Amidst political reshuffling at home and heightened economic headwinds coming from the other side of the Atlantic, key voices in Germany’s economy no longer sugarcoat the bleak melange of stagnation, dependency and structural decline – or the fact that there is no easy way out.
Germany’s „Five Sages of Economy,” an advisory council to the federal government, does not go easy in their recent assessment of the country. „In terms of GDP growth, Germany clearly lags behind other advanced economies,” the experts state in their annual report published on Wednesday. It predicts a GDP decline of 0.1% for the current year and a growth rate of 0.4% for 2025.
References to the country’s „declining competitiveness” can be found throughout the report. The experts attribute the country’s stagnation to „both cyclical and structural problems,” one of them being weak export rates due to „non-price competitive factors.”
When it comes to the question of which these factors might be, Germans are their own harshest critics. Nearly every sector is claimed to be in crisis, savings rates are stalling and slowing down consumption, and the blame game has started.
First 'lazy’ – and now 'dependent’
Echoing a narrative that has taken hold among some business leaders, Norbert Röttgen, foreign policy expert of the Christian Democratic Party (CDU/EPP) – currently leading the polls for the upcoming February elections – blamed it on laziness.
„In Germany, we have become lazy in our thinking because neither did we feel threatened in our security nor do we want to be particularly powerful. We just enjoyed our increasing wealth,” he said in a recent interview.
Röttgen accused domestic enterprises of „acting on short notice” and „not thinking strategically enough”. He blamed previous governments for endorsing large-scale investments into China and, thereby, increasing the country’s economic dependency.
On a federal level, the country’s main industry association BDI warns that dependency on critical raw materials like lithium has even increased in recent years.
„While in 2014, Germany used to import 18% of its lithium batteries from China, this figure has risen to 50% by 2024,” a recent BDI report stated.
Ironically, it was published not even a week after the opening of a battery-grade lithium factory near Frankfurt. The study warns that this leaves Germany’s automotive industry at serious risk.
BDI president Siegfried Russwurm urged policymakers to boost efforts towards strategic autonomy, warning in a speech on Monday: „In the rivalry of political systems, autocratic regimes use their monopoly in particular raw materials to meddle in the market development for the sake of their own geopolitical interests.”
Germany’s 'economically most difficult moment’
When seeking to become more independent from systemic rival China, Germany is in for another challenge: To assert its interests, Berlin must either heavily rely on coordination with 26 other states on the EU level – or not alienate its major ally and trade partner US. But on that front, many German economic experts feel the crisis has just begun.
After the US presidential election, Moritz Schularick of the Kiel Institute for the World Economy (IfW) called Donald Trump’s victory the „economically most difficult moment in the history of the Federal Republic of Germany”. He believed the country needs to invest „massively” in defence capabilities and lead the EU’s way alongside France.
The Ifo Institute for Economic Research calls for a stronger integration of the single market, claiming that the resulting gross value added could amount to €67.8bn for Germany.
Michael Hüther, director of the Cologne Institute for Economic Research (IW), calls for „shock therapy”. „This is what we are lacking: Hunger for more, for something different. We have been lulled into inaction for more than 16 years because [former] Chancellor Angela Merkel used to pacify us and promised to take care of everything,” he said in an interview.
Crisis-proofing the country amid political jitters
Hüther’s policy recipe to find a way out of the current crisis hinges heavily on government action: among the most urgent efforts required, he mentions accelerated tax write-offs, amendments to tax regulation, cutbacks on energy prices and investment in infrastructure.
However, there is one other headache that all leading German economists share: They worry about a period of political instability due to the upcoming snap elections and coalition talks that could last well into the early summer of next year.
Meanwhile, German companies have already begun taking matters into their own hands. The country’s largest seaport, Hamburg, has registered the largest increase in turnover volumes since the summer of 2024. Logistics company Hamburger Hafen und Logistik (HHLA) attributes this to a lingering fear of tariffs, which could be introduced by the new Trump administration in the US.
„Many traders have taken these insecurities into account and stockpiled orders to keep their warehouses filled in advance,” HHLA’s CEO Angela Titzratz told Euractiv.
Stockpiling and saving up does indeed seem to be a very German way to react to crises.
Economic News Roundup
Thursday 14
Pressure is increasing from Germany to conclude the free trade agreement between the EU and the Latin American Mercosur bloc by December. Key politicians called to split the deal to circumvent French opposition, blaming a “misguided patriotism” of the French government. „The EU Commission must split the agreement into an EU-only trade part and a political part,” Markus Töns, German MP and speaker for trade policy for leading government party SPD (S&D), told Euractiv. This would allow the trade part to be adopted by a 'qualified majority’ of member states. At a meeting with Commission President Ursula von der Leyen this Wednesday, French Prime Minister Michel Barnier doubled down on its opposition due to concerns over its agricultural sector and environmental protection. Meanwhile, the European Commission is hinting a political agreement could be reached before the year ends, of which the German government is also “firmly in favour”. Read more.
