Germany: Longest Recession since the Great Depression, and that's just the start

After the 2nd year of contraction of German GDP in 2024, a rare third year of recession is likely in 2025. But the worst is yet to come after that...

24 February 2025. Germany. As Germany’s national election catches world attention for a brief moment, any hope of significant policy changes away from the “degrowth” strategy in place under Chancellor Scholz and his economy minister Habeck are as remote as ever. The allegedly “Christian” parties CDU/CSU and their candidate for Chancellor, Blackrock staffer Friedrich Merz, refuse to form a coalition with the conservative AfD party (Alternative for Germany), led by Alice Weidel (ex-Goldman Sachs), despite the latter party’s significant gains (and support from Elon Musk). The reality is that likely future Chancellor Merz is a follower of Angela Merkel, who started Germany’s downfall ten years ago by transforming the CDU/CSU into a left-leaning party that has opened the doors to mass illegal immigration on an unprecedented scale. Merz is set to form a coalition with the degrowth parties SPD or/and the Greens, who are keen to implement World Economic Forum and UN SDG goals of reducing growth to zero. And they have delivered on the promised dismal economic performance in recent years!

Without significant positive impulses from government policy, we are left to ponder Germany’s economic future - which is the topic of this report. The picture is more than bleak: Many pessimists are not even aware of the most dangerous threat Germany is being exposed to, and it is a threat authored by the Europpean Central Bank.

But one thing at a time. When the 2024 real GDP growth figures for Germany were announced in mid-January, few were surprised: Germany’s economy had contracted again in 2024, by 0.2%, after a contraction of 0.3% in 2023. The earlier government expectation of marginally positive growth of 0.1% in 2024 had already relegated Germany to the bottom of the ranking of countries by economic growth (see Figure 1).

Figure 1: Ranking of European (plus Asia Minor) countries by real GDP growth

As it turned out, German growth is now weaker than all but Austria’s and Estonia’s performance, whereby Austria, historically as much German as any of the constituent states of Germany, suffers from the same problems we are going to analyse in this report.

The February report by Germany’s central bank noted that

“German economic output fell surprisingly significantly in the fourth quarter of 2024.”

Looking ahead: While the government forecasts modest growth of 0.3% in real terms in 2025, at present even this appears far too optimistic. Instead, it is more likely that the economy will contract again, producing three consecutive years of GDP contraction and therefore marking the longest recession in post-war German history, and indeed since Hitler came to power in January 1933, ninety-two years ago: Germany has never experienced three or more consecutive years of GDP contraction since then. (The statistics on the years 1945 to 1949 are shaky but it appears that growth recovered relatively swiftly; there were no three consecutive years of GDP contraction). Sadly, much worse is yet to come.

Biggest downturn since the Great Depression

In other words, with another contraction in 2025, Germany is now mired in what will then constitute the longest recession since the Great Depression. The German Chamber of Commerce and Industry (DIHK) expects a contraction of 0.5% in real GDP in 2025.