Economic crisis in Germany: Traffic light coalition fails due to promises

Economic crisis in Germany: Traffic light coalition fails due to promises

The traffic light coalition in Germany, which started in 2021 with great promises, is now faced with a sobering reality. At the time, Chancellor Scholz spoke of an “economic miracle,” but the results after three years are anything but rosy. Instead of progress, there is a stubborn recession, rising unemployment and the threat of deindustrialization. As the Mercury reports, gross domestic product (GDP) has been stagnating at 0 percent for three and a half years, while industrial production has collapsed by an alarming 8.8 percent.

The situation in energy-intensive industries is particularly dramatic. According to the Federal Statistical Office (Destatis), these sectors, including the chemical industry and metal processing, have experienced a massive decline since the energy crisis broke out as a result of the war in Ukraine. The decline in industrial production has not only weakened the economy but also pushed up unemployment rates. Despite a shortage of skilled workers, unemployment numbers rose from 2.3 million in May 2022 to 2.85 million in October 2024, according to the Berlin newspaper reported.

Economic challenges and rising unemployment

The traffic light coalition has failed to implement promised reforms, leading to a rise in unemployment. In October 2024, the unemployment rate was 6.0 percent, an increase from 5.1 percent in 2021. While the number of job vacancies remains high, with 675,000 in October 2024, companies are being forced to cut staff, highlighting the precarious situation.

The cost of citizens' money is also rising, forcing the federal government to pass a supplementary budget. The FDP is opposing these measures, which led the government to issue an emergency resolution to free up 3.2 billion euros for citizens' money.

Bankruptcies at record levels

Another alarming signal is the number of insolvencies. Last month, 1,530 companies filed for bankruptcy, an increase of 17 percent compared to the previous month. This is the highest October value in 20 years. However, the professional association of insolvency administrators sees no reason to panic, as the current figures are not comparable to those of the financial crisis. The bankruptcies are also a consequence of demographic change and outdated business models.

The progress in the area of ​​renewable energies should be highlighted positively. The share of renewable energy in total energy consumption increased from 19.3 percent in 2021 to 21.6 percent. Solar expansion in particular has boomed, with 83.7 gigawatts of solar capacity installed in August 2024. This is a bright spot in an otherwise bleak economic situation like this Mercury reported.

In summary, it can be said that the traffic light coalition has faced significant economic challenges during its term in office so far. Hopes for a “green economic miracle” have remained largely unfulfilled, and citizens must grapple with the consequences of these political decisions.