BERLIN — German Chancellor Friedrich Merz urged Ukrainian President Volodymyr Zelenskyy to curb the flow of young Ukrainian men to Germany and ensure they stay to defend their country. “In a lengthy telephone conversation today, I asked the Ukrainian president to ensure that young men in particular from Ukraine do not come to Germany in large numbers — in increasing numbers — but that they serve their country,” Merz said Thursday. “They are needed there.” His comments come amid growing concerns in Germany — particularly within Merz’s conservative ranks — that public support for the Ukrainian cause could wane if young male Ukrainians are seen to be avoiding military service by coming to Germany. Following the relaxation of Ukrainian exit rules over the summer, the number of young Ukrainian men aged 18 to 22 entering Germany rose from 19 per week in mid-August to between 1,400 and 1,800 per week in October, according to German media reports citing the German interior ministry.   Markus Söder, Bavaria’s conservative premier and an ally of Merz, proposed restrictions on the EU’s so-called Temporary Protection Directive if Kyiv doesn’t voluntarily reduce arrivals. The rules provide Ukrainians with an automatic protected status.       Germany is one of Ukraine’s staunchest allies within the EU. The country has hosted over 1.2 million Ukrainian refugees since Russia’s full-scale invasion in 2022 and is its biggest donor in military aid after the U.S. in absolute numbers. Members of Merz’s ruling coalition fear that the growing presence of young Ukrainian men in Germany will be turned into a political flash point by members of the far-right Alternative for Germany (AfD) party, who criticize the government’s ongoing support for Kyiv. The ascending AfD, now polling first, has long demanded a stop to welfare payments to Ukrainians. Around 490,000 Ukrainian citizens of working age receive long-term unemployment benefits in Germany, according to data from the country’s employment agency. Merz’s coalition — which is under increasing fiscal pressure and generally wants to reduce welfare spending — is working on a draft law that would cut the right to such benefits for Ukrainians and encourage work. “In Germany, the transfer payments for these refugees will be such that the incentives to work are greater than the incentives in the transfer system,” Merz said Thursday. In the same phone conversation, Merz also urged Zelenskyy to sort out the country’s corruption problems as Kyiv faces the fallout of a massive scandal involving kickbacks — another development that German officials fear could undermine public support for the embattled country.

PARIS — Emmanuel Macron was on a plane to Egypt when France faced the most serious crisis of his time in office. So why did the French president leave the country early Monday morning while there was such uncertainty at home? The answer, according to several current and former French officials, was to ensure his legacy. With fewer than 20 months left in the Elysée Palace, Macron is laser-focused on cementing his place in the history books — and believes he’s earned that distinction for his work in the Middle East, they said. The French president wasn’t going to miss his chance to be there for Monday’s peace summit in the Egyptian resort of Sharm el-Sheik, even with his house on fire and irrespective of it forcing his twice hand-picked prime minister, Sébastien Lecornu, to push back presenting his draft budget by a day, nearly missing the deadline. French officials in recent days have been working hard to craft a narrative that the Gaza peace plan pushed by U.S. President Donald Trump was triggered by Macron’s own proposal and his lead role in pushing for recognition of Palestinian statehood at the United Nations General Assembly last month.  That’s why Macron really wanted to make it to the summit in Egypt, said a government adviser who, like others quoted in this piece, was granted anonymity to speak candidly. An ally of Lecornu said the president was “very, very focused” on Gaza.  The French political system is designed so that the president can represent the country on the world stage while the prime minister looks after matters at home. But these are exceptional circumstances in France, with Lecornu resigning after just 14 hours before being reappointed and some politicians even speculating that Macron might not even see out his time in office. At first sight, Macron appears to be following in the footsteps of former presidents, such as François Mitterrand and Jacques Chirac, who pivoted to the international stage in the later years of their terms after losing their parliamentary majorities.   But Macron hasn’t let go of domestic policy. Unlike his predecessors, he isn’t adopting a “hands-off attitude,” said an early Macron backer.      “Macron has become very attentive to his European and international visibility,” said a former French official. “It’s what he’s got left to give himself the impression that he still has influence.” At first sight, Macron appears to be following in the footsteps of former presidents. | Joel Saget/AFP via Getty Images CHARM IN SHARM The Elysée last week went into lobbying mode, ramping up briefings with academics and journalists to drive home that Macron had been key to the success of Trump’s peace plan. “The Elysée’s priority was to spread the idea that their plan was very useful,” said a former diplomat, referencing the Franco-Saudi roadmap to end the war in Gaza. At the U.N. General Assembly last month, Macron risked drawing U.S. and Israeli ire with his push for Palestinian statehood, which was followed by close to a dozen Western states doing the same. His speech on the U.N. stage drew comparisons in Paris with other occasions when France stood up to Washington, in particular former Prime Minister Dominique de Villepin’s landmark 2003 address rejecting Washington’s march to war in Iraq. While in Egypt, Macron played carefully with the optics of power, of which he is an astute reader, to avoid being seen as playing second fiddle to Trump. He chose not to stand on the podium behind the U.S. president, instead sitting with Turkish President Recep Tayyip Erdoğan and Middle Eastern leaders, a move that was noted by Trump. Talking to reporters on the sidelines of the summit, Macron spoke about the efforts needed to keep the ceasefire in Gaza alive and the contribution France could make. Asked about national politics, he presented himself as “the guarantor of French institutions,” but could not help but lash out at opposition parties for trying to destabilize his prime minister. WINNING THE BATTLE, LOSING THE WAR Many officials say the French president is trying to remain above the fray. But there are several explanations as to why he’s doing so that go beyond the legacy argument. Some attribute it to the Jupiterian strategy of shrouding his office in mystique, communicating in grand gestures, and refusing to sully himself with the mudslinging of domestic politics.  One government official said Macron is “probably letting tensions dial down” and he is remaining silent to protect the institutional checks and balances of the French state.  Macron has cycled through centrist and center-right prime ministers in the past year. | Chip Somodevilla/Getty Images Others say the silence is strategic, even magnanimous. They say the president recognizes just how unpopular he is — a recent poll put his approval rating at 14 percent — and is trying to prevent his allies from being tarnished by his political toxicity.  But Macron never really lets go of anything. In his meeting with opposition parties last week, Macron made it very clear who calls the shots when, according to a presidential aide, he offered to partially delay his flagship pension law, which pushed back the age of retirement to 64 from 62 for most workers.  Macron has cycled through centrist and center-right prime ministers in the past year to fend off challenges to that law and other achievements such as his tax cuts. Many saw his decision to reappoint the loyal Lecornu, just days after he resigned in the aftermath of his 14-hour government, as the sharpest example of his dogged refusal to hand over power despite his camp losing last summer’s snap election.   Macron ended up being forced to sell off the crown jewel he had jealously been guarding, the pensions reform, at least for now. Lecornu announced Tuesday that he would freeze the law raising the retirement age until 2027, in order to secure support from the Socialist Party and survive a no-confidence vote on Thursday.  Macron might yet save his pensions reform as there are doubts swirling that the suspension might not pass through parliament.  But fighting tooth and nail to ensure his legacy might also destroy it if Macron can’t secure the future of his centrist movement and his potential successors, such as former prime ministers and likely presidential candidates Edouard Philippe and Gabriel Attal.   Macron’s handling of the current crisis will almost certainly affect the campaign of any centrist trying to stop Marine Le Pen, or someone else from the far-right National Rally, from winning the presidency.  “What image are we projecting? We’re in favor of pension reform, and then we give up. It’s not clear,” said the Lecornu ally quoted above. “The only one who appears to know what she represents is Marine Le Pen,” they said. “She has a populist message, but it’s simple and consistent: This circus must stop.” Pauline de Saint Remy and Giorgio Leali contributed reporting.

