German industrialists says Germany in deep economic crisis

BERLIN

Germany’s economy is in a deep crisis, according to industrialists, warning that Europe's largest economy will contract by 0.1% this year.

Forecasting that the eurozone will grow 1.1% this year and the global economy 3.2%, the Federation of German Industry (BDI) said Germany will lag behind the eurozone.

BDI head Peter Leibinger told a press conference that Germany is in a deep economic crisis and said: “The situation is very serious. Especially industrial growth has suffered a structural break.”

Leibinger said Germany’s current economic crisis is not only a result of the COVID-19 pandemic and the Russia-Ukraine war, but domestic problems and the result of the “structural weakness” that the economy has been struggling with since 2018.

For years, governments have postponed important reforms and investments, and so public investment in modern infrastructure and in the transformation and resilience of the German economy is urgently needed, he said.

Leibinger called for a clear strategy to cut red tape in Germany, invest in infrastructure, reduce energy prices, and strengthen the German innovation and research environment.

The problems are big but not insoluble, he added.

For Brussels, Leibinger emphasized that it is important for Europe to become more strategically independent and said Europe must use its negotiating power to effectively represent its economic interests and build alliances for greater European integration and competitiveness.

The EU needs to know where it wants to go, and that includes Germany leading the way with an ambitious economic policy agenda, he added.

On US President Donald Trump's threats of tariffs, Leibinger said the EU is on the brink of a radical change.

Trump's tone is growing increasingly belligerent and new tariffs could deal a heavy blow to Germany and the EU economy, Leibinger warned.

According to the BDI, Trump's planned tariffs could depress EU economic growth, shrinking the export-oriented German economy 0.5% in 2025 instead of just 0.1%.

- On the brink of recession

The German economy contracted for the second consecutive year last year due to increased competition with China and structural problems.

After shrinking 0.1% in the last quarter of last year, the economy will enter a technical recession, defined as two consecutive quarters of contraction, if it contracts in the first quarter of 2025.

If GDP in Germany declines 0.1% this year in line with the BDI forecast, its economy, Europe's largest, will not have grown for three consecutive years for the first time since the unification of the two Germanies in 1990.

*Writing by Gokhan Ergocun from Istanbul