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Germany's cost-of-living squeeze hardens into a political problem for Merz

Germany's economic strain deepened on June 2. A confidential report put the Federal Employment Agency on course for an 8-billion-euro deficit this year and 23 billion euros in debt by 2030 as joblessness rises, while Eurostat and ECB data showed euro-zone real wages falling for the first time in three years after May inflation hit 3.2 percent. A leading charity said Germany's poverty rate had reached a record 16.1 percent, affecting 13.34 million people, and warned against benefit cuts -- pressure now hardening into a political problem for Friedrich Merz's coalition.

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Germany's labour agency heads for 23 billion euros in debt by 2030 as jobless forecasts worsen

Germany's Federal Employment Agency (BA) is on course for a deficit of more than 8 billion euros this year and cumulative debt of about 23 billion euros by 2030, according to a report prepared for the Bundestag budget committee and seen by Reuters. A weaker labour market -- higher average unemployment feeding higher jobless-benefit payouts -- is driving the shortfall, which the agency would have to cover with federal loans unless the unemployment-insurance contribution rate rises. BA chief Andrea Nahles said the hoped-for spring recovery had "not really got going."

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Real wages fall across Europe for first time in three years due to energy shock

Real wages in the euro zone have fallen for the first time in three years, as May inflation hit 3.2% year-on-year, outpacing an expected 2.6% rise in negotiated wages, Eurostat and ECB data showed on Tuesday. The decline, also seen in the United States and the United Kingdom, comes as households were still recovering from the 2022-2023 inflation shock. In the third quarter of 2025, only half of OECD countries had regained their end-2021 average wage levels, with euro zone pay still 2% below that benchmark.

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Germany's poverty rate hits record 16.1% in 2025, charity warns of 'crisis-like situation'

Germany's poverty rate rose to 16.1% in 2025, a new record, with 13.34 million people affected, according to the Paritätischer Wohlfahrtsverband. The charity warned of a 'crisis-like situation' and urged the government not to cut social benefits. Opposition parties and a CDU social politician criticized the government's austerity plans.

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Every other event tracked in Germany, with a one-line preview.

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EU agrees on deportation centers; German citizenship law criticized

The EU has cleared the way for deportation centers in third countries for rejected asylum seekers, with sanctions for non-cooperation. Meanwhile, the article criticizes Germany's liberalized citizenship law under the previous government, which allows dual citizenship, arguing it weakens social cohesion and loyalty. It calls for a clearer commitment from new citizens to Germany as their own country.

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The EU has cleared the way for deportation centers in third countries for rejected asylum seekers, with sanctions for non-cooperation. Meanwhile, the article criticizes Germany's liberalized citizenship law under the previous government, which allows dual citizenship, arguing it weakens social cohesion and loyalty. It calls for a clearer commitment from new citizens to Germany as their own country.

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EU Commission demands Germany phase out internal border controls, citing lack of proportionality

The European Commission has formally assessed Germany's reintroduction of internal border controls with neighboring states, introduced in November 2024 and extended until September 2025, as insufficiently justified and disproportionate. It criticized late notifications, lack of detailed risk assessments, and failure to explain why controls were applied uniformly at all land borders, urging Germany to transition to targeted, risk-based checks. Similar assessments were issued for eight other EU states. The Commission linked its criticism to the upcoming entry into force of the EU's new migration and asylum pact in June 2026, which it hopes will address underlying concerns. German Interior Minister Alexander Dobrindt (CSU) had recently tightened the controls, including directing federal police to reject asylum seekers at land borders, a practice the Commission flagged as raising legal and security concerns.

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The European Commission has formally assessed Germany's reintroduction of internal border controls with neighboring states, introduced in November 2024 and extended until September 2025, as insufficiently justified and disproportionate. It criticized late notifications, lack of detailed risk assessments, and failure to explain why controls were applied uniformly at all land borders, urging Germany to transition to targeted, risk-based checks. Similar assessments were issued for eight other EU states. The Commission linked its criticism to the upcoming entry into force of the EU's new migration and asylum pact in June 2026, which it hopes will address underlying concerns. German Interior Minister Alexander Dobrindt (CSU) had recently tightened the controls, including directing federal police to reject asylum seekers at land borders, a practice the Commission flagged as raising legal and security concerns.

