In early March 2026, Germany’s four leading business associations—representing employers, industry, trade, and crafts—issued a joint warning to Chancellor Friedrich Merz. “As a place to do business, Germany is under greater pressure than it has experienced since the postwar period,” they wrote. After three years without growth, they said, the economy is approaching a “tipping point.” It was the third such warning in as many years, but almost nobody who doesn’t read the business pages noticed.

Germany’s official public debt stands at roughly 62 percent of GDP—above the Maastricht limit, but far from alarming by the standards of France, Italy, or the United States. But despite the German government’s confident assertions, this figure is misleading. According to the Stiftung Marktwirtschaft and the University of Freiburg’s Research Center on Generational Contracts, Germany’s total sustainability gap—explicit plus implicit liabilities—reached 19.5 trillion euros in 2025, or 454 percent of GDP. Explicit debt accounts for only 2.7 trillion of this. The remaining 16.8 trillion—more than six-sevenths of the total—consists of implicit obligations: future pension commitments, retirement entitlements for civil servants, and healthcare liabilities, all of which are real, binding, and generally go completely unmentioned in budget debates.

Germany’s implicit liabilities extend beyond its own borders. The euro crisis of 2010–12 was not resolved; it was frozen. Mario Draghi’s “whatever it takes” and the subsequent programme of ECB bond purchases halted the immediate contagion, but the structural imbalances that produced the crisis—divergent unit labour costs, persistent current account deficits in southern Europe, sovereign debt levels that remain unreduced—remain in place. Since 2022, rising interest rates have begun to defrost what monetary policy suspended. The refinancing costs of Italy, Greece, and Spain are rising again. Germany, as the eurozone’s largest economy and the implicit guarantor of last resort for its currency union, carries contingent liabilities for this exposure that appear in no federal budget line and are mentioned in no coalition agreement. The sustainability gap of 454 percent of GDP already excludes them.

The pension liabilities of Germany’s federal and state governments alone are substantial. Federal pension reserves for civil servants and their surviving relatives reached 902.95 billion euros in 2024, according to the government’s own accounts—up 36 billion from the previous year. The ifo Institut—the Munich-based Leibniz Institute for Economic Research, one of Germany’s most respected and widely cited independent research bodies—estimates the pension liabilities of Germany’s sixteen state governments at over one trillion euros. In some states—North Rhine-Westphalia, Baden-Württemberg—pension payments already consume 20–25 percent of the entire state budget.

Germany has borrowed from tomorrow by making promises it did not fund and has kept the borrowing out of the ledger by calling it something other than debt. The Rentenpaket (“pension package”) 2025, the pension stabilisation package passed last year, will add a further 17.7 percent of GDP to the implicit liabilities. The headline debt ratio has barely moved.