Germany’s economic engine is sputtering – and the warning lights are flashing. Deep-seated shifts are reshaping the very foundations of its manufacturing strength. Domestic demand and exports have stagnated for more than five years, and key industrial sectors are bearing the brunt. Reports of factories cutting jobs at home are mounting. While overall industrial employment remains above the 2010s average, job losses – particularly in North Rhine-Westphalia, Baden-Württemberg, and Bavaria – are real. The evidence suggests these cuts are not simply the product of cyclical downturns, but the result of structural weaknesses and profound changes in the global economic landscape - with the climate crisis and the efforts to curb it among the most powerful forces driving this transformation.
Although Germany has significantly reduced its CO₂ emissions in recent years, the country is unlikely to meet its self-imposed climate targets if current trends continue. Ongoing regulatory uncertainties – in sectors such as transport and buildings – are making households and businesses hesitant to invest, slowing the pace of the green transition. Germany’s Council of Experts on Climate Change has also criticized current climate policy for paying too little attention to lowand middle-income groups. If left unaddressed in these uncertain times, this oversight could not only hamper economic progress but also seriously undermine social cohesion, a risk made more pressing by Germany’s already pronounced regional disparities.
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