Factory workers, cashiers and hotel staff in Greece could soon be working longer shifts, with the country set to become the first EU member to officially introduce a 13-hour workday for the private sector. Parliament is set to vote on the controversial legislation on Wednesday, amid planned nationwide protest rallies. Despite growing pushback from unions and opposition parties, the bill is expected to pass comfortably with the votes of the ruling New Democracy party. Since taking power in 2019, the center-left government has transformed the country’s labor market into what it hails as one of the most “flexible” in Europe. Starting in July 2024, employees in industry, retail, agriculture and some service sectors can be asked to work a new six-day schedule, with an extra 40 percent paid on top of their regular wage for the sixth working day. The move, a shift against a trend toward shorter working weeks in some European countries, was deemed necessary due to Greece’s aging and shrinking population and a major shortage of skilled workers. Greece was gripped by a general strike on Tuesday, the second this month, as unions demanded the withdrawal of the new legislation. Most public transport and public services were brought to a standstill amid mass protests. “Flexible working hours” in practice means “the abolition of the eight-hour workday, the destruction of every concept of family and social life and the legalization of overexploitation,” the public sector union, ADEDY, said in a statement. The new legislation stipulates that employees can work up to 13 hours per day on no more than 37.5 days per year, with a maximum limit of 48 hours per week, based on a four-month average and maximum overtime of 150 hours. But the 40-hour workweek continues to be the rule, and overtime in general is to be better compensated, with a 40 percent bonus. The 13-hour workday should be voluntary with no employee obliged to work overtime, the Labor Ministry has said. But unions have argued that employers have the upper hand in this negotiation, particularly in a country with almost no tradition of workplace inspections. The legislation would also introduce an option for annual leave to be fragmented into more than two parts throughout the year, flexible weekly schedules, two-day contracts and fast-track hiring via an app, all in order to fulfill “urgent company needs,” the draft legislation says. Greece’s economy has rebounded since its decade-long financial crisis, which started with the 2009 debt crisis and was followed by three bailout programs that lasted until 2018. The unemployment rate, which during the crisis reached a staggering 28 percent, was at 8.1 percent in August, the latest month for which figures available. The EU average stood at 5.9 percent. However, there has been no convergence with the EU on the rest of the data: Salaries remain among the lowest in the bloc, which means many Greeks are forced to work two jobs to cover the soaring cost of living, in particular high housing costs. The country is second to last in the EU when it comes to purchasing power, with nearly half of households unable to afford basic necessities, according to a 2024 report by the European Committee of Social Rights. One in five Greeks works more than 45 hours a week, the highest rate in the European Union, according to Eurostat data published earlier this month. According to OECD data, Greece ranked fifth worldwide in terms of annual working hours in 2023, behind only Colombia, Mexico, Costa Rica and Chile. NEW LABOR RULES WILL GIVE ‘BOOST TO THE PRIVATE SECTOR’ Labor Minister Niki Kerameus of the New Democracy Party strongly supports the new legislation, arguing that it “gives a boost to the private sector” and “strengthens the employees.”  “The expression ’13-hour workday’ implies that we will all work 13 hours every day, all year round. Is this true? Can it happen every day? No, is the answer. It can happen up to 37 days a year, or three days a month. Secondly, it requires the employee’s agreement,” she told Skai TV in an interview on Tuesday. Kerameus has repeatedly stressed that an employee cannot be laid off for refusing to accept the new rules, added that with unemployment levels at a “17-year low […], you can understand how much this strengthens the position of the employee.” But opponents of the new law, including Dimitrios Mantzos, a lawmaker with the main opposition socialist Pasok party, called out the government in parliament on Tuesday for deregulating labor relations, heightening job insecurity and disrupting work-life balance. “The mere fact that we are here discussing such a bill is unacceptable, it is shameful, it is backward,” said Efi Achtsioglou, an MP with the New Left party. “It is unthinkable that in 2025 we are still debating whether to legislate a 13-hour work day.” Labor market experts have said the move would legalize labor rights violations that have been committed by employers in terms of overtime work and will lead to burnout and increased accidents. The legislation has been repeatedly condemned by employee representatives. “These regulations exacerbate job insecurity and reinforce the model of flexible and unprotected work,” Greece’s main private sector union, the Greek General Confederation of Labour, said in a letter to Kerameus in late September.

