Germany has announced the suspension of arms exports to Israel that could be used in military operations in the Gaza Strip. The decision, declared by Chancellor Friedrich Merz, comes in response to Israeli Prime Minister Benjamin Netanyahu's plan to expand military control over Gaza City, a move that could lead to a full reoccupation of the enclave and exacerbate the humanitarian crisis in the territory. Germany, historically a major supplier of weapons to Israel after the United States, cited deep concern over the potential civilian casualties and worsening humanitarian conditions in Gaza as the primary reasons for the halt. The suspension marks a notable shift in Germany's long-standing policy of supporting Israel's defense capabilities. The German Foreign Minister has expressed support for the Chancellor's decision. This action aligns with broader European caution, as the Council of Europe has also issued warnings to its members regarding arms sales to Israel amid the ongoing conflict. The decision has drawn international attention and represents a significant diplomatic stance amid escalating tensions in the Middle East.

The far-right Alternative for Germany (AfD) party has emerged as the largest political party in Germany according to the latest Forsa poll, securing 26% support and surpassing Chancellor Angela Merkel's conservative bloc, which has fallen to 29%. This marks the first time AfD leads all German political parties in voter preference. The rise of AfD comes amid ongoing discussions about potentially banning the party due to its extremist positions, although a majority of Germans oppose such a ban. Additionally, more than two-thirds of Germans anticipate that one of the country's state premiers will be from AfD by next year. This shift toward right-wing populism is part of a broader trend in Europe, with right-wing parties also gaining momentum in the UK, France, and Italy. In Italy, Prime Minister Giorgia Meloni's Fratelli d’Italia continues to lead with nearly 30% support, despite criticism that she has not fulfilled her campaign promises on immigration policies.

German Foreign Minister Johann Wadephul has sharply criticized China for its "increasingly aggressive" behavior in the Taiwan Strait and the East and South China Seas, warning that such actions threaten international security and directly affect European interests. Speaking ahead of and during his visit to Japan and Indonesia, Wadephul accused China of repeatedly issuing threats to unilaterally change borders in the Asia-Pacific region, which undermines fundamental principles of global coexistence and the international rules-based order. He emphasized that Germany and Japan are united in addressing the security challenges posed by Russia and China and expressed Berlin's intention to deepen diplomatic, economic, and military cooperation with Tokyo. Wadephul also highlighted concerns over China's rapid military buildup in the South China Sea, which he said jeopardizes regional security and the broader international order. In response, China condemned Germany for "hyping" tensions and accused Berlin of exaggerating regional issues, with Chinese state media asserting the historical and legal basis of China's sovereignty over the South China Sea islands. Additionally, during his visit to Indonesia, Wadephul voiced support for a two-state solution to the Israel-Palestine conflict, underlining Germany's special partnership with Israel and the responsibility that comes with it.

Germany’s government approved a draft law on 27 August that would introduce a new system of voluntary military service, ending a 14-year hiatus in conscription policy. The legislation is intended to shore up manpower in the Bundeswehr, which has struggled to meet NATO readiness goals since compulsory service was suspended in 2011. Under the proposal, all men turning 18 would be required to complete an online questionnaire about their willingness and fitness to serve; the survey is optional for other genders. Volunteers chosen from the pool would undergo at least six months of basic training and could extend their commitment to up to 23 months. The Defence Ministry plans to offer net monthly pay of about €2,300, free accommodation and medical care to make the scheme more attractive. Berlin aims to raise the number of active soldiers to 260,000 by the early 2030s from roughly 183,000 today, and to double the reserve force to 200,000. Annual intake targets are set at 20,000 recruits in 2026, rising to 38,000 by 2030. If those benchmarks are missed or the security environment deteriorates, the bill allows the government—subject to Bundestag approval—to reinstate mandatory conscription. Conservative lawmakers want an automatic trigger that would re-impose the draft without a separate vote, setting the stage for a parliamentary battle when debates begin in October. Chancellor Friedrich Merz and Defence Minister Boris Pistorius said Russia’s “aggressive posture” makes a larger force essential for credible deterrence. The measure now moves to the Bundestag, where the governing CDU/CSU-SPD coalition holds a majority but faces pressure from both hawks seeking a firmer draft mechanism and critics wary of compulsory service’s return.

Germany has commenced commercial operations at its second liquefied natural gas (LNG) import terminal located at Wilhelmshaven port. The floating storage regasification unit (FSRU) Excelsior is expected to add up to 1.9 billion cubic meters (bcm) of gas this year, sufficient to heat approximately 1.5 million households. This development enhances Germany's energy security by diversifying supply sources and reducing reliance on Russian gas. The increased LNG imports have contributed to a decline in European gas prices. The new terminal's operation marks a notable advancement in Europe's energy transition amid efforts to stabilize gas markets following a less volatile summer storage period.

