For decades, Germany was Europe’s golden child—efficient, hardworking, and eternally proud of her economic success. It produced more vehicles, machines, and Bratwurst than any other European country, leaving other European nations in awe (and occasional envy).
What about now?
The once-mighty Teutonic titan has stumbled, and the question isn’t whether Germany can rebound, but if it knows how to do it anymore.
Here’s the grim reality: the German economy is in a rut so deep you could hide an Autobahn in it.
Industrial production has plummeted for ten straight quarters. Yes, one-zero. That’s not just a bad streak; that’s a lifestyle choice. The GDP is sliding into negative territory (-0.2% for 2024), and even optimists are only mumbling about a possible 0.4 percent growth for 2025, which is like celebrating the fact that your sinking ship has slowed down slightly.
Exports?
Oh, those are circling the drain, too.
Once hailed as the lifeblood of the German economy, exports are now faltering thanks to a toxic cocktail of high energy costs, stiff competition, and the general realization that maybe the world doesn’t need quite so many diesel-powered luxury sedans and China learned to develop and produce cars and other higher quality products.
But it were energy prices that turned out to be Germany’s kryptonite.
Remember when Germany went all-in on renewable energy, shutting down nuclear plants and doubling down on wind and solar, betting high on the cheap Russian gas – just to lose it when Putin attacked Ukraine?
Great intentions, but here’s the rub: energy prices are now among the highest in Europe.
Manufacturers, who once thrived on reliable and affordable energy, are now looking at their electricity bills and wondering if someone accidentally charged them for the entire grid. Last week several industrial producers stopped their factories, because after the second windless, cloudy day (long live the unreliable renewables), the prices become unaffordable to them.
China’s growing competitiveness and high electricity prices at home have left German manufacturers in a bind.
Automakers like Bosch and Volkswagen, emblematic of the German industrial machine, are slashing jobs and scaling back operations. Take it from Gunnar Gröbler of Salzgitter AG, who warned that creeping deindustrialization is no longer just a scary bedtime story—it’s happening in real time. Lose a steel plant here, a chemical factory there, and pretty soon, Germany’s industrial ecosystem starts looking more like a museum exhibit than a global force.
Just when you thought it couldn’t get worse, enter Germany’s political circus.
The coalition government collapsed spectacularly in December, leaving the nation without so much as a babysitter, let alone a competent leader.
At first sight, the timing couldn’t be worse. As Europe’s largest economy, Germany’s struggles don’t just stay at home—they ripple across the continent. And yet, the government’s main achievement this year appears to be proving that three-party coalitions work best as punchlines, not policymaking bodies.
Scholz’s political suicide was surely a hard personal decision, but it is yet to be seen whether this was the only way how Germany could rein in the Greens’ push, just a little, yet maybe just enough to get a chance for a stronger government, rather than wasting more time.
Of course, when it comes to economy, the latest buzzword is innovation.
Economists are calling for structural transformation, claiming that Germany should shift away from its reliance on exports and its high-quality heavy industry and invest in future-oriented areas such as AI and green tech.
Doesn’t that sound great?
Except that Germany is already lagging behind the United States and China in AI research, and they should change their complete ecosystem, starting with financing, to have at least a chance to become competitive in these sectors.
Is there an upside?
Well, here’s the thing: we are talking about Germany.
The same nation that emerged from the ashes of World War II to become Europe’s economic powerhouse. The same country that integrated East Germany (more or less anyways) and was called the Sick Man of Europe in the 1990s when bogged down by high unemployment levels and an ossified labor market.
Germany has a propensity for finding a way forward, even when the odds are stacked against them.
Let us hope that this crisis serves as a wake-up call for Berlin to get its act together.
The stakes could not be higher—not only for Germany, but for Europe as a whole. A strong Germany means a strong EU. Nobody gains from seeing the continent’s economic anchor deteriorate into driftwood, especially when France has its own struggles economically and politically, too.
