A sharp rise in investor confidence has fuelled hopes that Germany’s long-running economic stagnation could be nearing an end — a potential shift that would carry weight far beyond its borders.
Germany’s ZEW economic sentiment index almost doubled in June, jumping to 47.5 points from 25.2 in May 2025. The increase surprised most observers — analysts had expected only 35.0 — and represented the highest reading since March.
According to the ZEW Institute, the rise reflected growing optimism about Germany’s near-term economic outlook.
ZEW president Achim Wambach said on June 17 that the latest results “seem to strengthen the assessment that the fiscal policy measures announced by the new German government can provide a boost to the economy”.
He added that, together with recent interest rate cuts from the European Central Bank (ECB), “this could bring economic stagnation in Germany, which has lasted for almost three years, to an end”.
Earlier in June, major German research institutes including Ifo and IfW Kiel, had already revised their 2026 growth forecasts upward, citing government spending and improving sentiment.
The ZEW’s June report mirrored those trends and pointed to an increasingly shared expectation that Germany could shift from stagnation to moderate growth within the next 12–18 months.
According to Bloomberg, on June 17, investor morale has improved despite ongoing uncertainty over US trade tariffs. The news outlet noted that a surge in public spending — including a €46 billion corporate tax cut package and a €500 billion infrastructure fund — appeared to be outweighing those concerns.
Trade, in particular, remained central to Germany’s recovery outlook.
Wambach said that if tensions eased — especially in the Middle East and with the US — economic hopes would remain justified. For Germany’s export-heavy economy, even a modest improvement in trade conditions could make a difference.
Meanwhile, the European Central Bank (ECB), in its latest publication, confirmed that its recent interest rate cut was designed to support economic activity across the eurozone, including in Germany.
The ECB wrote that lower rates should ease financial conditions, support lending and household spending and make European exports more competitive.
While the ECB also warned that global trade tensions remained a risk, it also noted that recent data — including Germany’s — showed signs of stabilisation.
The German economy appeared set to show some growth again after three years of dismal results. https://t.co/HlXNFqnQYa
— Brussels Signal (@brusselssignal) June 13, 2025
In a separate article on June 17, Reuters highlighted that the ZEW index measuring current conditions, although still in negative territory, also improved significantly, rising to minus 72.0 from minus 82.0 in May.
That was better than the forecast of minus 75.0 and suggested that views on Germany’s present situation were also beginning to improve, albeit from a very low base.
The June ZEW survey was conducted between June 6 and 16, drawing on the views of 200 analysts and institutional investors.
While the short-term mood has brightened, the underlying economic picture remained cautious. Germany’s economy has either contracted or flatlined for nearly three years.
First-quarter growth in 2025 was revised slightly upwards but many forecasts still expected stagnation for the full year.
The Bundesbank, Germany’s central bank, continued to predict modest GDP growth from 2026 onward, helped by higher public investment, especially in infrastructure and defence.
Bundesbank president Joachim Nagel said recently that if Germany addressed its structural challenges decisively, it could yet become a “success story”.