Germany has reaffirmed its commitment to providing security guarantees and continued support to Ukraine amid the ongoing conflict with Russia. German officials, including the Vice Chancellor and Finance Minister, have emphasized the importance of reliable security assurances for Ukraine and the need for local input in negotiations. Despite concerns within Germany about deploying troops on the ground, Berlin remains steadfast in backing Kyiv, focusing on strengthening Ukraine's defense capabilities and advancing peace talks. The German Finance Minister made a surprise visit to Kyiv to underscore this unwavering support, even as domestic debates continue over the allocation of resources.

Germany is preparing to launch a €100 billion investment fund aimed at securing strategic sectors including defense, energy, and critical raw materials. This move comes amid ongoing economic challenges, with the German economy contracting by 0.1% in the second quarter of 2025 due to weak investment. The country is also projected to run budget deficits exceeding 4% of GDP through 2032, marking the largest and longest sustained deficits in its post-war history. These developments raise concerns about Germany's fiscal trajectory and the potential need for measures such as quantitative easing to manage the growing debt burden.

Germany’s closely watched Ifo Business Climate index edged up to 89.0 in August from 88.6, marginally beating economists’ expectations for 88.8. The improvement was driven by a rise in the expectations component to 91.6, its highest level in three months, even as the current-assessment gauge slipped to 86.4, underscoring the economy’s uneven momentum. The brighter outlook among German companies contrasts with deteriorating household sentiment. The GfK Consumer Climate survey, released two days later, showed confidence is expected to fall for a third straight month in September to –23.6, below the consensus of –21.5 and the weakest reading since March. Survey authors cited mounting concerns over job security and persistent inflation worries as key factors dampening willingness to spend. Signs of softer confidence were not confined to Germany. In Switzerland, the UBS/ZEW expectations index for August plunged to –53.8 from 2.4, pointing to a sharp deterioration in investor outlook across the Alps. Together, the data highlight the fragile state of sentiment in Europe’s largest economies as they contend with higher energy prices, rising unemployment and geopolitical uncertainty.

Germany’s economy contracted by 0.3% in the second quarter of 2025 from the previous three months, revised data from the Federal Statistical Office showed on Friday. The update deepens the initial flash estimate of a 0.1% drop and reverses the 0.3% growth recorded in the first quarter, underscoring the fragility of Europe’s largest economy. The sharper decline reflects weaker industrial activity and falling investment. Capital spending slid 1.4%, while goods exports dipped 0.1% as demand from the United States cooled following a front-loading of orders ahead of Washington’s 10% baseline tariff that took effect in April. Household consumption eked out a 0.1% rise and government expenditure grew 0.8%, but these gains were insufficient to counter the drag from trade and manufacturing. Germany has now posted negative growth in seven of the last 11 quarters and remains the only G-7 member without net expansion since 2023, raising the prospect of an unprecedented third straight year of recession. Berlin’s “investment booster” tax package and planned increases in defence and infrastructure outlays aim to revive momentum, yet economists such as ING’s Carsten Brzeski warn that a meaningful recovery is unlikely before 2026 without deeper structural reforms.

Germany is experiencing a public and political debate over the potential deployment of troops to Ukraine as part of a European peacekeeping initiative linked to a possible peace deal with Russia. This discussion has sparked unease and backlash within Germany, a country still sensitive due to its militaristic Nazi past. Although the prospect of sending troops remains remote, the idea has intensified divisions among the German public. Concurrently, Germany is considering reviving military conscription through new legislation, which has raised concerns about social tensions. The law would require young people to serve in the military, despite widespread skepticism about the sustainability of the current social system, which relies on younger generations to support pensions and healthcare amid demographic challenges.

German Foreign Minister Johann Wadephul said Berlin believes the process of recognising a Palestinian state should begin immediately, adding that the government is ready to accelerate the effort if Israel proceeds with the annexation of parts of the West Bank. Wadephul’s comments mark Germany’s most explicit public signal in recent years that it is prepared to depart from a long-standing policy of withholding formal recognition pending a negotiated two-state solution. He did not outline a specific timetable, but indicated that diplomatic groundwork could start at once.

German investor sentiment declined sharply in August, with the ZEW Economic Sentiment Index falling to 34.7 from 52.7 in July, below the estimated 39.5. The current conditions assessment worsened to -68.6, deeper than the expected -67.0 and the previous -59.5. This drop reflects investor disappointment following the EU-US trade deal and ongoing sluggish economic growth. Key sectors such as chemical, pharmaceutical, mechanical engineering, metal, and automotive industries were notably affected, contributing to the negative outlook. Despite the DAX index trading near record highs, investor confidence has weakened. The German Economy Ministry reported no clear signs of economic recovery despite a basic agreement on US tariffs, and inflation is expected to remain stable for the rest of the year. Meanwhile, industrial production in Germany has been in recession, declining approximately 10% over two years to its lowest level in five years, with energy-intensive output falling about 20% over three years, below the 2020 crisis level. Economists have expressed concern over the slow pace of reforms under Chancellor Friedrich Merz, whose approval ratings have dropped below 30% after 100 days in office. The lack of political momentum for deregulation and structural reforms has been highlighted as a major issue for the German economy, which has not grown since 2017.