Is the German economic crisis getting worse?

Ranked second among all the European economies, the German economy has undergone an unexpected downturn since 2019. Real wages are dropping; the automotive sector is collapsing; GDP growth has stopped; and resentment is growing.

Germany controlled the European economy for many years, and rapid growth improved living conditions. But this development has lately ceased somewhat abruptly. Unquestionably, the German economy has suffered greatly from the situation in Ukraine. Gas prices surged from disturbances to the supply, and they remain high even with some decrease. This is a major challenge for an economy largely depending on industrial output.

German industrial output continues declining even with the latest gas price decrease. It is today 15% less than it was in 2016. It also deviates 25% from its pre-trend level. Though the Ukraine crisis is unfortunate, it also emphasizes the horrible decision made to shut down nuclear power plants. This was taken without any logical alternatives. Germany had to revive coal-powered plants to meet demand for energy despite with policies toward investment in renewable energy. The rising energy prices have seriously hurt German business. German power rates exceed two times those of the United States.

Beyond the energy crisis, the German economic woes are abundantly evident in the automotive sector. Concerns about declining profitability and competitiveness have Volkswagen thinking about first closing German factories in 87 years. Declining exports…