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The economic costs of populism have been little researched. Does it make a difference for a country if a populist is in power? How does the economy develop when populists take office? Initial answers can be found in a comprehensive new study we recently published in the prestigious journal American Economic Review.

The Joint Economic Forecast Project Group forecasts a 0.1% decline in Germany's gross domestic product in 2024. Looking further ahead, the institutes expect a weak recovery with growth of 0.8% (2025) and 1.3% (2026). Compared to the spring forecast, this represents a downward revision of 0.2 (2024) and 0.6 (2025) percentage points. “In addition to the economic downturn, the German economy is also being weighed down by structural change,” says Dr. Geraldine Dany-Knedlik, head of Forecasting and Economic Policy at the German Institute for Economic Research (DIW Berlin). “Decarbonization, digitalization, and demographic change – alongside stronger competition with companies from China – have triggered structural adjustment processes that are dampening the long-term growth prospects of the German economy.”

After decades of military downsizing, German military spending is woefully inadequate to meet the new strategic challenge posed by Russia—as both a new report by the Kiel Institute for the World Economy and the new Kiel Military Procurement Tracker show. In combination with a cumbersome national procurement system and depending on weapon systems it would take Germany as much as a century to bring its military inventory up to the level of 20 years ago. In contrast, Russia is radically increasing its capacity to produce armaments, including advanced systems, and is now in a position to produce as many weapons in six months as all of Germany’s armed forces currently field.