The German Council of Economic Experts cut its 2026 growth forecast to 0.5% -- down from 0.9% -- and projected 0.8% in 2027 with inflation at 3.0%, telling Chancellor Friedrich Merz on 27 May that the Iran war's energy shock had erased the recovery he promised. Council chair Monika Schnitzer warned that without reform, combined social-insurance contributions could exceed 50% of gross pay by 2040, while the budget deficit is set to reach 3.7% of GDP this year and 4.3% in 2027, breaching the EU's 3% limit. The panel urged painful tax, pension and health reforms and a shift of industrial investment away from automotive toward high-tech and healthcare.

The Authority for European Political Parties and Foundations on Wednesday initiated a process that could strip the far-right Europe of Sovereign Nations party, home to 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 violate EU core values through anti-immigration, antisemitic and anti-LGBT rhetoric. The ESN party is slated to receive over €2 million in EU subsidies in 2026.

The Netherlands and Germany are planning to establish return centers in third countries to prevent rejected asylum seekers from remaining in the EU. The centers would eliminate the ability of failed applicants to choose which state to stay in, closing a loophole that critics say turns asylum law into de facto immigration law. Proponents argue the measure would also deter illegal immigration by making the route less attractive.

Germany's coalition government has approved a draft bill that would lower the renewable energy requirement for new heating systems from 65% to 10%, replacing the current Heating Act with a Building Modernization Act. The move comes as the war in the Middle East threatens fossil fuel supplies and drives up energy prices in Germany. Critics, including the National Regulatory Control Council, have called the draft one of the weakest pieces of legislation in recent years.

Germany's Federal Network Agency has proposed a reform of electricity grid fees to redistribute costs more fairly amid the energy transition. The plan would increase base charges for households with solar panels (prosumers), estimated at under 100 euros per year, while balcony plug-in solar units are exempt. Wind and solar parks, previously exempt from grid fees, would contribute a limited annual amount for the first time. A new pricing model for industry aims to incentivize flexible, grid-friendly consumption. Most households without their own generation would see little change. The reform is driven by rising grid expansion and stability costs, and the need to comply with a European Court of Justice ruling that invalidates current legal provisions by end of 2028. The total annual grid fee volume is about 37 billion euros, representing roughly 30% of household electricity bills. The proposal will be further discussed, with a final decision expected next year.

Background: Daniela Klette, a former RAF member, was on trial for eight armed robberies between 1999 and 2016, with her defense arguing no evidence linked her to the crimes. The Verden Regional Court sentenced Klette to 13 years in prison for six counts of aggravated robbery and weapons violations, rejecting defense attempts to politicize the trial and stating her left-wing extremist ideology was irrelevant. Klette showed no remorse, blaming the capitalist system. Federal prosecutors have now filed additional charges of attempted murder for three RAF attacks in the early 1990s: a failed bombing of a Deutsche Bank building in Eschborn, a shooting at the US embassy in Bonn, and a prison bombing in 1993. Klette's DNA was found at all three scenes. The verdict is seen as a significant step in prosecuting former RAF members, though her accomplices Burkhard Garweg and Ernst-Volker Staub remain at large.

Europe's shift to renewable energy is hampered by a lack of large-scale battery storage, forcing reliance on gas power when solar and wind output drop. The EU aims for 750 GW storage capacity by 2050 but currently has only 14 GW. Investment is rising, but grid modernization, permitting delays, and raw material access remain obstacles. The Iran war has had minimal impact on storage markets so far.

German Defense Minister Boris Pistorius is in Canada to push for a multi-billion euro deal for TKMS to supply Canada with 12 Type 212 CD submarines. The deal is seen as strategically important for NATO interoperability and transatlantic defense cooperation, especially as Canada seeks to replace its aging fleet and meet NATO spending targets. Pistorius will also discuss broader security partnerships and visit potential industrial partners. A planned visit to the US was canceled due to scheduling conflicts.