Germany's economy slows amid EU Ukraine aid debate and soaring energy costs

The German Bundesbank warns that Germany’s gross domestic product will grow only modestly—0.5% in 2026, 0.8% in 2027 and 1.4% in 2028—after the Iranian war and persistently high energy prices stalled the recovery. Inflation is expected to stay near 2.9% before easing to about 2.7% by 2027, prompting the ECB to raise rates to 2.25% and signal further hikes if commodity prices surge again.

At the same time, within the European Union a shift is emerging in attitudes toward Ukraine. While some leaders, such as EU foreign policy chief Kaja Kallas, continue to stress that aid to Ukraine remains a priority, growing economic strain and defence‑spending pressures are encouraging calls for a more pragmatic, less sanctions‑focused approach. The debate reflects broader concerns about the EU’s weakening economic outlook, Germany’s competitiveness, and the balance between supporting Ukraine and safeguarding the bloc’s own fiscal stability.