Germany continues to struggle economically while the United States and most of the European Union have bounced back from the pandemic recession. The German economy shrank slightly in 2024, with forecasts for this year looking bleak. The country is facing stunning declines in various industries, leading to concerns about competitiveness. Business leaders and voters alike are worried about the rapid decline in the economy, with many pointing to the need for fundamental changes in economic policy.
Germany’s heavy reliance on exports, particularly to China, has hurt its growth potential. The manufacturing sector, which has long been a key driver of the economy, is also facing challenges. High energy costs and expensive labor are putting German companies at a disadvantage compared to their European counterparts. The country’s workforce is also facing issues, with high labor costs and a decreasing number of working hours.
Despite efforts to attract more workers, including immigrants, Germany is still struggling to address its workforce crisis. Political promises to reform welfare payments and encourage more women to enter the workforce have been made, but the situation remains dire. The charts below illustrate the extent of Germany’s economic challenges and the need for significant changes to turn the economy around.