Two years of recession in Germany, the locomotive of Europe is firm

Anyone who wins in the most awaited and uncertain German federal elections in recent years will have to face the challenge of Germany’s economic relaunch, which has stopped being the locomotive of Europe. For two years the German economy has been in recession and now things could further worsen with the perspective of the commercial war linked to the duties announced by the USA. In short, the Germans analyze the inspire, “they will vote thinking mainly of the economy”.

In market analyzes we often return to cite Germany with the ‘great patient of Europe’ as happened in the late 90s, when the country paid a decade of costs for reunification after the collapse of the wall and the end of the countries of the Block of real socialism. Starting from 2020, in fact, Germany appears to be without that economic thrust that had distinguished it in the previous decade: it resumed the pre-Panimo levels of Covid only at the beginning of 2022 and the economy has jammed again.

Among the European countries is probably the one who is paying the highest account of the repercussions of Ukraine’s invasion by Russia, given the many interconnections that existed with the Moscow economy. The high dependence of Germany from Russia made it more vulnerable: in 2021 Russian natural gas imports amounted to a majority share of the total consumed in Germany, or 57% of 96 billion cubic meters (in Italy it was about the 38% of 76 billion cubic meters).

But there is more. The German industries suffer from what corporate and trade union leaders define “a crisis of competitiveness” determined by infrastructure deficiencies, excess of bureaucracy, high energy costs, absence of qualified labor and aging of the population. The German companies present in the Fortune 500 European ranking, relating to the largest groups per turnover, have announced over 60 thousand layoffs in 2024.

Thyssenkrupp has communicated the steel division will lose 11 thousand jobs. While the agreement between the union and the Volkswagen reached at the end of December avoided for now what would have been the first historical closure of a series of factories in Germany, even if there will be the cut of over 35 thousand jobs by 2030. The sector Cars in particular suffers the competition of Chinese cars, arrived first in the challenge for the transition to electricity.

“Germany is now permanently the eurozone tail light and is the only large European country to have recorded a reduction in GDP compared to 2019, before Covid’s pandemic”, commented last year Ruth Brand, president of the Institute Destatis.

“The German economy will hardly get rid of stagnation this year” in the absence of economic reforms, the IFO Economic Research Institute has warned last month, which is expected to grow “just perceptible by 0.4%”. According to the head of the forecast of the IFO Timo Wollmershauser:

“Germany is going through the longest phase of post-war stagnation and is considerably losing positions in international ranking”. The forecasts for 2025 vary between -0.1% indicated by the Bundesverband Der Deutschen Industrie and +0.3% estimated by the International Monetary Fund. In the decade of pre-plays 2010-19 Germany, recalls the Confindustria Study Office, “pulled the Economy of the Eurozone with its growth and its size (28% of the GDP of the area is German)”.

He had exceeded two crises, the financial one of 2008-2009 and that of the Sovereign debts of 2012-2013, with more vigor and speed than the other European partners. The German dynamism in the pre-plays was due “to the accommodation relevance of exports and the reforms on the labor market”, with the commentators who then spoke of the ‘German Job Wunder’, the miracle of the German occupation.

Among the first consequences of current stagnation there is the growth of unemployment, which increased to 6.2% in January 2025 from 6.1% of the previous month. This is the highest data since October 2020. The conditions for the German economic restart, however, are not lacking. Germany, recalls inspire, “remains firmly the largest economy in Europe, has the public debt ratio on the lowest GDP among the G7 countries (62%), as well as in a descending trajectory” Ceteris Paribus, and can count on the ” greater number of ‘hidden champions’ in the world, or small and medium -sized enterprises that are global leaders in their specialization field.