German business morale unexpectedly declined in September, a key survey showed Wednesday, adding to growing concerns among German business that Chancellor Friedrich Merz’s government will not deliver the economic turnaround it has promised.

The Ifo institute said its business climate index fell to 87.7 in September from a revised 88.9 in August. Analysts had expected the index to show modest gains on expectations of a coming massive fiscal stimulus.

The survey was published as Merz stood up in Berlin to begin the Bundestag’s first big debate on the 2026 budget. In a speech focused largely on the need to increase spending on defense and security issues, Merz also pointed to first steps in reducing German energy prices and his intention to cut bureaucracy.

“There is no time to lose: Our country has to feel now that things are getting better,” Merz said.

For businesses, though, this appears to be taking too long. Ifo’s survey suggested that not only were companies less happy with their current business, but that expectations had also darkened noticeably.

“The surprisingly sharp decline … dampens hopes for a rapid economic recovery,” Deutsche Bank economist Robin Winkler said in a note to clients.

The news follows on the heels of another survey from Tuesday: S&P Global’s Purchasing Manager Index. This showed Germany’s private sector expanding at the fastest pace in more than a year — but cast doubt over the sustainability of this recovery, as new orders dropped in both services and manufacturing.

A representative survey commissioned by POLITICO’s sister publication, the German tabloid Bild (also owned by Axel Springer), showed Wednesday that not only businesses are increasingly pessimistic about the country’s economic prospects.

Confidence in the Christian Democrats and Socialists’ ability to return the German economy to growth continues to fall. While 43 percent believed this was the case in May, by mid-September that number had fallen to just 28 percent.