BERLIN — Germany’s coalition government agreed on measures to revamp the country’s ailing economy after hours-long negotiations that lasted into early Thursday. Chancellor Friedrich Merz’s conservative alliance and the center-left Social Democratic Party (SPD) have been under pressure to come up with a plan to deliver on the sweeping reforms and a rapid turnaround in the country’s economic mood that they promised since taking office in May. Following two straight years of economic contraction, the government expects growth of 0.2 percent in the current year and an acceleration to 1.3 percent next year. “The economy is under pressure, and everything we decided yesterday reflects this pressure,” Bärbel Bas, the SPD’s labor minister, told reporters in Berlin Thursday morning. “We now need solutions as a matter of urgency, and for our part, I would like to say that we have agreed that we stand by the employees and want to secure jobs in this country.” The total number of unemployed people reached 3.02 million in August — the highest figure in a decade. Manufacturing companies that once drove the postwar economic boom are shedding jobs. These include national champions such as engineering group Robert Bosch —which announced last month that it would cut a further 13,000 jobs by 2030 — automaker Volkswagen, and Germany’s second-largest bank, Commerzbank. Measures designed to stabilize the economy and secure jobs include financial incentives for retirees to continue working and stricter rules for beneficiaries of the long-term unemployment benefit system. Merz spoke of a “really great working atmosphere” between the negotiators and promised a quick implementation of the measures. The incentives for pensioners would be adopted in Cabinet next week, he said, while the the legislative process on the reform of the long-term unemployment system is “to be opened immediately.” The latter topic is especially sensitive for Merz’s coalition partner, the SPD, who are known to be staunch supporters of Germany’s strong welfare state and workers’ right. Under the agreement, long-term unemployment benefits will be reduced by 30 percent if a beneficiary misses two consecutive appointments at the employment office, ultimately losing all benefits if the person fails to show up for the third appointment. “If 100,000 more people are encouraged to leave the long-term unemployment system by incentives that make work more worthwhile than unemployment, the rule of thumb is that we will save around €1 billion. That is our goal,” said Bas, who is also the co-chair of the SPD. “Our common goal is to get people into work. Then we will make real savings,” she added.

The White House is continuing to pressure Portland, surging federal law enforcement and floating plans to go after the city’s pocketbook on Friday as protests continue over President Donald Trump’s deployment of the National Guard. The administration will review cutting federal funding to Portland, press secretary Karoline Leavitt told reporters at a press briefing, citing what she said was elected officials’ refusal to work with the White House to crack down on street crime and immigration enforcement. “We will not fund states that allow anarchy,” said Leavitt. The president surprised city officials — and many in the Pentagon — by writing last Saturday on Truth Social that he was directing Defense Secretary Pete Hegseth to send troops “to protect War ravaged Portland, and any of our ICE Facilities under siege from attack by Antifa, and other domestic terrorists.” He said he authorized “the use of full force” for “all necessary troops” in doing so, an extraordinary declaration for an American city. The next day, both Portland and Oregon sued to block Trump from federalizing the state’s National Guard, calling the measures “provocative and arbitrary” and arguing that they threatened to incite public backlash. A hearing for that case was scheduled for Friday. The city’s mayor, Keith Wilson, and Oregon Gov. Tina Kotek have both argued that Portland does not need federal assistance to fight crime and that Trump’s actions are based on outdated assessments of its public safety and an abuse of presidential power. “We think it’s despicable that these local elected officials who swear an oath to protect their people are preventing law enforcement from doing their jobs on the ground,” said Leavitt. “So that’s why the president has directed his team here at the White House, and they are already on it, to look at how we can cut funds.” In a statement, Wilson said the city “is not a military target.” “We will use every legal and constitutional tool at our disposal to protect our residents, uphold our values, and defend the rights of every Portlander,” he said. The White House Office of Management and Budget did not immediately respond to a request for comment on what specific cuts are on the table for Portland. City Council President Elana Pirtle-Guiney told POLITICO in a statement that Trump’s threats “only stand to cause harm.” “There is no uncontrolled situation unfolding in our city that warrants the president’s threats to withhold the federal funding that keeps Portland alive and healthy,” she said. “If our president is serious about keeping our city ‘under control,’ then we absolutely cannot take actions that would contribute to unemployment in Portland. Right now, this city is on track, and our leaders are united in their commitment to protect and serve our community.” Also on Friday, Department of Homeland Security spokesperson Tricia McLaughlin announced the agency would surge Customs and Border Patrol and Immigration and Customs Enforcement resources into the city, after conservative media influencer Nick Sortor was arrested by Portland police officers during a Thursday night protest. “This violence will end under @POTUS Trump,” she wrote alongside a video of Sortor’s arrest. At the direction of Attorney General Pam Bondi, federal officials are also investigating the arrest, senior Department of Justice official Harmeet Dhillon wrote on X Friday. Kotek’s office and the Portland Police Bureau both declined to comment. Wilson’s office did not immediately respond to a request for comment. Natalie Fertig contributed to this report.

