Germany’s economy is facing its deepest post-war crisis, the nation’s leading industrial federation warns, criticising the government for failing to act as industrial production declines for a fourth consecutive year.
Peter Leibinger, president of the Federation of German Industries (BDI), described the situation as a “dramatic low” for the manufacturing sector at the end of 2025. In a statement, he accused the government of lacking the decisive response needed to address the downturn.
The BDI statement was highly critical of Chancellor Friedrich Merz, who leads a coalition government of conservatives and social democrats, formed earlier this year after elections marked by a surge in support for far-right parties.
The federation predicts industrial production will fall by 2% this year, marking the fourth consecutive annual decline. It emphasises that this is not a temporary economic dip but a structural crisis requiring urgent policy changes focused on competitiveness and growth.
Data for the third quarter shows industrial production dropped by 0.9% compared to the previous quarter and by 1.2% year-on-year, further highlighting the severity of the downturn.
Germany’s economy, once a model for Europe with its export-driven success fuelled by cheap Russian gas, has been hit hard by a series of challenges. These include the COVID-19 pandemic, rising energy costs following Russia’s invasion of Ukraine, insufficient innovation, competition from China, and new US trade tariffs.
Chancellor Merz has acknowledged the seriousness of the crisis, promising reforms to address bureaucratic hurdles in Germany and across Europe which, businesses say, limit innovation and raise production costs.
However, German industrialists remain critical of the pace of the government’s action.
The BDI warned that delays in implementing structural reforms could lead to further job losses.