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Berlin intelligence report shows rise in extremists across all ideologies

Berlin's domestic intelligence agency (Verfassungsschutz) released its 2025 report, revealing an increase in extremists across all ideological categories from 9,370 to 9,720. Left-wing extremism saw the largest rise to 3,950 individuals, linked to an eco-anarchist ideology that fueled a major arson attack on the power grid in September 2025, cutting power to tens of thousands. Right-wing extremism grew to 1,480, driven by violent online networks. Islamist extremism rose to 2,590, and foreign-ideology extremism to 1,700. Interior Senator Iris Spranger highlighted left-wing extremism as having the most severe consequences recently.

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Berlin's domestic intelligence agency (Verfassungsschutz) released its 2025 report, revealing an increase in extremists across all ideological categories from 9,370 to 9,720. Left-wing extremism saw the largest rise to 3,950 individuals, linked to an eco-anarchist ideology that fueled a major arson attack on the power grid in September 2025, cutting power to tens of thousands. Right-wing extremism grew to 1,480, driven by violent online networks. Islamist extremism rose to 2,590, and foreign-ideology extremism to 1,700. Interior Senator Iris Spranger highlighted left-wing extremism as having the most severe consequences recently.

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German politicians warn of espionage risks over AfD delegation's Russia trip

Background: Russian President Vladimir Putin's adviser Anton Kobyakov invited German AfD lawmakers Markus Frohnmaier and Steffen Kotré to the St. Petersburg International Economic Forum in June 2025. German politicians from CDU, SPD, and Greens have publicly condemned the AfD delegation's participation as a security risk, warning that Russian intelligence services use such events for information gathering and recruitment. The AfD defended the trip as maintaining diplomatic channels. The forum, boycotted by German officials since Russia's 2022 invasion of Ukraine, is also seeing renewed participation from some German business representatives.

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Background: Russian President Vladimir Putin's adviser Anton Kobyakov invited German AfD lawmakers Markus Frohnmaier and Steffen Kotré to the St. Petersburg International Economic Forum in June 2025. German politicians from CDU, SPD, and Greens have publicly condemned the AfD delegation's participation as a security risk, warning that Russian intelligence services use such events for information gathering and recruitment. The AfD defended the trip as maintaining diplomatic channels. The forum, boycotted by German officials since Russia's 2022 invasion of Ukraine, is also seeing renewed participation from some German business representatives.

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German military procurement criticized for buying familiar systems instead of needed capabilities

A Kiel Institute analysis finds that four years after Chancellor Scholz's 'Zeitenwende' speech, German military procurement remains flawed. Germany buys over 60% of equipment from domestic firms, neglecting European alternatives, and fails to invest in new paradigm systems like drones, AI, and electronic warfare. The defense strategy lacks a European dimension, omitting France, the UK, and Poland. Delivery timelines are unclear, with a rising share of orders lacking final delivery dates.

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A Kiel Institute analysis finds that four years after Chancellor Scholz's 'Zeitenwende' speech, German military procurement remains flawed. Germany buys over 60% of equipment from domestic firms, neglecting European alternatives, and fails to invest in new paradigm systems like drones, AI, and electronic warfare. The defense strategy lacks a European dimension, omitting France, the UK, and Poland. Delivery timelines are unclear, with a rising share of orders lacking final delivery dates.

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FDP reaches 5% in Forsa poll for first time since February 2025 after Kubicki elected leader

Background: The FDP has been polling below 5% for months, failing to enter several state parliaments, and is in the midst of a leadership contest. Today: A new Forsa trend barometer for RTL and ntv conducted May 26 to June 1 shows the FDP at 5% for the first time since February 2025, meaning it would enter the Bundestag if elections were held. The poll was taken before and after the party congress where Wolfgang Kubicki was elected new party leader. CDU/CSU fell one point to 21%, while AfD remained strongest at 27%.

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Background: The FDP has been polling below 5% for months, failing to enter several state parliaments, and is in the midst of a leadership contest. Today: A new Forsa trend barometer for RTL and ntv conducted May 26 to June 1 shows the FDP at 5% for the first time since February 2025, meaning it would enter the Bundestag if elections were held. The poll was taken before and after the party congress where Wolfgang Kubicki was elected new party leader. CDU/CSU fell one point to 21%, while AfD remained strongest at 27%.

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Brandenburg intelligence warns of AI-generated local disinformation targeting regional debates

Germany's Brandenburg Office for the Protection of the Constitution has issued a warning about a new disinformation trend using AI-generated accounts that mimic local residents to influence regional debates. The report highlights the 'Brandenburg Girl' profile, a fake identity named Larissa Wagner from Senftenberg, which posts everyday content and promotes far-right AfD positions. The account is linked to the extremist magazine Compact. The report notes that Russian actors and German extremists use such methods to amplify emotional issues like migration and structural change, and that AI is increasingly used as a 'feeling amplifier' to create images of national symbols, dehumanizing depictions, or visual stories about 'threat' and 'decline'.