Friedrich Merz’s stimulus can’t arrive quickly enough. The number of people out of work in Germany rose by more than expected again in September, as years of economic weakness took their toll on the labor market. Data released by the Federal Labor Office showed unemployment, adjusted for seasonal effects, rose by a worse-than-expected 14,000 to a new 14-year high of 2.98 million. “The labor market continues to lack the necessary impetus for a stronger recovery,” said labor office head Andrea Nahles. Indeed, the local headlines are being conspicuously dominated by national champions shedding staff. Earlier this week, Lufthansa said it will cut 4,000 administrative jobs by 2030. The news came only days after engineering giant Robert Bosch said it would cut an additional 13,000 positions by 2030, after announcing 5,550 layoffs in November last year. Automaker Volkswagen and Germany’s second-largest lender, Commerzbank, announced significant job cuts earlier this year. Such trends are having knock-on effects further down the supply chain: Insolvencies nationwide were up over 12 percent from a year earlier in the first half of 2025. Last week it was the turn of Kiekert, an auto supplier that pioneered central locking sytems, to declare itself bankrupt, putting another 700 German jobs at risk. Europe’s largest economy has been in recession for two consecutive years and will eke out minimal growth this year, according to a report from think tanks that advise the government. Many fear the country risks missing out on the turnaround that Chancellor Friedrich Merz promised to deliver when he took office earlier this year. Companies have become increasingly skeptical that the government will deliver necessary reforms. Only last month, the unadjusted number of unemployed in Germany passed 3 million for the first time in a decade. It dipped back below that level in September, as is usual at this time of year. The seasonally adjusted jobless rate remained stable at 6.3 percent of the workforce. While analysts say that unemployment may continue to tick up, they argue that changing demographics and ongoing skills shortages should prevent any massive surge similar to the one in the early 2000s that triggered radical labor market reforms under then-Chancellor Gerhard Schröder. The jobs numbers wasn’t the only worrying data out of Germany on Tuesday. Retail sales volumes in August fell 0.5 percent, suggesting that consumers are getting increasingly cautious about spending. On the brighter side, recent declines in world energy prices are leaving more in consumers’ pockets, and Pantheon Macroeconomics’ Claus Vistesen pointed out that planned cuts to energy-related taxes will give them a further boost from January.

