Germany is in the middle of its worst economic slowdown in years.
Official figures show two years of consecutive GDP contraction, and 2025 is unlikely to bring any relief, projected at near-zero growth.
Over the next five years, Germany’s economy is forecast to grow by only 5%, well below the EU average of 8%, according to the IMF.
The snap elections on February 23, 2025, offer an opportunity to address these issues. But so far, election campaigns have avoided focusing on the country’s long-term economic challenges, leaving voters with limited insight into how the next government might tackle them.
What happened to ‘Made in Germany’?
German industry accounts for nearly 20% of the country’s GDP, well above the EU average of 15%. But industrial output has been declining since 2017, even as global production increased.
Germany’s auto industry, which is the pillar of its economy, is now struggling to keep pace in the electric vehicle (EV) market. Last month, Volkswagen announced its plan to cut 35,000 jobs after years of lagging behind Chinese competitors in EV innovation.
Additionally, the bankruptcy of auto supplier Gerhardi has left 1,500 workers facing redundancy. Another major supplier, Kostal, has relocated jobs to Eastern Europe. Union representatives warn that the region could become an “open-air industrial museum.”
High energy prices have worsened the situation. Following Russia’s invasion of Ukraine, Germany lost access to cheap Russian gas, increasing costs for energy-intensive industries.
Germany’s economy: how bad is it?
Germany’s economy is now the same size as it was in early 2020, marking five years of stagnation, according to Carsten Brzeski, an economist at ING.
The country faces growing external pressures as China has transformed from being a key export destination to a fierce competitor.
Meanwhile, U.S. protectionist policies under President Donald Trump could cost Germany’s economy 1% of GDP and 300,000 jobs if tariffs on German exports are introduced.
Germany’s economic slowdown isn’t just about external pressures. Decades of underinvestment in infrastructure have taken a toll.
Trains frequently run late, internet connectivity lags behind other European countries, and the country lacks enough charging stations to support EV adoption.
Meanwhile, demographic challenges are intensifying. Germany’s aging population and a shortage of skilled workers threaten long-term growth.
The Bertelsmann Foundation estimates that Germany needs 288,000 skilled immigrants annually until 2040 to prevent its workforce from shrinking by 10%.
Yet immigration has become a divisive political issue, with rising support for the far-right Alternative for Germany (AfD).
Election promises: fact or fiction?
The 2025 election campaign has been dominated by promises, but few address Germany’s structural problems.
Friedrich Merz, the leader of the conservative CDU/CSU and favorite to become the next chancellor, has pledged tax cuts for businesses and increased defense spending.
However, he has avoided discussions about loosening Germany’s constitutional “debt brake,” which limits budget deficits to 0.35% of GDP.
The CDU/CSU manifesto emphasizes conditional development aid linked to combating illegal migration and reducing Russia’s and China’s geopolitical influence.
The Social Democrats (SPD), led by Chancellor Olaf Scholz, propose taxing the wealthy to fund investments in green energy, education, and infrastructure.
However, their track record of three years in power has been marred by inaction on critical reforms, weakening their credibility.
While the SPD emphasizes feminist foreign policy and global taxation of the super-rich, these proposals have gained little traction amid voter skepticism about their ability to deliver meaningful change.
The Greens have focused on climate action and support for Ukraine, advocating increased international climate financing and adopting feminist and decolonial approaches in their development agenda.
However, balancing these priorities with fiscal constraints has proven difficult. Polling at around 13%, the Greens may struggle to gain enough influence to push their policies in a future coalition.
Meanwhile, the Alternative for Germany (AfD) capitalizes on voter anxiety, particularly around migration.
Polling at 20%, the far-right party has proposed strict immigration limits, reduced development aid, and policies targeting the cultural dimensions of foreign funding.
However, the AfD offers few concrete solutions for Germany’s deeper economic problems, relying instead on populist rhetoric.
The Free Democratic Party (FDP), polling at 4% and in danger of missing the Bundestag threshold, advocates cutting development budgets and integrating development policy into broader foreign and security frameworks.
This aligns with their focus on fiscal austerity but fails to address Germany’s investment needs.
Germany’s ‘debt brake’ dilemma
Germany’s fiscal rules are a major barrier to investment.
The “debt brake” has been in place since 2009 and limits public borrowing, even for critical needs.
Economists argue that decades of underinvestment have left Germany with crumbling infrastructure and outdated technology.
A study estimates that Germany needs €600 billion in public investment over the next decade just to modernize education, transport, and climate protection systems. This would require an annual investment of 1.5% of GDP—far above current levels.
Defense spending is another pressure point. Meeting NATO’s 2% GDP target has relied on a €100 billion special fund that will expire in 2026.
Experts say Germany needs to spend 3% of GDP to maintain a modern military force, which would mean an additional €70 billion annually.
Germany’s immigration paradox
More than a third of German businesses report difficulty finding qualified employees, according to the Ifo Institute.
Yet public discourse often overlooks the economic contributions of immigrants.
For example, 89% of Syrian men who arrived between 2014 and 2016 are now employed, demonstrating the potential benefits of a well-managed immigration policy.
However, the rise of the AfD, with its anti-immigration stance, has pushed mainstream parties toward stricter policies.
The CDU/CSU has proposed a “de facto immigration freeze” and tougher asylum rules, such as limiting family reunification and expediting deportations.
In contrast, the Greens and SPD have emphasized the importance of skilled immigration to fill workforce gaps.
However, their messaging often gets overshadowed by the louder, more populist rhetoric of the AfD.
Germany: a country in search of direction
Election campaigns have largely sidestepped Germany’s structural issues. Politicians continue to promise tax cuts and social benefits without addressing the need for significant reforms.
For decades, “Made in Germany” stood for innovation, strength, and reliability. It wasn’t just a slogan—it was a promise to the world and a source of pride at home. But today, as factories close and industries struggle, many Germans are feeling pessimistic about the future.
This election isn’t just about policies or party platforms. It’s about identity. Will this vote light the way forward—or leave Germany searching for itself in the rearview mirror?
The post Germany’s economy is in big trouble: can the elections bring change? appeared first on Invezz
