Article by Thomas Kolbe
The German Chamber of Industry and Commerce (DIHK) has raised concerns about the prolonged phase of deindustrialization in the German economy. Working alongside the Federation of German Industries (BDI), both organizations are emphasizing the need for extensive reforms to stimulate growth and investment. However, they are hesitant to address the challenges posed by the green transformation.
The economic crisis in Germany persists as we enter the new year. A survey conducted by the DIHK among 23,000 member companies revealed that only one in six firms anticipates an economic upturn in 2026.
Twenty-five percent of companies are considering further layoffs, while only one third plan to invest in growth. DIHK President Helena Melnikov describes the situation as critical. Without decisive action from policymakers, Germany could face significant losses in value creation and jobs. The core of the economic decline, according to DIHK, lies within German industry, with approximately 400,000 jobs lost since 2019.
This loss is particularly impactful as these positions are typically well-compensated and require high skills. Their value extends across Germany’s economic landscape, affecting industry-related services, regional commerce, and public finances.
As a result, cities facing industrial crises, such as Stuttgart, Erlangen, and Wolfsburg, are grappling with mounting challenges due to shrinking business tax revenues and increasing budget deficits.
Avoiding Reality
Despite acknowledging the need for reforms, Melnikov points out that existing measures have failed to address issues such as high labor and energy costs. The BDI has also labeled 2026 as a “year of reforms” in statements to Reuters.
While these observations are valid, the reluctance of prominent figures in German business to openly critique government policies and abandon the faltering green agenda remains puzzling.
The economic elite is witnessing a significant breakdown in industries, and yet this reality is being denied by large sections of the media and policymakers. The data paints a clear picture of the situation.
The extent of capital outflows in the past year is still uncertain. In 2024, net direct investment outflows amounted to €64.5 billion, surpassing €100 billion in 2023. Previous years also saw substantial capital flight.
Companies are fleeing due to the impact of green regulations, high fiscal burdens, and the economic challenges posed by Germany’s energy transition.
Calls for reducing bureaucracy are also prevalent among the list of location weaknesses. However, this demand seems feeble in the face of increased state intervention. The state is expected to create thousands of new public-sector jobs to channel the influx of credit into the economy.
Businesses remain silent on the topic of extensive state intervention, accepting what is provided without questioning the market distortions or the state’s encroachment on private sector capital markets.
The DIHK forecasts a GDP growth of 0.7 percent for the current year. This figure includes net new public borrowing, with the state’s share exceeding 50 percent of GDP, while the private sector is projected to contract by approximately four percent.
The political space for maneuvering is shrinking, with a reliance on capital markets to prolong the illusion of social and economic stability through new subsidy programs.
Navigating Realities
Before shedding patriotic tears, stakeholders must carefully consider the detrimental political conditions in Germany and the EU that are driving businesses away from the country.
The narrative of disloyalty to the location has been established, portraying entrepreneurs and investors as the culprits for the economic decline. The ongoing recession and deindustrialization suggest that Germany may have crossed an economic tipping point.
German society is left with two choices: embracing further nationalization and centrally planned economies, or returning to the principles of a free market economy despite the initial social challenges it may pose.
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About the author: Thomas Kolbe, a graduate economist born in 1978 in Neuss, Germany, has over 25 years of experience as a journalist and media producer. He focuses on economic processes and geopolitical events through the lens of capital markets, advocating for individual rights and self-determination.
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