Germany was billed as Europe's growth driver. Now economists are saying: Not so fast

Huge investment pledges and major fiscal changes had bolstered hopes that Germany could give the euro zone economy a much-needed boost, but economists are starting to question if — and when — that will happen.

Germany was a hub of excitement earlier this year, with many politicians, analysts and economists sharing big hopes of an economic rebound — domestically, and across Europe.

It had moved to amend its long-standing debt brake rule, which limits how much debt the government can take on and dictates the size of the federal government's structural budget deficit. Certain defense and security expenses above a specific threshold are exempt from the debt brake under the new rules.

The country also opted to create a 500 billion euro ($592 billion) infrastructure and climate investment fund.

The shift was considered a potential game-changer at the time, and was widely billed as a way to turn Germany's sluggish economy around.

The country recorded annual contractions in both 2023 and 2024, with 2025 also off to a muted start. While gross domestic product grew 0.3% in the first quarter, it shrank by 0.3% over the following three months, according to the latest data.

The euro zone economy more broadly is also struggling, posting growth of 0.6% in the first quarter, although this slowed to just 0.1% in the following three months.

European Central Bank Governing Council member Martins Kazaks told CNBC earlier this month that “the big hope lies on Germany” when it comes to fiscal spending boosting the euro zone economy next year.

But it's looking increasingly unclear whether this will come to fruition.