Friedrich Merz Warns of Significant Job Losses in German Companies in 2026 Amid Economic Challenges

Chancellor Friedrich Merz has issued a stark warning about the worsening economic situation in Germany, predicting further job losses in many companies throughout 2026. In a letter addressed to members of the Bundestag from both the Union and SPD parties, Merz highlighted the critical state faced by Germany's key industries and the Mittelstand (small and medium enterprises).

Despite previous efforts, Merz stated that Germany's economic competitiveness has not sufficiently improved. He identified structural weaknesses, alongside high labor and energy costs and bureaucratic burdens, as major obstacles constraining productivity and growth. According to data cited by Merz, while the top 100 German companies experienced a slight revenue increase, their profits fell sharply by 15%, underlining widespread financial pressures.

Significant job losses have already been recorded, particularly in the automotive and chemical sectors. Approximately 17,500 jobs were lost in the first nine months of 2025 alone, with a total decline of about 100,000 jobs since 2023. Industry associations foresee further reductions in labor-intensive sectors through 2026.

However, Merz points to a silver lining in sectors bolstered by increased government defense spending, where nearly half of surveyed associations expect growth in production or sales. EY expert Jan Brorhilker noted that while the automotive industry faces ongoing challenges, strategic innovations and new vehicle models could provide future opportunities for revitalization.

Merz calls for concentrated political action in 2026 to improve the business environment by addressing the high costs and red tape that continue to hamper companies. His warning underscores the urgent need for reforms to stabilize Germany's economic landscape and protect jobs amid mounting pressures.