.0%, down from a fall of 0.5% predicted in March.

“Every month without decisive structural reforms costs further jobs and prosperity, and severely restricts the government’s future room to manoeuvre,” the BDI said, calling for more investment and less bureaucracy.

The government did not immediately react to the criticism.

PROMISED ECONOMIC REFORMS ARE LACKING

Striking a similar tone, the VDMA engineering association said on Tuesday that promised reforms had been lacking.

“The necessary signals of a new beginning in global trade are lacking, as are the promised economic reforms that would truly ease the burden on businesses,” said VDMA chief economist Johannes Gernandt.

The group reported that overall engineering orders had increased slightly in October, driven primarily by a jump in contracts from outside the euro zone, while domestic orders and those coming from within the currency bloc stagnated.

“The slight increase in orders in October is encouraging, but unfortunately only a consolidation at a low level as last October was one of the weakest months of 2024,” said Gernandt.

“The mechanical engineering industry continues to stagnate,” he said, pointing out that orders for the first 10 months of 2025 were down 1% year on year.

CHANGE

OCTOBER

overall +4% y/y

of which German +0% y/y

foreign +6% y/y

AUG -6% y/y

TO OCT

of which German -3% y/y

foreign -8% y/y

($1 = 0.8618 euros)

(Reporting by Miranda MurrayEditing by Madeline Chambers and Gareth Jones)