ECB’s Nagel: Germany Must “Take Decisive Action” to Boost Productivity

7 October 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Tuesday urged the German government to move quickly on structural reforms to revive weak productivity growth, warning that the country’s long-term prosperity was at stake.

Speaking in Athens at the annual general assembly of the Hellenic Federation of Enterprises, the Bundesbank president said that Germany faced a “major problem” in the form of persistently weak productivity and that policymakers needed to “take decisive action” to reverse the trend.

“Productivity is the engine of prosperity,” he said. “It is a major driver of economic growth, it sustains our standard of living, and equips us to tackle the challenges of tomorrow. However, this engine has been faltering for some time now.”

Nagel noted that German labor productivity per hour had grown by an average of 1.1% a year between 1992 and 2024, but since 2018 the rate had dropped to just 0.3%. He attributed the weakness to both cyclical and structural causes, including labor hoarding, weak investment following monetary tightening, demographic change, rising production costs and excessive regulation.

To reignite productivity, he said, Berlin should reduce bureaucracy, lower barriers to market entry – especially in services – boost research and development and improve conditions for startups.

He also called for stronger incentives for women and older workers to participate in the labor market, greater openness to skilled immigration, and faster progress toward a deeper EU single market and completed Capital Markets Union.

“[T]he digital transition offers immense possibilities for boosting productivity,” he said. “Technologies like artificial intelligence and automation hold the potential to unlock efficiency gains, but only if we create the right environment for them to be adopted.”

Nagel said all euro area countries would benefit from stronger productivity, which he described as “the key to our economic future.” To safeguard prosperity, “we need to set the course for economic policy so that productivity can grow more strongly once again,” he said.

Earlier in his remarks, Nagel praised Greece’s economic performance and fiscal consolidation, calling its progress “remarkable” and “an inspiration for all of Europe.” He credited structural reforms and adherence to fiscal discipline for restoring confidence and said Greece’s example showed that “reform, though challenging, does pay off.”