The publication of the IFO business index in Germany for February, which is significantly lower than expected (84.4, the lowest level since the low point of the COVID period) after 86.3 in January, reflects the current difficulties of the German economy. But the essential question is whether these are the consequences of the current international instability and will therefore fade away in the future or a structural change affecting a country whose economic model has long been the benchmark in Europe.
Paul Valéry, in his study published in 1898 (A Methodical Conquest) described it as follows: "To bring back the maximum amount of wealth from all points of the world to all points of Germany". Thus was gradually built what was to become the leading European industrial power. In the aftermath of the Second World War, the principle of shared prosperity was added, at a time when the "Welfare State" was being created in England and in France the Welfare State. Thus a new social model guaranteeing social peace and removing the risk of extremist parties was spreading in Europe.
The success of reunification, even if it had come at a cost, had further strengthened German industry, whose companies had understood all the benefits they could derive from the end of communism in the Eastern European country. They built new supply chains for their factories while keeping most of the added value in their home territory. In this respect, there should be no misunderstanding about the significance of the "Hartz reforms" introduced by Social Democratic Chancellor Schroeder. Their aim was not to reduce the cost of labour in the West German regions but to curb migratory movements from the former East Germany that were jeopardising his party's prospects for future elections.
Germany was thus a real economic model during the first quarter of the twenty-first century with solid growth, controlled inflation, almost full employment, healthy public finances with one of the lowest public debt ratios in the euro zone and a very large foreign trade surplus. These results had increased Berlin's influence in Brussels and led to the adoption of decisions, particularly in the field of energy or with the generalisation of competition, which further strengthened its economy, most often to the detriment of France. It had emerged weakened and had ended up making it a complex, the "German complex".
Those days are over. The country experienced two years of recession in 2023 (-0.7%) and 2024 (-0.5%). The expected recovery in 2025 was lower than expected (+0.3%) according to the first estimate. Inflation remained above 2% in 2025, much higher than in France (0.7%). While debt remains low (65% of GDP), it is expected to rise sharply in the future with the revival of military spending and, to support growth, a programme of investment in infrastructure which had deteriorated in recent years.
Unemployment remains very low, but for two reasons: a very high use of part-time work, which mainly concerns women, and a demography marked by a low fertility rate (1.35 children per woman) and rapid ageing (30.5% of people over 60 and only 18.7% under 20). The increase in the population (2 million in ten years) has mainly been the result of immigration, but this trend is not expected to last.
The most striking symbol of Germany's success has been its performance in terms of foreign trade, due first of all to the vitality of its industrial fabric, made up of thousands of medium-sized companies, most often with family shareholders. They had been able to establish "win-win" links with large groups, which found competitive suppliers from which they in turn benefited the most. Three other factors contributed to this.
Trusting relations with the United States have fostered the success of German companies in the world's largest market. They have also enabled Germany to rely on its ally to benefit from substantial savings in military spending, the budget of which, in recent decades, represented about 1% of GDP, i.e. half of what France devoted to it.
Berlin, after the end of the Soviet Union, thought that Russia could become a reliable partner, particularly in the supply of fossil fuels, and favoured the construction of gas pipelines in the Baltic Sea. A former chancellor, Gerhard Schroeder, was even chosen to chair one of the companies that were to ensure the deliveries.
Finally, Chinese growth provided German groups, particularly in the automotive sector, with a major outlet and offered the possibility of setting up spare parts supply chains at a low cost, which strengthened competitiveness and encouraged market share gains in other countries.
Donald Trump's return to power has put an end to these traditional relations. German companies are no longer welcome following multiple tariff hikes and Berlin has been asked to take responsibility for its defence, which will result in heavy spending in the future.
Russia's invasion of Ukraine has dealt a fatal blow to Germany's energy strategy, which was based, after abandoning nuclear power, on Russian natural gas to power its power plants. The sanctions adopted by the European Union have caused a rise in energy prices that has been further amplified by the war in the Middle East, which has penalised purchasing power and therefore economic activity and weighed on the competitiveness of companies.
Finally, China is no longer a lucrative outlet for German industry. On the contrary, the progress of Chinese industry, thanks to its research efforts and high-quality scientific staff, has allowed the emergence of major competitors on their domestic market but also worldwide, the most affected sector being the automotive industry. Exports by Chinese manufacturers have increased from one million in 2020 to 7.1 million in 2025. Chemicals, pharmaceuticals and tomorrow machines with China's progress in robotics are also concerned.
Germany's trade surplus began to narrow in 2025, from 239 to 202 billion euros. Exports grew by only 1% while imports increased by 4.6%. The surplus with the United States, which had become the leading trading partner replacing China in 2024, has been in close contact with each other and the trend has been accentuating since the beginning of the year with a 7.5% drop in exports. The most affected sector is industry with an expected fall in employment of 180,000 employees, particularly in car manufacturing. Volkswagen has announced the elimination of 50,000 jobs in Germany by 2030.
This situation has political repercussions with the rise of extremist parties, particularly in the regions of the former East Germany, which weakens the government's ability to provide appropriate responses. The announcement of massive spending on infrastructure and defence to support growth has not been convincing and the next regional elections could see the AFD come to power.
Germany's difficulties, in the current context of international tensions, are not temporary but structural. France and Europe must be aware of this and adapt to this new situation.