BERLIN — Less than five months since he became chancellor, Friedrich Merz’s options for ending Germany’s long economic stagnation already look slim. Merz came to power on a promise to bring a speedy end to Germany’s industrial malaise, but the economic outlook has only turned grimmer since he took office, and his political frailties aren’t helping. Business leaders are publicly venting their frustration. “The mood in our industry is no longer just tense —  it is furious, and it is disappointed,” Bertram Kawlath, president of VDMA, a lobby group for machinery and equipment manufacturers, said at a recent event in Berlin as Merz looked on. “The fear of reform looms large like the proverbial elephant in the room. This hesitation comes at a high price. More and more companies are facing deep cuts. Jobs are being lost.” Merz already faces an uncomfortable reality: He has few weighty options for delivering the sweeping reforms and the rapid turnaround that he staked his election victory on. Manufacturing firms that once powered the country’s postwar economic boom are shedding jobs. The total number of unemployed people reached 3.02 million in August — the highest figure in a decade. Following two straight years of economic contraction, economists expect little if any growth this year. German business morale is on the decline. A historic move by Merz and his allies to unleash hundreds of billions of euros in borrowing for infrastructure and defense last March is having a beneficial economic effect — but it’s not enough to fully make up for larger structural problems, economists say. That spending will help bring back anemic growth of 1.3 percent in 2026 and 1.4 percent in 2027, a group of German economic institutes predicted this week. “The German economy is still on shaky ground,” said Geraldine Dany-Knedlik of the German Institute for Economic Research. “It will recover noticeably in the next two years. However, given ongoing structural weaknesses, this momentum will not be sustained.” None of this can rightly be blamed on Merz’s government. The massive structural problems the chancellor is confronting — U.S. President Donald Trump’s tariff wars, high energy prices, increased competition from China, an aging population — long predated his arrival or seem largely beyond his power to resolve. But that hasn’t stopped Merz from suffering the political consequences. Dissatisfaction in his government is growing, with a new poll showing only 26 percent of Germans approve of his performance. Merz’s main political opponent, the far-right Alternative for Germany (AfD), the largest opposition party in parliament, is increasingly hitting the chancellor hard on the economy and on his efforts to revive it through borrowing. In September, the AfD surpassed Merz’s conservatives and became the country’s most popular party for the first time since its inception more than a decade ago. | Ying Tang/Getty Images “You will go down as the most bankrupt of all chancellors in the history of the Federal Republic of Germany,” AfD co-leader Alice Weidel said in the Bundestag this week before going on to bemoan how “deindustrialization and exodus are affecting all industrial sectors.” The approach appears to be working. In September, the AfD surpassed Merz’s conservatives and became the country’s most popular party for the first time since its inception more than a decade ago, according to POLITICO’s Poll of Polls. ‘AUTUMN OF REFORMS’ Merz is keenly aware of the rising alarm among industry leaders and appears to have realized that his political survival depends on speedy action. After spending the first months of his chancellorship largely focused on foreign policy issues — particularly on rallying military aid for Ukraine in the face of the Trump administration’s faltering support — Merz has turned to domestic matters, conducting a series of high-profile meetings with business leaders and addressing the economy head-on. “We haven’t seen any real growth for many years,” Merz told members of a chamber of trade during a visit to his home region in western Germany earlier this month. “The first step toward improvement is to recognize that we are not just dealing with a temporary economic downturn, but with a structural growth crisis.” Merz then vowed to launch fundamental reforms in the fall. Some of his conservatives have dubbed the initiative “the autumn of reforms.” The problem for Merz is it’s unclear whether his coalition ― consisting of his conservative alliance and the center-left Social Democratic Party (SPD) ― will be able to push through consequential legislation in the coming months. Lawmakers are considering granular moves to trim long-term unemployment benefits and to increase financial incentives for pensioners to work. But proposals on the most far-reaching and politically sensitive reforms — including a structural overhaul of the pension system and a more sweeping reform of the country’s constitutional spending restraints — have been outsourced to expert commissions. That makes quick, bold reforms unlikely given the complexity of the tasks involved.  Some SPD politicians are also expressing doubt that much will materialize from the “autumn of reforms,” calling it an empty political stunt. “I don’t really understand the term,” said Dagmar Schmidt, a SPD lawmaker. “We have not even entered negotiations.” In the meantime, Merz has called for more high-profile meetings, including a two-day coalition summit in a villa on the outskirts of Berlin focused on competitiveness. He is also planning talks with representatives of the troubled car and steel industries. This week, Merz also appointed a commissioner for foreign investment who said one of his first orders of business will be to organize an investor conference.  “I don’t really understand the term,” said Dagmar Schmidt, a SPD lawmaker. “We have not even entered negotiations.” | Britta Pedersen/Getty Images Meanwhile, business representatives say time for the truly ambitious reform needed is running out. “It’s like our economy is in intensive care and we need immediate treatment,” said Jörg Dittrich, president of the German Confederation of Skilled Crafts. Dittrich called on the government to immediately do away with unnecessary bureaucracy and overhaul Germany’s social security system to control surging costs. “We must not lose our competitiveness because we cannot afford to pay for all this,” Dittrich said. “We must ensure that we can continue to invest.” ‘THERE IS NO PLAN’ One reason Merz’s options are limited is his relative political weakness. With the rise of the political extremes, the chancellor’s ideologically divergent coalition has one of the narrowest parliamentary majorities in Germany’s postwar history. It was that weakness that forced Merz to undertake what may well end up being his most ambitious reforms even before taking office. In March, Merz used the outgoing parliament to push through a historic package of spending reforms that partially untethered Germany from the self-imposed spending restraints of its constitutional debt brake, creating a €500 billion infrastructure and climate fund and allowing for massive defense spending to face down the threat posed by Russian President Vladimir Putin. Merz decided to act at that moment because the country’s centrist parties still had the two-thirds majority needed to amend the constitution while the previous parliament was still in power. That’s a majority he no longer has, limiting his ability to undertake similarly sweeping constitutional reforms. But the bigger problem for Merz is that the spending reforms already passed are likely not enough to drive robust growth, economists say. For one thing, there are doubts as to whether Germany’s massive defense spending increase will stimulate much economic growth, as some have hoped. In the short term, every euro the German government spends on defense will lead to only 50 cents of additional economic activity, according to a study by economists at the University of Mannheim. In the longer term the effects are hard to predict, according to the authors. “To go out and say that this is really the recipe for the boom is really overselling it from an economic perspective,” said Tom Krebs, one of the authors of the study. “We can’t have that many tanks to compensate for all the other stuff that’s going wrong in the manufacturing sector.” While infrastructure spending has a greater multiplier effect, the €500 billion package is also not enough on its own to stimulate strong growth, as it is spread out over 12 years — and much depends on how it is used. “It’s still good, but it’s much less than people think it is,” said Krebs. Many economists agree that what Merz has done so far is not enough. A majority of economists rated the performance of Merz’s coalition as “rather negative” in a survey conducted by a leading economic institute.   “I think we need a sensible and strategic industrial policy, and we don’t have it,” Krebs said. “There is no plan.”

WARSAW — The cost of political fighting between President Karol Nawrocki and the Polish government, combined with a booming defense bill, is starting to show up in the country’s finances. Ratings agency Fitch said on Friday that the deadlock is weighing on Poland’s credit score, something that could push up the country’s borrowing costs. While the agency kept Poland’s long-term sovereign rating unchanged at A-, it cut its outlook to “negative” over concerns about public sector wages and defense spending. Those concerns are now compounded by the risk of EU funds getting frozen again. Brussels unblocked billions in cash thanks to promises from the centrist government of PM Donald Tusk that it would roll back unlawful judicial reforms pushed through under the previous populist right-wing Law and Justice (PiS) party government, which ruled Poland between 2015 and 2023. But the right-wing Nawrocki, who is backed by PiS, is unlikely to sign off on such legislation. Fitch said that repeated vetoes by Nawrocki of the government’s efforts to bring Poland back in line with EU law were paralyzing policy until the next parliamentary election in 2027. Fitch’s update quickly resulted in a blame game between Tusk’s coalition government and PiS. “This decision is the consequence of President Nawrocki blocking key legislation, which limits the space to strengthen the foundations of the economy and deliver the necessary fiscal consolidation,” Finance and Economy Minister Andrzej Domański said on X. Domański argued that while the government has restored growth, kept unemployment low and overseen the fastest disinflation in Europe, the negative outlook is a “warning signal” that should be heeded by Nawrocki and his advisers. Fitch’s update quickly resulted in a blame game between Donald Tusk’s coalition government and PiS. | Adam Warzawa/EPA PiS pushed back that the fiscal deterioration predates Nawrocki’s presidency, since he has only been in office since Aug. 6. PiS’s former deputy