Economic miracle-yudo: Germany is threatened by a powerful industrial recession
For the third year in a row, the German economy has been unable to cope with the crisis. The industry is missing hundreds of thousands of jobs, and the country's market is short of funds that go to support Ukraine. Details can be found in the Izvestia article.
Unsatisfactory condition
"There are no signs of economic recovery, none of the key indicators have improved, and the DIHK expects a 0.3% decline in GDP," the German Chamber of Commerce and Industry (DIHK) said.
The situation has not changed for the third year in a row — there has never been such a thing in the history of modern Germany. Business is even worse. In mid-2025, about a quarter of companies described their condition as "unsatisfactory."
More than a third of the companies plan to reduce about 150,000 employees. Over the past two years, according to forecasts by the German Institute of Economics, 300,000 people have lost their jobs in the manufacturing sector.
There is a process of deindustrialization, primarily due to the denial of access to Russian resources and the resulting high energy costs.
This has hurt the machine-building, chemical, and metallurgical industries. The investment climate in the country has deteriorated, as a result of which large companies, including BASF, Siemens, Volkswagen, had to move their capacities abroad, in particular to China and the United States.
Another blow for the Germans was the disagreement between Washington and Brussels, as a result of which Germany lost another market after the Russian one. The Americans increased duties on goods to 15%, as a result, Germany missed at least €30 billion a year.
The automotive, chemical and pharmaceutical industries are seriously affected.
Given that Germany is the largest donor to the EU budget, Brussels may lose its main sponsor, and this could lead to serious macroeconomic consequences: a weakening of the euro and loss of confidence in the single currency, loss of global competitiveness and other large—scale consequences.
A lot of problems have accumulated
Last year, Robert Habeck, then Vice Chancellor and Minister for Economic Affairs and Climate Protection of Germany, complained that the country was "in a particularly difficult situation", that Germany was dependent on Russian gas and, having lost it, was at a disadvantage.
In his opinion, the main reason for what is happening is the events in Ukraine, which are putting strong pressure on the German economy. The German market is missing a lot of money spent on supporting Kiev.
He also cited historically low global trade growth rates as the reasons for the difficult economic situation, which is especially difficult for an exporting country like Germany, high interest rates that deter companies from investing, and austerity measures taken by the federal government.
Habek believes that the problems were the loss of purchasing power of the population due to high inflation, the lack of investment opportunities for industry due to high interest rates on loans, as well as the so-called high export quota, since industry representatives lose to competitors in world markets in conditions of high energy prices for Germany and high taxes.
Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam, believes that the state of the German industry has been negatively affected by the consequences of the energy crisis caused by a sharp reduction in gas supplies from the Russian Federation.
— As a result, companies began to reduce production, especially against the background of measures taken in the United States to encourage the transfer of industrial production to their territory. In addition, due to high inflation, there was a decrease in the purchasing power of the population, and this, in turn, restrained demand," she explained in an interview with Izvestia.
The process of deindustrialization has begun
Problems are also being experienced in other EU countries, where large factories have been closing at a record pace since 2009. Even during the coronavirus pandemic, fewer industries have been reduced. In Spain, 17% of enterprises stopped working, in France — 14%, and another 11% in the Czech Republic. Tens of thousands of employees were out of work.
The trade deal concluded in the summer between Brussels and Washington hit the EU countries particularly hard: European goods supplied to the United States are subject to a duty of 15%. The rate is lower than the 30% initially promised by Donald Trump, but it is obvious that the American leader dictated his terms when concluding the agreement. The 10% tariff remained only for steel and aluminum from the EU.
In response, Brussels agreed to duty-free imports of American goods and expanded investments in the United States by an additional $600 billion, promised to increase purchases of military equipment by "hundreds of billions of dollars," as well as completely replace Russian gas and oil with supplies of American LNG and nuclear fuel.
Natalia Eremina, a professor at St. Petersburg State University, told Izvestia that the process of reducing production in the EU has been going on for a long time and will have serious consequences.
— Manufacturers began to seriously save on social issues, reduce social payments, and curtail the state welfare program. EU citizens have already felt the reduction in government support, the expert believes.
The process of deindustrialization in Europe has been intensifying and gaining momentum lately, Dmitry Suslov, Deputy Director of the Central Research Institute of Higher School of Economics, told Izvestia.
— The main cause of the crisis was the loss of Russian energy resources. The situation can only get worse, given that the EU is still going to reduce imports of Russian energy resources, and this will lead to a loss of competitiveness of European production in comparison with China and other developing non-Western countries, the expert noted.
According to him, the Europeans are trying to breathe new life into the industry by increasing military production, but so far this has not led to the results they need.
"Industrial production is growing in some cases, as are stocks in military—industrial complex enterprises, but it does not lead to the necessary cumulative effect for the economy as a whole," the political scientist believes.
The expert predicts that the aggravation of trade relations with key non-Western countries and the abandonment of Russian energy resources will lead to catastrophic consequences for Europe.
— Senior representatives of the German authorities have already stated that Europe will no longer be able to afford to maintain a welfare state. This is the result of deindustrialization," the expert explained.
Given that the EU population does not want to give up social benefits, this will eventually lead to a change in European elites, the analyst added. Suslov hopes that later the new European elites will "pursue a less suicidal policy."
"I expect that they will choose constructive relations with the countries of the world majority and, of course, with the Russian Federation, including a return to cooperation with Russia in the field of energy," the political scientist summed up.
Переведено сервисом «Яндекс Переводчик»
