Germany’s Economic Decline Marks Longest Crisis Since World War II

Germany faces its most severe economic crisis in decades as the country enters a third consecutive year of recession. The Handelsblatt Research Institute (HRI) predicts a 0.1% GDP contraction in 2025, following declines of 0.3% in 2023 and 2024.

HRI chief economist Bert Rürup called the downturn Germany’s biggest post-war economic challenge. He attributed the crisis to inflation, the energy crunch, and the aftereffects of the pandemic, which he said have left Germans poorer on average.

The industrial sector continues to struggle. The Ifo business climate index recorded its lowest reading since May 2020, with nearly twice as many companies expressing pessimism about 2025 as those optimistic about the year ahead. Manufacturing and construction have been hit hardest, with regular announcements of layoffs.

Creditreform reported a sharp rise in bankruptcies last year. Corporate insolvencies jumped 25% to 22,400 cases in 2024, while consumer bankruptcies grew by 8.5%. Allianz Trade expects further increases in 2025, reflecting continued financial strain on businesses and households.

Economic Affairs Minister Robert Habeck, the Greens party’s candidate for chancellor in February’s snap election, has faced criticism for his handling of the crisis. Some opponents have questioned his qualifications to lead during a period of prolonged economic hardship.

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