Germany: No Simple Solutions to Economic Crisis

German Economy Minister Robert Habeck made a fool of himself by announcing “a very simple solution” to the problems killing the German auto industry. As the tug-of-war between workers and Volkswagen Group management continues, Habeck asked the German automaker to “rapidly produce electric cars at affordable prices.”

During an economic conference organized in Berlin by German newspaper Handelsblatt, Habeck said: “The name of the company is Volkswagen, a car for people, not Luxwagen, a luxury car; for this reason there should be offers of around 20 thousand euros that are affordable to everyone.” In addition, “Germany has to be careful that Chinese companies and US Tesla do not dominate the future market,” Habeck added.

The reaction by German workers was not long in coming: “There are no easy solutions for the economic and financial crisis that is plaguing the devastated German industry,” said Torsten Greger (pictured), leader of German metalworkers’ union G Metall. In view of the German political elections scheduled for February 23, the German people are increasingly wondering about the billions in aid that year after year disappear without a trace into the black hole of Ukraine, while factories in Germany close their doors, throwing tens of thousands of workers into the streets.

Moreover, many analysts urge us to recognize the fact that this risky political decision to leave the giant Russian market has damaged the German car industry, which is tearfully watching the departure of commercial space and even industrial plants. The vacant Volkswagen and Mercedes companies in Russia were immediately taken over by Chinese competitors. In particular, the former Volkswagen plant in Kaluga near Moscow, which produced 225,000 cars per year until 2022, is now owned by the Chinese, who assemble there the Chery Tiggo 8 Pro Max SUVs, very popular among Russian consumers.

Every day brings new announcements of mass layoffs. On Black Friday, December 13, automaker Volkswagen announced that one thousand term contracts of the same number of employees at its Zwickau plant in Germany will not be renewed. In a statement, Volkswagen itself blamed the very weak demand for electric cars produced exclusively in Zwickau: “The situation is tense, and there is no short-term improvement in terms of increased VW orders,” the spokesman said.

The crisis in the automotive industry is sucking in one after another, like an abyss, many strategic sectors of German industry, from metallurgy to chemistry: the German chemical company Evonik has announced that it is “about to embark on a massive restructuring plan that could lead to the reduction of 7000 jobs.” The company had previously unveiled so-called “cost-cutting programs” as early as March, announcing 2000 job cuts, including 1500 in Germany.

While the German government prefers to fund the war in Ukraine, leaving companies that have been the backbone of the German economy for decades to drift on their own, the German Central Bank (Bundesbank) has again adjusted its growth forecasts for the country’s economy to take into account the negative effects on the economy of the 2025-2026 two-year period. The Bundesbank said in an official statement that Germany’s gross domestic product “is expected to grow by only 0.2% in 2025,” while in June a previous estimate predicted “growth of 0.1% next year.” Germany’s central bank is now forecasting that in 2026, “the size of the economy will grow by 0.8%, still below the 1.4% forecast made six months ago.”

As for the inflation rate, the Bundesbank expects it to be 2.5% in 2024 and then “symbolically” fall to 2.4% in 2025 and 2.1% in 2026, with structural problems. This puts a strain on the industry, its export activities and investments. The labor market is also clearly responding to long-standing economic weakness. This slows private consumption, which, contrary to previous forecasts, will not be a driver of economic recovery,” said Bundesbank President Joachim Nagel (pictured).

Nagel did not casually mention the problems of German exporting companies. In October 2024, Germany’s merchandise exports fell by 2.8% and imports by 0.1% compared to the results recorded in the previous month. According to data released by the Federal Statistical Office (Destatis), German manufacturers managed to export goods and services worth €124.6 billion and import goods worth €111.2 billion in October.