Tegernsee, Germany — Recently, leading figures from Germany's business, economic, and political sectors gathered in a charming Bavarian town by the iconic Tegernsee Lake. The event focused on expectations for the newly formed government and the critical issues at hand.

Riding a wave of positive market sentiment towards Europe’s largest economy, participants urged the government to fulfill its campaign commitments. Business leaders emphasized that any failures to act decisively would be unacceptable, with some stressing that a "lazy summer" is not an option for the new administration.

Despite rain and low-hanging clouds casting a gloomy atmosphere over the summit, dubbed Germany’s "Davos," the air was filled with optimism for the changes that Chancellor Friedrich Merz could bring.

The view across the Tegernsee from the Ludwig Erhard Summit

Sophie Kiderlin, CNBC

High expectations for government performance were evident amidst concerns over Germany’s lagging economy and recent political instability, which seemed to fade into the background during discussions.

The German DAX index has risen over 18% since the beginning of the year, frequently reaching new highs. However, the economy has faced stagnation for more than two years, weighed down by conflicts within the prior ruling coalition and its eventual collapse.

“There are significant hopes surrounding the new government,” remarked Patrick Trutwein, COO and Chief Risk Officer at IKB Deutsche Industriebank AG, during a CNBC panel. He expressed optimism about Germany's future, especially following the announcement of a substantial fiscal package enshrined in the nation’s constitution, along with anticipated reforms. He noted that “Germany has a robust economy capable of leveraging its own productivity and competencies.”

Matthias Voelkel, CEO of Boerse Stuttgart Group, echoed these sentiments. “Looking ahead, if they make the right choices, I remain optimistic,” he mentioned in an interview. Meanwhile, Audi CEO Gernot Döllner expressed hope that the new administration would rejuvenate the German economy.

In the auto industry, which has grappled with competition from China and the transition to electric vehicles, there was a sense of renewed energy. Hildegard Müller, president of the German Association of the Automotive Industry, confidently stated, “The Germans are back. We are competitive.”

A discussion at the Ludwig Erhard Summit.

Sophie Kiderlin, CNBC

Despite the optimistic buzz, attendees are closely monitoring the government's actions. Karl-Theodor zu Guttenberg, chairman of Spitzberg Partners and a former German politician, emphasized, “The new government cannot afford a political lazy summer. They must work diligently.” Likewise, Veronika Grimm from the German Council of Economic Experts remarked, “Many challenges lie ahead for the government.”

Overall, the consensus was unmistakable: Germany needs decisive action.

Alexander Horn, general manager of Eli Lilly's German division, welcomed the government’s ambitious plans but stressed that expediency is crucial. “We expect a swift implementation of the commitments outlined in the coalition agreement. Speed is of the essence,” he stated during a panel discussion.

Voelkel of Boerse Stuttgart Group noted his optimism hinges on governmental action, indicating a desire for reduced bureaucracy and more anti-growth regulations to foster innovation and strengthen investments.

The newly inaugurated German government has highlighted these issues as key priorities, promising to bolster the economy, minimize red tape, and catalyze innovation and investment in its coalition agreement and during the election campaign.

"This country requires an economic revival. After two years of recession, the previous government had to announce another year of zero growth for 2025, and we truly must address this," asserted Katherina Reiche, Germany's economy minister, during the summit.