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Germany's Brandenburg Office for the Protection of the Constitution has issued a warning about a new disinformation trend using AI-generated accounts that mimic local residents to influence regional debates. The report highlights the 'Brandenburg Girl' profile, a fake identity named Larissa Wagner from Senftenberg, which posts everyday content and promotes far-right AfD positions. The account is linked to the extremist magazine Compact. The report notes that Russian actors and German extremists use such methods to amplify emotional issues like migration and structural change, and that AI is increasingly used as a 'feeling amplifier' to create images of national symbols, dehumanizing depictions, or visual stories about 'threat' and 'decline'.

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German interior minister proposes civil service pay reform to comply with constitutional court ruling

Background: The German Civil Service Federation (DBB) has criticized Interior Minister Alexander Dobrindt's proposed pay reform as unconstitutional, particularly regarding the assumed partner income and salary gaps for senior civil servants. The Constitutional Court's 2020 ruling on inadequate pay in Berlin and North Rhine-Westphalia prompted nationwide adjustments, but the previous government failed to act. Today: Dobrindt has formally proposed a reform that raises entry-level salaries by starting civil servants in experience level 2 instead of level 1, ends the 'sole earner' principle by assuming a partner income of about €20,000 per year, and adjusts pay scales for senior civil servants (B-Besoldung) only in line with the collective bargaining agreement for public employees, costing over €3.5 billion annually from 2027. Critics argue the reform does not address the growing number of federal civil servants (over 360,000 full-time posts in 2024, up 20,000 in a decade) and the need to reduce government tasks. Some legal experts consider the adjustment for senior civil servants insufficient to maintain required grade differentials.

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Background: The German Civil Service Federation (DBB) has criticized Interior Minister Alexander Dobrindt's proposed pay reform as unconstitutional, particularly regarding the assumed partner income and salary gaps for senior civil servants. The Constitutional Court's 2020 ruling on inadequate pay in Berlin and North Rhine-Westphalia prompted nationwide adjustments, but the previous government failed to act. Today: Dobrindt has formally proposed a reform that raises entry-level salaries by starting civil servants in experience level 2 instead of level 1, ends the 'sole earner' principle by assuming a partner income of about €20,000 per year, and adjusts pay scales for senior civil servants (B-Besoldung) only in line with the collective bargaining agreement for public employees, costing over €3.5 billion annually from 2027. Critics argue the reform does not address the growing number of federal civil servants (over 360,000 full-time posts in 2024, up 20,000 in a decade) and the need to reduce government tasks. Some legal experts consider the adjustment for senior civil servants insufficient to maintain required grade differentials.

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Bangladesh Foreign Minister Khalilur Rahman Elected President of UN General Assembly

Bangladeshi Foreign Minister Khalilur Rahman has been elected President of the UN General Assembly for a one-year term starting September 2025. He received 99 of 193 votes, defeating Cypriot diplomat Andreas Kakouris. Rahman succeeds former German Foreign Minister Annalena Baerbock, whose own election in June 2025 was controversial due to her self-nomination over a career diplomat. The election marks a significant diplomatic achievement for Bangladesh.

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Bangladeshi Foreign Minister Khalilur Rahman has been elected President of the UN General Assembly for a one-year term starting September 2025. He received 99 of 193 votes, defeating Cypriot diplomat Andreas Kakouris. Rahman succeeds former German Foreign Minister Annalena Baerbock, whose own election in June 2025 was controversial due to her self-nomination over a career diplomat. The election marks a significant diplomatic achievement for Bangladesh.

Frequently Asked

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What is the projected deficit for Germany's Federal Employment Agency in 2025?
The Federal Employment Agency is on course for a deficit of more than 8 billion euros in 2025.
How much cumulative debt does the BA expect by 2030?
The BA expects cumulative debt of about 23 billion euros by 2030, roughly double its earlier 2026 estimate.
What is Germany's current unemployment rate?
Unemployment stood at 6.3 percent in May 2025.
What percentage of Germans are living in poverty in 2025?
16.1 percent of people in Germany, or 13.34 million, were living in poverty in 2025, a new record high.
How are German voters reacting to the cost-of-living crisis?
A late-May poll found 69 percent of Germans expect the far-right AfD to win a state premiership in autumn 2025.