Germany Faces Economic Challenges Amid Investment Slumps and Financial Literacy Gaps

Germany's economic outlook remains subdued as a significant portion of companies signal plans to cut back investment and jobs, underscoring a deepening industrial investment crisis. According to the Institute of the German Economy (IW), 33% of businesses intend to reduce their investment budgets in 2026, while only 23% foresee an increase. This trend is exacerbated by ongoing threats to raw material supplies and high energy, labor, and regulatory costs which erode industry competitiveness. The private service sector also exhibits pessimism, although the construction sector bucks this trend with noticeable improvements. In response, the German government has introduced tax relief measures designed to incentivize investments and mitigate these challenges (Source 126961).

Amid these economic headwinds, the general population’s financial literacy presents an additional concern. Despite Germany scoring above average in a 2023 OECD survey on adult financial literacy, only about one-third of Germans consider their financial knowledge to be good, revealing a disconnect between test results and perceived competence. Notably, financial literacy varies significantly by gender and education levels, with 36% of men rating their knowledge highly compared to only 23% of women. Alarmingly, 20% of young people aged 14 to 29 are in debt—the highest level recorded. Experts highlight gaps in financial education, noting that economic instruction is often insufficient in schools and that continuous education is needed across all ages. The Finanztip foundation advocates for Germany’s participation in OECD’s financial literacy modules to better address these gaps (Source 126958).

Poor financial literacy also has direct economic consequences, contributing to increased debt burdens and reduced workplace productivity. Experts stress the urgency of comprehensive financial education initiatives to improve decision-making and reduce vulnerability to financial exploitation.

Together, the worsening investment climate and challenges in financial literacy compound uncertainties for Germany’s economic recovery, demanding coordinated policy and education efforts to stabilize both the industrial base and household financial health.