prime minister and defense minister, Mariusz Błaszczak, further warned that Fitch’s outlook cut “signals increased risk for investors, which could lead to higher borrowing costs on international markets.” This, in turn, could squeeze the defense budget and force the government to look for savings or new funding sources, he added. GROWING DEFENSE BURDEN Poland is NATO’s top defense spender relative to economic output, with 4.7 percent of GDP currently earmarked for that purpose. The country has recently joined the $1 trillion economy club and is set to attend the G20 summit in Miami in 2026 as an observer. Fitch underlined that the start of Nawrocki’s presidency “highlights likely challenges for the coalition government to implement policy. Since early August, the president has vetoed various bills and publicly stated his opposition to tax increases and proposed tax cuts.” With political tension already running high in the wake of this year’s presidential election, domestic considerations will increasingly dominate fiscal decisions in the run-up to the parliamentary vote in 2027. The election cycle could further weaken fiscal discipline, especially as “options for raising revenue are limited and a significant share of spending is rigid,” Poland’s Bank Millennium said in a note. Fitch projects the deficit will average 6.7 percent of GDP through 2025 due to the “lack of a credible consolidation strategy” before the next election. The figure is likely to hit 6.9 percent before the end of 2025, before easing slightly to 6.8 percent in 2026, still above the government’s budget projections of 6.5 percent. “Our forecast reflects our expectation of a limited ability to increase taxes, and continued increases in public investment and defense spending … despite additional revenue from the freeze of income tax thresholds and slower growth of public sector salaries and social spending,” the agency said. Fitch expects Poland’s general government debt to rise from 49.5 percent of GDP in 2023 to 59.3 percent this year and 68.3 percent in 2027, the result of continued primary deficits and guarantees for the army fund. Meantime, it expects interest payments to grow from 5.1 percent of revenues in 2024 to 7.2 percent in 2027, well above the 4.3 percent median for countries with similar credit ratings. Fitch’s update is a “clear signal for the government that the lack of action to visibly reduce the fiscal deficit could lead to a downgrade of Poland’s credit rating,” according to Bank Millennium. This article has been updated.

The Bank of England cut its key interest rate by a quarter-point to 4 percent, as fears of a U.K. economic slowdown outweighed concerns about lingering inflation. Growth has gone into reverse in recent months after a strong start to the year: The Office for National Statistics has tentatively estimated that the economy contracted in both April and May, under pressure from Chancellor Rachel Reeves’ tax hikes and U.S. President Donald Trump’s trade war. However, the BoE said its staff estimated that growth was still positive in the second quarter, at 0.1 percent, and would pick up again to 0.3 percent in the current quarter. Reeves’ decision last year to increase employers’ National Insurance contributions and jack up the National Living Wage have led companies to shed jobs, pushing unemployment up to its highest in four years. The Bank said in its new Monetary Policy Report on Thursday that it expects the jobless rate to continue rising in the coming months, after hitting 4.7 percent in June. The cut is the fifth in 12 months but still leaves rates at a level that most economists think is holding the economy back. The Bank warned again on Thursday that stubborn inflation — most visible in food and services prices — still demand that any further relaxation of monetary policy be “gradual and cautious”. Inflation has rebounded this year after falling from a peak of over 11 percent in 2023. The Bank said on Thursday it could hit 4.0 percent by September and won’t return to its 2 percent target before 2027. Against that backdrop, four of the BoE Monetary Policy Committee’s nine members voted against the cut, including chief economist Huw Pill and Deputy Governor Clare Lombardelli. Alan Taylor, who has consistently placed more emphasis on the risks of a slump, voted for a bigger, half-point cut.

The Bank of England faces a dilemma at its meeting next month: inflation is accelerating again but the labor market is showing increasingly clear signs that the economy needs support. New data from the Office for National Statistics Thursday showed the unemployment rate rose to 4.7 percent of the workforce in May, while the number of people claiming unemployment benefits rose by nearly 26,000 in June. There was also a further slowdown in the pace of wage growth, which the BoE has seen as one of the main factors stopping it from cutting interest rates more aggressively. Average wages excluding bonuses rose by 5.0 percent in the year to May, down from 5.3 percent in April. In part, the numbers reflect employers’ reaction to the rise in their National Insurance contributions, which took effect in April. Companies had signaled via various surveys that they intended to lay workers off or award smaller pay raises to offset the rise in their labor costs. The numbers weren’t unambiguously weak though, as the economy continued to create jobs: Employment grew by 134,000 in the three months through May, well above the 46,000 expected by analysts.