From Growth Engine to Fragile Giant: Why Germany’s Economy Is Struggling

The pillars of cheap energy, strong autos, and fiscal discipline have eroded, leaving Europe’s largest economy vulnerable.

German Chancellor Friedrich Merz speaks at the opening ceremony of IAA Mobility 2025 auto show in Munich, Germany, on Sept. 9, 2025. Kai Pfaffenbach/Reuters

News Analysis

Germany—the economic engine of Europe—enters the final stretch of 2025 in fragile condition. The world’s third-largest economy and the largest consumer market in the European Union, Germany last year generated roughly a quarter of the bloc’s gross domestic product (GDP) and stood as the United States’ top European trading partner.