Is Germany's business model broken?

All three of the country's major industries are in crisis, and the economy is flatlining. Are politicians finally waking up?

- Olaf Storbeck, Patricia Nilsson and Guy Chazan

In a 30-plus-year career in corporate restructuring, consultant Andreas Ruter has seen it all: the dot.com bust, September 11 terrorist attacks, the global financial meltdown, the euro crisis, Covid-19. But what's happening right now in corporate Germany is "unprecedented" and "of a completely different order of magnitude", says Mr Ruter, the country head of AlixPartners.

The federal republic's all-important automotive sector, chemical industry and engineering sector are all in a slump at the same time. Mr Ruter's firm is so overwhelmed by demand for restructuring that it's turning potential clients away.

Over the past three years, Europe's largest economy has slowly but steadily sunk into crisis. The country has seen no meaningful quarterly real gross domestic product (GDP) growth since late 2021, and annual GDP is poised to shrink for the second year in a row. Industrial production, excluding construction, peaked in 2017 and is down 16 per cent since then. According to the latest available data, corporate investment declined in 12 of the past 20 quarters and is now at a level last seen during the early shock of the pandemic. Foreign direct investment is also down sharply.

Light on the horizon is hard to detect. In its latest forecast, the International Monetary Fund says that German GDP will expand by just 0.8 per cent in 2025. Of the world's largest and richest economies, only Italy is expected to grow as slowly.