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the kiel institute for the world economy, a well-known german think tank, recently released a report saying that germany's gdp will shrink again this year, down 0.1% from 2023.

according to forecasts, germany's economic growth rate in 2025 is 0.5%, down from the previous forecast of 1.1%. it is initially estimated that germany's economic growth rate in 2026 will be 1.1%.

moritz schularick, president of the kiel institute for the world economy, said:the german economy is in crisis, which is not only an economic cyclical crisis but also a structural crisis.

why has germany, which has always been a world-class "top student", fallen into an economic crisis? how long will this crisis last and how can germany reverse its decline?

1

what's the problem?

germany is the largest economy in europe, but as the "locomotive" of the european economy, it has been somewhat unable to run in the past two years.

germany's gdp shrank by 0.3% in 2023, making it the only g7 economy to shrink last year. german finance minister lindner said the german economy is stagnating, and the country's economy minister robert habeck also described the outlook as "extremely bad."

not only that, the international monetary fund and other institutions are not optimistic about germany's economic outlook. in january this year, the international monetary fund predicted that germany's economy would grow by 0.5% this year, but in july it lowered the index to 0.2%, predicting that germany's economy may perform the worst among the world's major economies.

in mid-august, the german institute for macroeconomics and business cycle research released a report saying that germany's economic outlook has deteriorated again, and the possibility of germany's economy entering a recession in the next three months has risen again. the german central bank expects that the economic recovery will be further delayed.

a series of data show that germany is sinking further into economic difficulties and future recovery and growth will be weak.ding chun, director of the center for european studies at fudan universityin an interview with china news service's national affairs express, he said that there are both temporary and structural problems behind germany's economic recession.

ding chun pointed out that the temporary reason mainly stems from the outbreak of the ukrainian crisis. germany, which is heavily dependent on russian energy, is facing energy supply shortages and the resulting high inflation, which has led to rising costs and hurting people's consumption. at the same time, due to the skyrocketing energy prices, german companies, especially energy-intensive companies, have seen a sharp increase in costs, and have stopped or limited production or even gone bankrupt, as well as relocated and laid off employees, affecting the overall economy.

the structural reasons mainly come from the fundamental problems of the german economic model, which has a series of structural drawbacks. insufficient innovation capacity, insufficient supply of qualified labor due to an aging population, and the long and difficult road to germany's energy transformation due to the ukrainian crisis have posed serious challenges to the german economy.

he also stressed that external environmental factors such as weak global demand have also exacerbated germany's predicament.

wang shuo, professor at the school of international relations, beijing foreign studies universityin an interview with guoshi direct, he pointed out that the ukrainian crisis and geopolitical turmoil in europe are the main external factors causing germany's economic difficulties. the downturn in manufacturing, the sluggish service industry, the decline in exports, the aging population and high energy prices have made the economy even worse.

at the same time, faced with the grim situation, the german government failed to make reliable adjustments. germany has not yet introduced a substantive solution to its economic problems, nor has it found an effective way to get rid of the geopolitical crisis. the "de-risking" strategy in its foreign economic and trade policies has also caused germany to miss many development opportunities.

"the german economy will continue to face problems in the next few years. this is the result of the accumulation of chronic economic problems in germany in recent years," said wang shuo.

2

europe under pressure

some analysts pointed out that against the backdrop of a series of uncertainties such as the ukrainian crisis and the us presidential election, germany’s “continued stagnation” is not positive news either for germany or the european union.

some british media said that germany's economic contraction has increased the risks to the eurozone economy. german local media said that germany's economic recession, coupled with geopolitical crises such as the ukrainian crisis and the israeli-palestinian conflict, will put the european economy at risk of high inflation this year.

yang jiepu, director of the sino-german cooperation research center of the chinese academy of social sciencesit is believed that the negative growth of the german economy may lead to a slowdown in the recovery of the european economy. the shrinking german economy will lead to a decrease in foreign investment, a decline in import and export trade, increase employment pressure in many european countries, and slow down the pace of industrial transformation in these countries.

ding chun said that for europe, the stalling of germany, the economic locomotive, will lead to insufficient development momentum and sluggish demand in other economies, affecting the development of other european economies. it will also put pressure on the european central bank to cut interest rates, making it increasingly difficult to coordinate eu economic policies.

for germany itself, continued stagnation will make the transformation of the original economic model more difficult, the economic recovery slower, and some manufacturing industries will face greater transformation pressure.

3

where is the way forward?

the international monetary fund has predicted that under the influence of factors such as slow global economic growth, lack of skilled workers and high interest rates, it will take some time for the german economy to get out of its predicament. in the next five years, germany's economic growth rate will be lower than that of western countries such as the united states, britain and france.

in ding chun's view, the impact of the german economic crisis is mostly temporary, but some of it is permanent, such as the transformation of the energy structure, the impact of an aging population on the labor market, the lack of technological innovation potential, and the transformation of the economic model. overall, germany's economic outlook is "cautiously optimistic."

"germany is at a crossroads of times amid multiple crises. if it can make a breakthrough and blaze a new trail in the future, there is still hope for germany."wang shuo said.

wang shuo's confidence comes from germany's vitality formed by its solid industrial foundation and rich talent pool. in addition, as time goes by, the impact of energy supply problems on europe, especially on germany, will gradually decrease. however, he stressed that germany still needs to continue to seek new solutions or new paths, otherwise the problem will become more and more prominent.

as for how to reverse germany's current economic downturn, the experts interviewed believe that not only has the german government not yet come up with an effective solution, but multiple uncertainties such as geopolitics and the world economic environment have also made this problem even more difficult.

wang shuo pointed out that to return to the track of rapid growth, germany needs to accelerate the transformation of its energy structure on the one hand, and on the other hand, continue to cultivate markets with potential, further expand investment, and cultivate more high-quality labor to ensure production. however, these measures will also be affected and restricted by factors such as geopolitics, the world economic environment, and the country's divided political situation.

it is worth mentioning that many analysts believe that germany should learn from china, its "once best customer". german local media said that china's renewable energy has formed a complete supply chain, and is a global leader in materials, production and research and development.

zheng chunrong, director of the german research center of tongji universityhe said that although germany is promoting "de-risking" to get rid of its dependence on china, in fact, china-germany and even china-europe economic and trade have been closely integrated, and many companies are still increasing their investment in china.

german economists pointed out that this year's high-level visit to china by the german government has sent a signal that the german government is seeking to expand cooperation with china in the fields of climate, environmental protection, transportation, etc. china and germany are both world-leading manufacturing powers, and cooperation between the two countries can make the industrial chain and supply chain deeply intertwined and enhance international competitiveness.