BDI President Warns of Germany's Economic Decline Amid Calls for Urgent Reforms

Peter Leibinger, president of the Federation of German Industries (BDI), has issued a stark warning about Germany’s economic outlook, describing the country’s industrial sector as being "in free fall" amid what he calls the deepest crisis since the founding of the Federal Republic. According to a recent industrial report, Germany’s industrial production is expected to decline by two percent in 2025, marking the fourth consecutive year of contraction. Leibinger characterizes this trend as a structural decline rather than a mere cyclical downturn.

Leibinger urges an urgent shift in economic policy focused on enhancing competitiveness and growth, emphasizing the need for decisive structural reforms to prevent further job losses and erosion of prosperity. He highlights that each month without these reforms diminishes the fiscal room for maneuver available to the German state and costs jobs.

A critical recommendation from Leibinger is that the government should prioritize investment spending over consumption expenditures. He criticizes the current government's practice of reallocating funds from the core budget into a special multi-billion-euro fund intended for infrastructure and climate protection. This fund, however, has reportedly been used to finance other controversial initiatives, such as expanding the "Mütterrente" (mother's pension). Leibinger stresses that these funds should be transparently used exclusively for additional investments.

Among affected sectors, the chemical industry is suffering significantly, operating at only 70 percent capacity. While the automotive industry shows some production increase, it remains under pressure regarding employment. Compared to Germany, the broader European Union’s industrial sector shows more optimism, with an anticipated 1 percent increase in production, potentially signaling a stabilization of the continent’s industrial recession.

Leibinger’s warnings come amid growing voices criticizing the government’s budgetary strategies, which many see as inadequate to address Germany’s economic challenges. He concludes by stressing the urgent need for a comprehensive economic and structural reform agenda to restore competitiveness, maintain jobs, and foster sustainable growth.