“Blühende Landschaften”
35 years after the fall of the Berlin Wall and the former chancellor Helmut Kohl’s evocation of “Blühende Landschaften” (“Blossoming Landscapes”) waiting for the country, Germany is facing a severe multi-dimensional crisis. Indeed, Mr Kohl promised, in 1990, a country of prosperity and global affirmation after the reunification. Today, these lands seem to have faded. With a deeply weakened economy, leading to the collapse of the governing coalition, Germany is no longer the power it was at the beginning of the 21st century. Some experts argue that it became the “Sickman of Europe” of our time. It could become even worse seeing the actual tumultuous global context.
Multiple Crises
Germany is facing crises at multiple scales. The most striking for the country and its partners is the economic crisis. For the second consecutive year, Germany is entering a recession. The federal government forecasts a recession of -0.2% in 2024, following a 0.3% decline in growth in 2023. Moreover, these economic difficulties become visible through growing unemployment, mostly in industrial production. On the 28th of October, Volkswagen announced a drastic redundancy plan, thinking about the closing of 3 factories in Germany and dozens of job cuts. This illustrates the growing difficulties of a model in difficulty.
Its economic model is built upon the manufacturing sector. It represented 20,4% of the input of its annual growth in 2023. It is higher than in the rest of Europe (9,8% in France, 8,8% in Britain) but this sector is threatened by global concurrence.
Moreover, Germany depends on its exchanges with other countries. The country depended on Russia for its energy provisioning. 49% of its gas provisioning came from Russia in 2021, before the Russian invasion of Ukraine. The government then had to change its strategy due to growing inflation, which increased its economic difficulties.
However, Germany is still dependent on others for its exports. Since 2015, China has been its leading partner in exportation. Nevertheless, the trend is changing as geopolitical tensions rise between Europe and China. Today, China is again Germany’s main trading partner, after having been briefly replaced by the United States. Both countries are very important in Germany’s exportation system. It could be even worse for Germany due to the comeback of Donald Trump and his policy based on commercial tariffs (a price that a country must pay if it wants to export there). Trump promised to increase the tariffs, which would induce a loss for Germany close to 1% of its GDP (a loss equivalent to €42bn, according to the president of the Bundesbank). However, half of the German economic growth comes from its exports. If the American President-Elect respected his campaign promises, it would become very difficult for Germany to maintain high exportations due to growing prices.
So, this bad economic conjuncture would worsen the actual situation. Indeed, the country is going through internal economic difficulties due to an economic model relying too much on manufacturing and exports. Moreover, it is affected by external pressures, coming from the United States and China. These economic difficulties are the result of structural changes, thus the country must adapt to new global realities.
Like with many other European countries, Germany faces a massive increase in far-right extremism, mostly characterized by the rise of Alternative für Deutschland in the different regional ballots, last September. By looking at the electoral map, one can observe a real division between the former two sides of the country. Indeed, the former German Democratic Republic (GDR) supported in majority of the far-right party Alternative für Deutschland. On the other hand, the former “Western Germany” plebiscites were more in favor of the pro-European parties (Christian Democrats, Socialists, and the Greens).
This illustrates a broad crisis of identity in Eastern Germany. The term ostalgia is often used to describe the “nostalgia of the East” and should be used with some limits. It is defined as the fact that East Germans regret the period of the GDR when the economy was stable and they had good living standards. For some, the reunification caused many problems by fragilizing the economy and creating a degradation of the quality of life. Far-Right parties use this myth of a “glorified past in the East” and promise to improve the situation and to make it as glorious as in the past. Even though the Iron Curtain has been shattered 35 years ago, it still divides the society today.
Moreover, it is essential to consider that Germany is going through a severe political crisis. Chancellor Scholz’s coalition collapsed after the dismissal of its liberal finance minister (November, 6). Indeed, this occurred in the context of growing instability and disagreements between the parties of the coalition, based on the economic trajectory the country should take to cope with the recession, and the climate policy, among other internal tensions. Because his Ampel coalition collapsed, the chancellor Olaf Scholz will call early elections to be held on February 23. Analysts argue that it could bring stability to the country. This recent political development about the collapse of the coalition and the right of extremist parties has been thoroughly analyzed by my colleague Simone Capuozzo, whose article is worth reading!
Change of polarity in Europe
Since the creation of the European Union, Germany has been a driving force, especially under the term of Angela Merkel. It has engaged Europe on the path of a geopolitical affirmation against the major powers of the world, played a significant role in the fight against climate change, and held firm leadership during the COVID-19 pandemic.
However, Merkel’s European dynamic couldn’t be sustained by Olaf Scholz, above all in the context of the Ukraine war and the progress towards a common European defense.
One could argue that Germany is not the only leader in Europe. The French-German alliance indeed used to be influential. Once again, this used to work well during the term of Angela Merkel. Today, French President Macron and Olaf Scholz have shifting interests on many topics. They disagree on the European defense strategy, on the respect of the Maastricht’s criteria, diplomatic partnership, and economic policies in Europe. One significant illustration of these divisions is the current discussion on the EU-MERCOSUR Trade Agreement. France is against this treaty which would significantly increase the amount of South American agricultural products having a negative for the French economy. On the opposite, Germany defends this treaty because it would increase its exports, benefiting its economy. The European Union is once more divided into two sides.
The “Franco-German engine” seems to have broken down. Moreover, both must face internal difficulties (the rise of the far-right, the immigration crisis, and the budget deficit) which makes a relationship even more difficult. This is leading to a slowing of European strategic affirmation and leadership.
What could be the main consequence of these actual difficulties and the result of successive crises, is a shift in Europe’s polarity. Now that major powers like France or Germany are weakened, new countries are taking the leadership. In the aftermath of the Ukraine war, the Baltics and Eastern countries are taking a more important place in Europe’s strategic and defense project. The most concrete example of this shift to the East is the nomination of the former Estonian Prime Minister, Kaja Kallas, as the head of European Diplomacy in the new European Commission. At the dawn of a new Trump Era, the Europeans must get more united and emancipate from both China and the United States, to develop a common geopolitical perspective. By nominating Kaja Kallas, who was in the first line against the Russian invasion of Ukraine, this issue will be addressed. It illustrates a strategic shift to Eastern Europe.
Also, Europe sees a shift in its economy, where the southern countries are becoming more and more dynamic while the northern powers are slowing down. Indeed, according to the Atlantic Council, Spain, Italy, and France were the largest contributors to the European GDP in 2023. This mostly comes from the fact that their economy is supported by sectors like tourism, services, and light manufacturing. By having a prosperous economy, these countries reversed the 2000s pattern, when they were the ones slowing and bringing difficulties to the European Union. It enhances the actual difficulties of Northern countries.
Growing uncertainty
These economic and political difficulties are general tendencies in Europe but are tenfold in Germany. The tendencies that are forecasted for its economy are anticipating growth in 2025 (+0,8%) and in 2026 (+1,3%). However, the country still faces multiple challenges and instability. During the next months, the political campaign and the creation of a new government will divert Germany from its European and global policies, making the EU even weaker than it is now. In the meantime, Donald Trump will be sworn in as the 47th President of the United States. As the CDU (Conservative Christian Democrats) leader Friedrich Merz is ahead in the polls and yearns to become the next chancellor, will it make the relationship with Donald Trump more “cordial” and soften the impact of the trade tariffs? Will this period of trouble leave time for European rulers, like Viktor Orban, to take the lead on European foreign policy, now that Germany is less powerful? Would Donald Trump use this time to put in place his drastic tariff plans? Without a powerful Germany, the European Union also faces uncertain times. It is time for the EU to get united!
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