Like a precision-engineered machine running low on fuel, Germany’s economic engine is sputtering. The one-time manufacturing powerhouse, which once dominated European growth, now faces an existential crisis as its export-driven model encounters headwinds. Industrial output has plummeted 15% since 2018, marking the steepest decline in the country’s post-war history.

• Germany’s GDP has flatlined since 2019 — the longest period of stagnation since World War II — while manufacturing employment has fallen by 3%.
• The metal and electrical industry could shed 300K jobs over the next five years while German automakers like Volkswagen and Mercedes-Benz struggle to keep up with Chinese competitors.

The perfect storm brewing: A confluence of factors threatens Germany’s industrial might — from China’s cooling appetite for German goods to soaring energy costs after Russian gas supplies dried up. Without thriving export markets, Peterson Institute’s Jacob Kirkegaard declared Germany’s economic model “dead.” Meanwhile, southern European nations like Italy and Greece are experiencing an economic renaissance, benefiting from tourism rebounds and reduced dependence on manufacturing. The Bundesbank expects Germany’s struggles to continue, though, saying that, “In the first quarter of 2025, the German economy is unlikely to emerge from its long period of stagnation,” attributing this outlook to a sluggish manufacturing sector and prevailing uncertainties that are suppressing consumer spending.