Germany struggling to break th e grip of twin crises

A political system and economic model that served Germans well in the past are now paralysing efforts to find solutions. That is bad news for Europe.

- Jonathan Eyal

While the world continues to watch political movements in the US, another development of critical importance is largely ignored: Germany - Europe's biggest country and economic powerhouse - is experiencing a severe battering on two fronts.

The fact that Germany's coalition government has fallen apart and that an early general election is now scheduled for Feb 23, 2025, is not remarkable.

What is exceptional in Germany's case is that its political crisis coincides with a downturn that is not easily reversible as it is rooted in a faltering economic model.

And regardless of how its people vote in the forthcoming election, the outcome is already known: The next German government will also be a coalition that will include most of the same old politicians, and is unlikely to generate the radical solutions the country needs as it faces an uncertain and troubled future.

So, as Europe faces the Ukraine war, and its leaders nervously contemplate Donald Trump's rise and trade protectionism, Europe's biggest economy is sputtering aimlessly and rudderlessly.

FAILING ECONOMIC FUNDAMENTALS For decades, the German economy was famous for, among other things, its precision engineering and car manufacturing, all underpinned by a disciplined, skilled workforce and the country's famous Mittelstand, the highly specialised small and medium-sized enterprises that make up 99 per cent of German companies and provide over half of jobs.

Germany's politicians were praised for their foresight and ability to negotiate long-term pay packages based on productivity deals rather than the industrial strikes that blighted other European economies.