Germany Eases Energy Rules as Economic Gloom Deepens

The day's center of gravity was a bleak economic verdict. The five professors of the German Council of Economic Experts met Chancellor Friedrich Merz and cut their 2026 growth forecast to 0.5%, down from 0.9%, projecting 0.8% next year and inflation of 3.0%. Council chair Monika Schnitzer warned that without reform, combined social-insurance contributions would exceed 50% of gross pay by 2040, while the budget deficit is set to reach 3.7% of GDP this year and 4.3% next -- above the EU's 3% ceiling. Council member Gabriel Felbermayr blamed the war in Iran, noting that "every day that passes with the Strait of Hormuz blocked makes the worst-case scenario more likely," and pointed to intensifying Chinese competition; the panel urged a shift of industrial investment from automotive toward high-tech and healthcare.

That economic squeeze shaped energy policy. The coalition approved a draft Building Modernization Act that would slash the renewable-energy requirement for new heating systems from 65% to 10%, replacing the current Heating Act as the Middle East war drives up fossil-fuel prices; the National Regulatory Control Council called the draft one of the weakest pieces of legislation in recent years. In parallel, the Federal Network Agency proposed reforming electricity grid fees -- a roughly 37-billion-euro annual burden that makes up about 30% of household bills -- by adding base charges of under 100 euros a year for households with solar panels, exempting balcony units, and requiring wind and solar parks to contribute for the first time, partly to satisfy a European Court of Justice ruling that voids the current rules by the end of 2028. A final decision is expected next year.

Politics hardened alongside the economic news. The Authority for European Political Parties and Foundations triggered a process that could strip the far-right Europe of Sovereign Nations party -- which houses Germany's Alternative for Germany -- of its legal status and EU funding. Director Pascal Schonard sent a 300-page letter to the Council of the EU citing evidence that ESN members breach EU core values through anti-immigration, antisemitic and anti-LGBT rhetoric; the party is due to receive more than 2 million euros in EU subsidies in 2026.

On migration, Germany and the Netherlands proposed establishing return centers in third countries for rejected asylum seekers. The plan would remove failed applicants' ability to choose which EU state they remain in -- a loophole critics say turns asylum law into de facto immigration law -- and, proponents argue, deter illegal crossings by making the route less attractive.