Germany heads to the polls on Sunday, and the stakes couldn’t be higher. Europe’s largest economy is stuck in neutral, struggling with weak growth, high energy costs, and fading industrial dominance.
The “traffic light” coalition of the Social Democrats (SPD), Greens, and Free Democrats (FDP) collapsed last year, leaving voters to decide who gets the next shot at reversing the decline.
Polls suggest the conservative CDU, led by Friedrich Merz, will take the lead. But a surge from the far-right AfD, amplified by Elon Musk’s vocal support, has voters concerned.
Whoever wins will inherit an economy that’s no longer the powerhouse it once was and it will be up to them to resurrect it. But so far, things aren’t looking so bright for Germany.
The state of Germany’s economy
Germany’s post-pandemic recovery just never happened. Since 2023, the economy has shrunk twice in a row.
That is the first back-to-back contraction since the early 2000s. The International Monetary Fund expects just 0.3% growth this year.
For an economy that once set the pace for Europe, that’s a clear sign something’s broken.
Energy prices are the most obvious problem. After Russia cut off gas supplies in 2022, Germany turned to liquefied natural gas (LNG) from the US and Qatar.
It worked, but at a cost. German manufacturers now pay twice as much for energy as their US competitors.
Industries like steel, chemicals, and glass are cutting production or moving abroad. Porsche just announced 1,900 job cuts, and smaller factories are quietly closing shop.
But energy alone doesn’t explain the crisis. Germany’s industrial backbone, machinery, cars, and chemicals, face tougher competition than ever, especially from China.
Once a reliable customer, China now builds its own high-tech products, from electric vehicles (EVs) to industrial equipment. German exports are shrinking, and the old “Made in Germany” advantage is fading.
Can the next government turn things around?
Whoever wins on Sunday will face tough choices. The CDU, polling around 30%, promises tax cuts, deregulation, and faster energy expansion.
Merz talks about “unleashing the economy” by cutting red tape and making it easier to build factories and power lines.
It’s a familiar playbook, but it’s not clear how it’ll tackle deeper problems like workforce shortages and digital infrastructure.
The SPD and Greens, trailing at 16-17% and 12-14%, respectively, favor more public investment.
They want to expand renewable energy, upgrade rail networks, and boost childcare to get more women into the workforce.
But Germany’s “debt brake,” a constitutional rule capping government borrowing, limits how much they can spend.
The last coalition fell apart arguing over whether to loosen this rule. Merz has already said he won’t budge.
Meanwhile, the AfD which is rising in popularity, now polling at around 20%, offers a nationalist economic vision: end Germany’s green transition, lower energy costs by reviving coal and nuclear, and curb immigration.
Their message resonates in struggling industrial regions. Yet economists warn their policies could isolate Germany from EU markets and global trade, the very lifelines keeping its economy afloat.
All mainstream parties, including the CDU, SPD, and Greens, have categorically ruled out working with the AfD in any coalition.
This political isolation means that even a strong AfD showing is unlikely to translate into real power.
At least for now. If the next government fails to provide meaningful change, who knows how the public will react in 4 years time.
Is Elon Musk really shaping the German election?
Elon Musk’s sudden embrace of the AfD has injected unexpected volatility.
It started with his interaction with Naomi Seibt, a German influencer known as the “anti-Greta Thunberg.”
Musk soon began praising the AfD, calling it the only party that “can save Germany.”
He even interviewed AfD leader Alice Weidel on X and appeared virtually at an AfD rally.
This endorsement matters because it’s amplified AfD messaging far beyond Germany’s borders.
Musk’s posts and retweets have pushed Weidel’s X following past 985,000, dwarfing rival politicians.
But while the AfD’s online presence has exploded, it’s less clear whether this will translate into more votes.
Traditional German media remains skeptical of Musk, and many voters see his comments as interference rather than insight.
Trump makes things even harder for Germany
Just as Germany struggles with its own domestic issues, Donald Trump’s return to the White House has reignited trade fears.
He’s already announced 25% tariffs on steel, aluminum, cars, and semiconductors which are all key German exports.
The US is Germany’s largest single export market, accounting for 10% of its total exports.
If tariffs expand, Germany’s struggling automakers, who are already losing market share to Tesla and Chinese brands like BYD will suffer even more.
German automakers, including Volkswagen and BMW, already produce cars in Mexico to bypass tariffs. But Trump has also slapped duties on Mexican imports.
The German central bank warns that if universal tariffs rise to 10%, German GDP could shrink further, deepening the current recession.
The uncomfortable truth
No party will win an outright majority. The CDU will likely lead coalition talks, probably with the SPD or Greens.
Merz has promised to form a government by Easter, but if negotiations drag on, as they often do, Germany could face months of political gridlock.
But forming a government is just the start. Without decisive action on energy costs, workforce shortages, and industrial competitiveness, Germany’s economy risks sliding from stagnation into long-term decline.
The political debate has largely avoided hard questions about how to fund infrastructure upgrades, attract skilled immigrants, or accelerate industrial innovation.
Here’s the uncomfortable truth: No party has a fully credible plan to fix Germany’s economy.
The CDU promises deregulation without addressing energy prices.
The SPD and Greens push investment without explaining how to bypass the debt brake.
The AfD blames migrants while ignoring Germany’s ageing workforce and shrinking industrial competitiveness.
If the next government continues to patch problems rather than tackle root causes, Germany’s economic drift will continue, no matter who sits in the chancellor’s office.
For voters, Sunday’s choice is less about ideology and more about who’s best prepared to confront reality. So far, no one has made that case convincingly.
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