Tackling the challenges the country is facing has proven harder than expected, the German chancellor admits

The German economy is experiencing a "structural crisis" rather than just temporary "weakness," Chancellor Friedrich Merz has said, admitting that steering the country's economy back on track has proven harder than he had anticipated.

Merz made the remarks on Saturday in a speech before members of his Christian Democratic Union party in the Lower Saxony city of Osnabrueck, the home state of major carmaker Volkswagen. 

"I say this also self-critically - this task is bigger than one or the other may have imagined a year ago," Merz stated.

Large parts of the country's economy "are no longer truly competitive," the chancellor acknowledged. Merz mentioned the plummeting earnings by Volkswagen, which experienced a massive 36% after-tax slump in the second quarter of the year, calling it just "one of many messages" about the state of the country's economy.  

"By this week at the latest, no one should be under any illusions about how deep and far-reaching the challenges that face us are," Merz stated.  

"The quality is still good and company leaders recognize these challenges. But the underlying conditions in Germany simply haven't been good enough for the last decade," he added.

Another German auto giant, BMW, has also reported a sharp decline in first-half profits, reporting a 29% drop from the same period last year.  

The downturn of the country's automotive sector has been fueling fears about the health of the EU's economic powerhouse. The country already endured a recession last year and is now expected to show zero growth this year, according to IMF projections.