Germany's Economic Shift: From Export Powerhouse to Consumer Focus

Germany's new coalition government, led by Friedrich Merz, is trying to boost domestic consumption in the face of global trade uncertainties. With measures like tax cuts and raising the minimum wage, the focus is on increasing purchasing power. However, sustainability trends and savings habits pose challenges.

Germany's economy, long driven by exports, faces a pivotal moment as it seeks to invigorate domestic consumption amidst global trade tensions. The incoming government, led by conservative Chancellor-in-waiting Friedrich Merz, is launching a slew of economic measures aimed at bolstering consumer spending.

In a strategic coalition with the centre-left Social Democrats, Merz has announced tax reductions and minimum wage increases to enhance purchasing power. However, economists and industry experts cast doubt on the efficacy of these measures in revitalizing consumer activity among Germans, known as the world's top savers.

Despite the lowering of income taxes and VAT reductions on restaurant food, the plan sees skepticism due to fluctuating consumer sentiment and savings trends. Environmental consciousness is also influencing spending habits, with many opting for sustainable consumption practices like borrowing clothes.

(With inputs from agencies.)