German economy in crisis after years of stagnation: Reiche
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Germany’s economy is facing a deepening crisis marked by zero growth, rising unemployment, and high energy costs, according to Economy Minister Katherina Reiche.
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German Economy and Energy minister Katherina Reiche arrives for the cabinet meeting at the chancellery in Berlin, Germany, Wednesday, July 23, 2025. (AP)
Germany’s Economy Minister Katherina Reiche has warned that the country is facing a “serious situation” as it struggles with persistent economic stagnation, rising unemployment, and growing structural challenges.
In an interview with Bild published on Sunday, Reiche said, “The situation is serious. We currently have three million unemployed. Since 2019, we have been in a no-growth phase, with zero economic growth in the past two quarters.”
While there were short periods of improvement, Reiche attributed them to accelerated exports to the US ahead of newly introduced tariffs, not to any fundamental economic rebound.
High energy, labor costs blamed for crisis
The minister pointed to elevated energy prices and very high non-wage labor costs as major contributors to the ongoing crisis.
She noted that Germany needs a comprehensive economic recovery program, but cautioned that meaningful reform will require time.
Read more: Germany pledged €9Bln a year for Kiev, but Pistorius wants far more
CDU promises reforms, but no recovery yet
Chancellor Friedrich Merz, who leads the conservative Christian Democratic Union (CDU), has pledged to reverse the economic downturn by the end of summer. However, economists have faulted the government for being too slow on structural reforms, particularly pensions, while Merz's calls to relax Germany's strict "debt brake" to boost defense and infrastructure spending have drawn fire from fiscal conservatives.
Reiche, who took office as economy minister in May, emphasized the importance of long-term investment. “The lack of investment in the economy will be a determining factor for 20 years or more,” she said.
According to official statistics, the German economy contracted by 0.2% in 2024, marking its second consecutive year of decline.
EU-US trade deal exacerbates economic pressure
On July 27, European Commission President Ursula von der Leyen and US President Donald Trump concluded a trade agreement that placed a 15% tariff on most EU exports to the US.
As part of the deal, Brussels agreed to purchase $750 billion worth of American energy products, placing additional pressure on the German economy, already grappling with high domestic energy costs and trade imbalances.
Read more: Majority of Germans disapprove of von der Leyen role in US-EU deal
