Germany in crisis: unemployment and recession at record levels!

Germany is currently facing the greatest economic depression since the founding of the Federal Republic. The economic challenges are manifesting themselves in a rising unemployment rate and a declining business climate. In January 2025, unemployment rose to 6.4 percent, representing almost three million unemployed. Compared to January 2024, this is an increase of 187,000 unemployed people. In addition, the number of short-time workers is increasing, which indicates a declining labor supply.

Particularly worrying is the decline in the business climate index for the self-employed and micro-enterprises, which fell from minus 23.4 to minus 24.9 points. A significant proportion of self-employed people, namely one in two, complain about a lack of orders. Gross domestic product (GDP) also fell by 0.2 percent in 2024, indicating an official recession. This is the second year in a row that Germany has seen a shrinking GDP.

Economic forecasts and challenges

The situation is alarming compared to other European countries, as Germany lags behind countries such as Italy, France and Spain in terms of economic growth. The Federation of Industry predicts that the decline in the German economy will continue in 2025. In addition, foreign direct investment in Germany has fallen in the last three years, while the difference between foreign investments in Germany and German investments abroad was around 94.1 billion euros in 2023.

In addition to concerns about employment and GDP, another source describes the general economic situation. The federal government expects GDP in 2024 to be below the previous year's figure for the second time in a row. Such negative GDP values ​​recently occurred during international crises, for example during the 2009 financial crisis and the 2020 corona pandemic. Germany has experienced a stagnating economy over the last five years, and the 2019 level has never been reached again.

Despite this bleak outlook, there are small rays of hope. In the third quarter of 2024, the economy recorded a positive growth rate supported by private consumption. Inflation is now back in the two percent range. Increases in income and low inflation have positively influenced household consumption patterns, even as industry continues to suffer from high energy prices.

The current economic situation is further burdened by external factors. Donald Trump's election victory could have a negative impact on the German economy, particularly through possible tariffs on EU imports. The general uncertainty among the population and among companies could hinder the economic recovery. However, a quick clarification of the political situation in Germany could help limit the economic consequences ZDF reported.

This is supplemented by estimates that the federal government expects growth of just 0.8 to 1.3 percent in the coming years, while inflation was at times above eight percent, which puts considerable pressure on consumers and the economy.