Germany Faces Deepening Economic Crisis with Widespread Job Cuts and Governmental Struggles

Germany is grappling with a prolonged economic crisis marked by economic stagnation, rising unemployment, and significant planned workforce reductions across the country. According to a recent survey by the Institute of the German Economy (IW), one-third of German companies intend to cut jobs in the coming year, with 36% planning layoffs while just 18% aim to hire new workers. This shift reflects the bleak economic landscape, as major German automotive firms such as Porsche and Mercedes report a 70% decline in profits and Volkswagen posts a quarterly loss of 1.3 billion euros.

The labor market is contracting, with an increase of 120,000 unemployed persons compared to last year, pushing the total close to 3 million. Renowned management consultant Roland Berger highlights Germany’s longest economic stagnation since 1948, noting exports have been stagnant since 2021 while imports have surged by 30% since 2015. Deutsche Bank has warned of a looming 'China shock,' citing rising imports from China paired with declining exports.

The German government, led by Chancellor Friedrich Merz’s CDU-SPD-FDP coalition, faces criticism for its fragmented response, often distracted by secondary political disputes such as debates over dual citizenship and internal party conflicts within the SPD. Business leaders, including Jürgen Geißinger, emphasize that high energy and labor costs combined with excessive bureaucracy impede industrial recovery. Despite plans for reforms and bureaucratic relief, skepticism remains over the government’s ability to reverse the economic downturn.

Psychotherapist Wolfgang Krüger characterizes the situation as a "Germany dilemma," where traditional policy measures fall short and society is forced to adapt to harsh new economic realities. The overall mood is one of guarded patience as the nation confronts its shrinking economy, rising unemployment, and diminishing global influence.