'The Germans are back:' Business leaders tell government it's time to deliver

TEGERNSEE, Germany — Top German business leaders, economists and politicians descended onto a small, picturesque Bavarian town situated next to the iconic Tegernsee lake last week to share their hopes and discuss what's at stake for the new government.

Buoyed by recent positive market sentiment for Europe's largest economy, attendees at the summit were united in their call for the new administration to step up and honour campaign promises. Any missteps would likely not be tolerated, with some business leaders warning the government cannot allow itself a "lazy summer."

Despite rain and low hanging clouds providing a somewhat dreary backdrop to the event, which has been dubbed the "Davos of Germany," the promise of new beginnings enveloped the summit and the atmosphere was buzzing with excitement for potential changes the newly-appointed Chancellor Friedrich Merz could initiate.

Big expectations for the government were commonplace, with concerns about Germany's struggling economy and recent political turmoil seemingly having faded into the background.

The German DAX index is currently up over 18% since the beginning of this year, frequently hitting record highs in recent months. The German economy has however been in stagnation territory for over two years now, with tensions over economic, fiscal and budget policy in the previous ruling coalition and its eventual breakup continuing to weigh on expectations.

"There are very high hopes now on the new government," Patrick Trutwein, chief risk officer and chief operating officer at the IKB Deutsche Industriebank AG, said during a panel moderated by CNBC's Annette Weisbach.

He said he was feeling positive about Germany's future considering the announcement of the major fiscal package enshrined in Germany's constitution, as well as further potential reforms ahead and "an economy that's pretty robust and can build on its own ... productivity and competencies."

Matthias Voelkel, CEO of Boerse Stuttgart Group, was among those feeling hopeful.

"If we look ahead and if they [the new government] do the right thing, I'm optimistic," he told CNBC.

Audi CEO Gernot Döllner meanwhile said in a fireside chat that he was hopeful that the new government would "send an impulse into the German economy."

The mood was also upbeat in Germany's auto sector, which has long been struggling with competition from China, pressures from the transition to electric vehicles and has recently been hit by U.S. tariffs.

"The Germans are back," Hildegard Müller, president of the German Association of the Automotive Industry, told CNBC's Weisbach Friday. "We are competitive," she added.

But amid the positive buzz, it was clear that observers are keeping a close eye on the governments every move.

"This new government in Germany cannot allow itself a political lazy summer, I'm sorry, they've got to work and they've got to work hard," said Karl-Theodor zu Guttenberg, chairman of Spitzberg Partners and former German politician.

Or as Veronika Grimm, member of the German Council of Economic Experts, told CNBC: "A lot lies ahead for the government."

Overal the message was clear: Germany needs to get its act together.

Alexander Horn, general manager of Eli Lilly's Germany arm — Lilly Germany — said the business strongly welcomes the new government's goals, but won't tolerate any caveats.

"Specifically we expect that the declarations of intent that are in the coalition agreement will be implemented quickly, speed plays an enormously big role," he said during a panel, according to a CNBC translation.

Boerse Stuttgart Group's Voelkel indicated his optimism relied on action from the government, saying he was looking for moves towards "less bureaucracy, less anti-growth regulation, more innovation and particularly strengthening investment."

The newly minted German government has set itself many of these points as policy goals, making promises to boost the country's economy, reduce bureaucracy and boost innovation and investment during the election campaign and in its coalition agreement.

"This country needs an economic turnaround. After two years of recessions the previous government had to announce again [a] zero growth year for 2025 and we really have to work on this," German economy minister Katherina Reiche told CNBC on the sidelines of the summit.