German Economy Faces Sharp Job Losses Amid Criticism of Government Response

Germany's economic situation in 2026 is increasingly precarious, with significant job losses across major industries and mounting criticism of the federal government's handling of the crisis. Former Chancellor Friedrich Merz has sounded the alarm on the state of the economy, warning that many companies are reducing their workforce due to high operational costs and structural weaknesses undermining competitiveness. According to Merz, about 17,500 jobs were cut in the top 100 German companies in 2025 alone, contributing to a broader decline of nearly 100,000 jobs since 2023. The automotive sector suffered a particularly steep drop in profits, falling by 46% despite relatively stable revenue, while the chemical industry saw profits plummet by 71%. Experts anticipate that 2026 will not see economic recovery, with further job reductions expected especially in labor-intensive industries like metal, steel, chemicals, and automotive.

Adding to the concerns, Ralf Luther, Vice President of the Industry and Commerce Chamber (IHK) Magdeburg, expressed strong disappointment with the federal government's response. At the IHK's New Year's reception, Luther accused the black-red coalition of failing to fulfill crucial campaign promises and urged for more robust political efforts to secure Germany’s economic position. His comments highlight a growing dissatisfaction among business leaders who are calling for decisive governmental action to alleviate the economic pressures.

Despite the gloom, some sectors such as aerospace and construction expect growth and potentially offer a glimmer of hope for longer-term recovery. However, the overall outlook remains grim with Merz emphasizing that current measures to improve competitiveness are insufficient.

Merz conveyed his concerns in a letter to Bundestag members from both the Union and SPD, emphasizing the need for better economic conditions to prevent further job losses. The EY analysis cited by Merz noted that while total revenue of the leading 100 companies increased slightly to about 1.55 trillion euros in the first nine months of 2025, profits before tax and interest declined 15% to 102 billion euros, underscoring the depth of corporate challenges. Merz's critique and Luther's rebuke together paint a picture of an economy under strain, vulnerable to further setbacks without meaningful policy intervention.