Economic experts report alarming stagnation: Germany's future is in danger!

Economic experts report alarming stagnation: Germany's future is in danger!

The German economy is facing a serious challenge. The “economic wise men” have lowered their economic forecast for 2025 to stagnation in gross domestic product (GDP). Growth of 0.4 percent was still expected in autumn 2024, but significant weakness is now being identified. The ongoing economic stagnation leads to further uncertainty, particularly with regard to the long-term recovery of the economy. According to the forecasts, growth for 2026 is expected to be just 1 percent.

The causes of the current weakness are diverse. One of the key challenges is the bureaucracy, which is characterized by long approval procedures and makes it difficult for many companies to grow. This problem is further exacerbated by the USA's customs policy under President Donald Trump, which is particularly burdening the export-oriented German economy. The effects are also noticeable on the labor market. The unemployment rate could rise to 6.2 percent in 2025, a significant increase compared to 2.3 million unemployed in 2019.

Important investments required

Inflation forecasts also show bleak prospects. A decline to 2.1 percent is expected for 2025 and to 2.0 percent for 2026. However, uncertainty remains about price developments given trade conflicts and government spending programs, which can vary widely. Despite criticism of the current situation, the new federal government is planning to invest 500 billion euros in infrastructure and climate protection. The “economic wise men” emphasize the importance of concrete use of these funds for long-term economic growth.

In order to strengthen the economic foundation, the experts demand that at least 10 percent of the core budget flow into investments. However, this is in conflict with the EU debt requirements, which creates additional uncertainty. A reduction in bureaucracy is considered necessary to relieve the burden on companies. Suggestions include reducing information requirements and speeding up approval procedures. These measures should make it possible to actively shape structural change.

Changes in the German economic model

In the past, Germany has benefited from a strong industrial base, flourishing foreign trade and innovative services. The successes of the 2010s led to a decline in unemployment and a balanced state budget. But economic success is at risk. The decline in industrial production since 2018 shows that economic conditions have changed. Forecasts suggest that unemployment could rise to over 6 percent in 2025, while nearly three million people are expected to be unemployed.

The challenges were exacerbated by geopolitical uncertainties and high costs in Germany. Over the next ten years, up to 600 billion euros will be needed for modernization and conversion to climate neutrality. But the debt brake in the Basic Law limits the state's ability to take out loans, which makes the situation even more difficult.

The demographic changes in Germany are leading to a shortage of skilled workers. It is estimated that around 8.5 million workers will need to be replaced by 2036, while only 12.5 million young people will be replaced. In order to ensure competitiveness, a comprehensive reform of the German business model is considered necessary. In this context, the next government could prioritize tax incentives for investment and reducing bureaucracy in order to generate fresh growth.

In summary, it is clear that Germany is facing profound economic challenges. A realignment of economic policy and targeted investments will be crucial in setting the course for future growth. Time is of the essence and it remains to be seen how the federal government will respond to the challenges at hand.