European policymakers must step up efforts to integrate the single market for services to mitigate – or even prevent – the imposition of blanket tariffs by newly re-elected US President Donald Trump, analysts at one of Germany’s leading research centres said on Wednesday (13 November). Lisandra Flach, director at the Ifo Center for International Economics, told reporters in Brussels that integrating the EU’s services sector would not only revitalise the Union’s flagging economy but could also render Trump less willing to follow through on his promise to impose duties of 20% on all US imports and 60% on Chinese goods. “Improving the market for services would make the European market way more attractive for US firms, and so would also decrease the willingness of Trump to impose tariffs,” she said. Read more.
Wednesday 13
The European People’s Party (EPP) will need time to assess the nomination of French commissioner-designate Stéphane Séjourné, a leading MEP for the European Parliament’s largest political family told Euractiv after the French centrist’s hearing on Tuesday. “He did not make any major error, there was no major controversy, but… he did not really offer many more details than he had offered in his written answers,” said EPP vice-president Siegfried Mureșan. “[EPP] members will need some time, and we will see if there’s a need for further clarifications in the form of written questions,” he added. The EPP’s assessment contrasted with that of the Greens/EFA group, which appreciated Séjourné’s strongly pro-European approach. “We think he did fine,” said a spokesperson for the group, which backed von der Leyen’s re-election in July but is not formally part of her centrist parliamentary majority. Manon Aubry, co-chair of the Parliament’s Left Group, offered a far more negative assessment. „I think he was completely disconnected from the [EU’s] huge industrial needs,” she said. Read more.
Tuesday 12
Italian commissioner-designate Raffaele Fitto fielded persistent questions from MEPs on Tuesday (12 November) on his political track record, with the positions he took as Italian Prime Minister Giorgia Meloni’s minister chastised by some as in conflict with European values. Centre-left forces have questioned Ursula von der Leyen’s decision to grant such a position to a member of the far-right European Conservatives and Reformists (ECR), a group that had not backed her in July. From his part, Fitto took every chance he could during his hearing on Tuesday to double down on his commitment to EU objectives, downgrading his national role to second ranking. “I want to avoid getting into the debate on personal political positions – also because I take it for granted that all of us – all the Commissioners – are going stay very far away from representing their member states’ interests and their political parties’ interest,” he said. Read more.
Stéphane Séjourné told MEPs on Tuesday (12 November) he would strive to help Europe “master its own destiny” if confirmed as commissioner for prosperity and industrial strategy, pledging to protect all domestic sectors, from energy-intensive steel to clean tech. In an often fiery hearing that also featured several questions about the French centrist’s political “legitimacy,” the French centrist repeatedly emphasised that EU policymakers should step up efforts to ensure Europe’s “strategic autonomy” – a key goal of his beleaguered close friend and ally, French President Emmanuel Macron. „We have to secure our strategic autonomy because what is at stake is our ability to master our own destiny today,” Séjourné said in his opening remarks. „Security of supply is one of the targets that will be set,” he said, adding that „social and environmental standards” should also be „part of our discussion” on public procurement. Read more.
Séjourné „won’t represent the interests of the French government,” French deputy minister for industry Marc Ferracci reassured Brussels ahead of the hearing of the designated Executive Vice-President for Prosperity and Industrial Strategy. This came amid suspicions that the 39-year-old, who, during part of his tenure at the European Parliament, was president of the liberal Renew group, maybe too close to Macron and thus may ultimately end up serving the interests of the Élysée rather than the Berlaymont. “What France expects is an ambitious view of what should be the European industrial policy,” Ferraci also said, arguing that trade, competition and industrial policy should all be “part of a global agenda”. Concerns about Séjourné’s fealty to the Élysée had not been eased by his written answers to MEPs’ questions last month, in which he expressed support for centralising financial market supervision. Read more.
Six executive vice president nominees, including Raffaele Fitto and Teresa Ribera, are set to face intense MEP scrutiny in the last round of hearings on Tuesday (12 November) amid political groups’ trade-offs and demands. According to Parliamentary sources, coordinator meetings on Italy’s hotly debated Fitto (Fratelli d’Italia/ECR), Spain’s Ribera (S&D), and potentially France’s Stéphane Séjourné (Renew) could be tied together and postponed until after Hungary’s nominee, Olivér Várhelyi’s (Patriots for Europe) assessment—along the lines of a political “hostage-taking” dynamic. Euractiv understands that the delay of the Parliament’s group coordinators’ vote on Várhelyi from Monday (11 November) to Wednesday (13 November) seems to have caused a ripple effect, possibly pushing the confirmation vote during the day and ultimately to Wednesday. Read more.
[Edited by Anna Brunetti/Rajnish Singh]
