The EU has been left humiliated as the economy of Germany, once Europe’s powerhouse, has shrunk for the second year in a row, with the threat of a winter recession looming.
The economy contracted by 0.2% in 2024, following a 0.3% dip in the previous year, new figures from the German statistics office have revealed. In the last three months of the year, it shrank by a worrying 0.1%.
This marks the first time since the early 2000s that the economy – the largest in Europe – has suffered a two-year contraction.
This news threatens Chancellor Olaf Scholz ahead of next month’s snap election, which was called after he lost a vote of no confidence before Christmas.
Carsten Brzeski, Chief Economist of ING Germany, has claimed that Germany is once again the “sick man of Europe”, according to The Telegraph.
The economy has suffered greatly due to, among other reasons, surging energy prices amid the war in Ukraine.
In September, it was revealed that carmaker Volkswagen was considering closing domestic plants for the first time. This was shortly followed by chipmaker Intel’s decision to suspend plans to build a 30 billion euro (£25.3 billion) plant in Germany.
Economists have also warned that the country is sliding into a winter recession, with high energy costs, increasing inflation and steep drops in factory activity levels in November 2024.
The news also comes as concerns grow around President-elect Donald Trump’s threat of imposing tariffs on all US imports, which could worsen the situation.
According to Timo Wollmershäuser, of the Ifo Institute in Munich, “Germany is going through by far the longest phase of stagnation in post-war history. It is also falling behind considerably in an international comparison.”
The Institute warns that without economic policy reforms, Germany is “hardly likely to break free from stagnation this year” and expects “barely perceptible growth of 0.4%”.
The economy, along with immigration, are among the top issues for German voters going into the election next month, which was triggered by a no-confidence vote in Scholz after the collapse of his three-party coalition.
According to Politico, the incumbent chancellor’s Social Democratic Party is set to receive only 15% of the votes, while the far-right Alternative for Germany (AfD) is expected to gain 21%.
The centre-right bloc – which includes Angela Merkel’s old party, the Christian Democratic Union – has a comfortable lead of 31%.
Brzeski warned: “The outlook for German industry remains anything but rosy. The upcoming elections will be key for Germany’s economic outlook in 2025 and beyond.”
