Germany Faces Its Worst Industrial Crisis Since 1945, BDI Warns

From an editorial perspective, the significance lies in the fact that Germany’s long-standing export-driven engine — often described as the post-war “miracle mercantile” — is now facing its most profound structural stress since 1945.

Germany’s industrial base is confronting a historic downturn, with the Federation of German Industries (BDI) warning that the country’s competitiveness is in “free fall.” The latest industry report forecasts a further 2% contraction in industrial production in 2025, marking the fourth consecutive year of decline — a deterioration deeper than the 2008 financial crisis or the 2020 pandemic shock.

“Everything that made the German machine run has jammed”

French economic commentator Nicolas Doze argues that Germany is now “paying the price of an obsolete model,” one that relied heavily on cheap energy, global demand and unparalleled engineering strength.

Data from LCI and the BDI underline the severity of the situation:

• Industrial production has fallen for four straight years, a post-war first.
• Automotive sector losses exceed 49,000 jobs in a single year, a sharp blow to an industry employing over one million workers.
• GDP growth stuck at 0%, trailing the EU average.
• Public debt rising to 65% of GDP.

The BDI’s latest assessment describes an “economy in free fall.” Its president, Peter Leibinger, warns: “The German industrial base is eroding. This is the deepest economic crisis since the founding of the Federal Republic.”

Structural, not cyclical, decline

Leibinger stresses that the downturn is no longer attributable to global cycles. Instead, it reflects a set of structural shocks that Germany has struggled to address:

• Energy shock after the loss of Russian gas, sharply raising industrial electricity costs.
• Green-transition headwinds as China outpaces Germany in electric vehicles and battery manufacturing.
• Global competition from U.S. firms benefiting from IRA subsidies.
• Demographics and bureaucracy: an aging workforce, rising labour costs, and slow administrative processing.

These constraints undermine the export-dependent model that once powered Germany (exports accounting for roughly 40% of GDP).

Key sectors under pressure

Germany’s chemical, machinery and steel industries continue to operate below optimal levels. Chemical plant utilisation has dropped to 70%, highlighting persistent demand weakness. The automotive sector has stabilised slightly in capacity usage, though employment remains under considerable strain.

Industrial output has now contracted for nine consecutive quarters since its peak in 2018 — a trend that, as historical cycles often show, points to long-term structural imbalance rather than temporary dislocation.

BDI calls for an “industrial Marshall Plan”

Leibinger urges the federal government to implement a fundamental economic policy shift focused on restoring competitiveness and revitalising investment. He argues that “every month without structural reform costs jobs and prosperity.”

The BDI proposes:

• Prioritising investment over consumption, particularly in infrastructure and innovation.
• Transparent use of special funds solely for long-term growth initiatives.
• Reducing bureaucracy, which Leibinger calls an “untapped driver of growth.”
• Rethinking industrial policy as Germany approaches the 2035 combustion-engine ban.

Broader consequences

Unemployment is projected to reach 6% by 2026, adding political pressure on the Scholz coalition to outline a new industrial strategy. Germany’s stagnation also weighs on the wider EU, particularly as France gains momentum in aerospace and services.

Whether Berlin responds with decisive reform — or continues incremental adjustments — will shape Europe’s economic trajectory for years to come.