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German Chancellor Friedrich Merz said that solving Germany's economic challenges is a much more difficult task than he initially anticipated. "When I say this, it is also meant as self-criticism - this task is much more difficult than I imagined a year ago," Merz said in a speech on Saturday in the northern German city of Osnabrck. "Not only are we in an economic downturn, but our economy is also facing structural crises." Affected by the conflict between Russia and Ukraine and the turmoil of U.S. trade tariffs, Germany, as the industrial engine of Europe and the largest export country, is struggling to cope with the continuous high energy costs. Data released on Friday showed that Germany's economy contracted more than initially estimated in the second quarter. Merz told members of the Christian Democratic Union in Lower Saxony that "no one should have any illusions about the depth and breadth of the challenges we are facing, at the latest by this week." He pointed out that the 36% drop in Volkswagen's second-quarter net profit is just "one of many signals." Volkswagen's headquarters is located in Lower Saxony.