European business leaders have expressed growing concerns that the rise of the far-right in Germany could undermine the country’s ability to implement key economic reforms and attract essential foreign investment. The recent electoral successes of the far-right Alternative for Germany (AfD) party in state elections have heightened investor uncertainty about the stability and direction of the German government.
In state elections held earlier this year in Saxony-Anhalt and Mecklenburg-Vorpommern, the AfD emerged as the strongest party, marking the first time since its founding in 1945 that the Christian Democratic Union (CDU) failed to secure any seats in a state election. These results have fueled speculation about Chancellor Friedrich Merz’s leadership, as the CDU has experienced consecutive electoral setbacks. Despite this, Merz has affirmed his intention to remain in office and continue advancing his reform agenda, which targets reducing bureaucracy, increasing labour market flexibility, and overhauling the pension system. His plan also includes investing around €1 trillion over the next decade in infrastructure and defence, alongside establishing a state fund to support Germany’s pay-as-you-go pension scheme.
Executives from leading corporations voiced concerns that the political uncertainty sparked by the AfD’s rise could slow or stall these reforms. Bettina Orlopp, chief executive of Commerzbank, noted that while there is significant interest in Germany as an investment destination, investors remain sceptical about whether promised reforms will materialise. Similarly, Thomas Buberl, CEO of French insurer Axa, described Germany as “the hot topic” among investors worried about political stability, warning that a politically weakened Germany could have ramifications across Europe.
Miguel López, chief executive of steelmaker Thyssenkrupp, highlighted the potential economic consequences of the AfD’s platform, which includes calls for mass deportations and a fundamental reshaping of the European Union. He emphasized that uncertainty represents a costly barrier for capital investment and stressed the importance of maintaining access to international skilled workers and the European single market.
Economic analysts and business leaders stress the urgency of reforms to address long-standing challenges such as bureaucratic complexity and high energy costs. Stefan Schaible, a senior figure at consulting firm Roland Berger, warned that without accelerated reform efforts, Germany risks becoming a “permanent restructuring case.” Stefan Hoops, head of DWS asset management, echoed this view, saying the critical question now is not the need for reform, but whether Germany can implement changes at the required pace.
An unpublished report by the business initiative Made for Germany, which includes major companies like Siemens and BMW, estimated that Germany will require up to €4.1 trillion in investment by 2035 to meet its economic needs. This includes approximately €1 trillion each for energy systems and infrastructure, €700 billion for defence, and €600 billion for artificial intelligence. The initiative has pledged €850 billion in investments by 2028, but significant additional funds will be necessary from both domestic and foreign investors.
Despite these challenges, overall foreign investment in Germany showed a 50 percent increase last year, reaching an estimated €86 billion, according to the Cologne Institute for Economic Research. Chancellor Merz is preparing to host the inaugural “Invest in Germany” event in Berlin this week, where he is expected to welcome around 200 investors, including the CEOs of Goldman Sachs and BlackRock, signaling continued efforts to maintain Germany’s appeal as a global investment hub amid political uncertainties.