Germany could enter its third year of economic recession in 2025, according to a report out of the Handelsblatt Research Institute (HRI), cited by the Mandiner news portal, meaning it will face the longest economic crisis in its post-World War II history.
Germany, the European Union’s largest economy, may shrink by 0.1 percent this year after a contraction of 0.3 percent in 2024 and 2023.
“The German economy is in the midst of the biggest crisis in post-war history,” said Bert Rürup, chief economist at HRI. “The pandemic, the energy crisis, and inflation have made Germans poorer on average.”
The HRI is not alone. In December, the German central bank lowered its growth forecast for 2025 to 0.2 percent from 1.1 percent forecast in June. According to surveys, German citizens also say they are most worried about the economy ahead of the snap election on Feb. 23.
The dismal economic performance does not bode well for Minister of Economic Affairs Robert Habeck, who holds a degree in philosophy and is the Greens candidate for chancellor in the upcoming election. Some have joked that if Habeck were to become chancellor, Germany would soon need economic aid.
The Nius news agency has also reported on data from the credit agency Creditreform, which reported there were almost a quarter more corporate bankruptcies in 2024 versus 2023, with 22,400 companies becoming insolvent, the highest number since 2015. The number of consumer bankruptcies increased by 8.5 percent to just over 72,000 as well.
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Meanwhile, credit insurer Allianz Trade expects even more bankruptcies in 2025, including a higher number of consumer bankruptcies.
The mood in industry, especially manufacturing, is particularly bad, says Nius, with nearly twice as many pessimistic about 2025 as those who have a more optimistic outlook. In December, the Ifo business climate index continued to slide, reaching its lowest level since May 2020. Hardly a week goes by without an industrial group announcing job cuts, and a slowdown in investment means even fewer jobs, they noted.
In terms of layoffs, manufacturing and construction have been the hardest hit. While the HRI report shows that employment increased slightly to 46.1 million people last year, the group now expects a decline of around 10,000 employed people per month.
HRI also sees no signs of an uptick in consumption, with inflation eating into disposable income despite gradually rising real wages. According to an Ipsos survey from December, only 38 percent of Germans believe the country is on the right track overall.
