German Recession Deepens, Industrial Jobs And Investments Under Severe Pressure

Submitted by Thomas Kolbe

The German economy is sinking ever deeper into recession. In its latest business survey, the Institute of the German Economy (IW) now also sees mounting pressure on the labor market. Meanwhile, no reforms are expected from policymakers.

The Cologne-based IW has published its semi-annual business survey among more than 2,500 companies—and the results could hardly be more sobering. The new analysis, presented over the weekend, paints a grim picture of the state of the German economy: the recession is deepening across all sectors. No part of the economy remains untouched.

No turnaround in sight for investments

Particularly revealing is the view on corporate investment behavior and workforce planning. Depending on the sector, 36 to 41 percent of companies plan to cut jobs next year—with the situation in industry especially alarming: 41 percent actively expect workforce reductions. Only 18 percent of companies are even considering expanding jobs.

The loss of industrial jobs already reached alarming levels last year: 70,000 positions were cut in core industrial sectors, from automotive to mechanical engineering. This trend is likely to intensify in the coming years unless German location policy is fundamentally corrected.

Three prominent examples illustrate the scale: Volkswagen plans to cut around 35,000 jobs by 2030. Bosch aims to reduce roughly 22,000 positions in the same period. Siemens has announced another 3,000 job cuts in the coming years.

And these are only the high-profile companies visible in the media. The IW survey sheds light on the “engine room” of the economy—the Mittelstand (SMEs). It confirms what insolvency statistics already reveal: Germany is expected to see around 25,000 corporate bankruptcies this year, a new record.

The foundation of German industry is cracked. Chain reaction to follow

The reduction in industrial jobs is more than a statistic—behind the raw numbers lies a dangerous social imbalance. These jobs represent high value creation, technological substance, and international competitiveness. Their disappearance typically triggers a chain reaction: for every industrial job lost, roughly four more positions in suppliers, service sectors, and consumer-related areas come under pressure.

The loss will also affect tax revenues once the effects of recent tax hikes are accounted for.

This sentiment is immediately reflected in investment plans: roughly one-third of companies plan to invest less next year, while only 23 percent plan to increase their investments in Germany.

Regionally, the picture is split: while northern Germany and Bavaria show cautious optimism, the northeast and industrial regions like North Rhine-Westphalia show no signs of recovery.

The IW report hits the German government at the worst possible time. Despite massive debt-financed government spending, no growth was reported for the third quarter.

Economic policymakers face a hard lesson: wealth is not generated by artificially created government demand, but solely through private-sector investments in free markets.

And this is precisely where the IW analysis hits the nail on the head. It shows that policymakers have failed to stimulate private investment, even alongside the multibillion-euro debt program. On the contrary, the trend continues downward.

Recession manifests itself

IW economist Prof. Michael Grömling sums it up: “The German economy remains in a deep recession.” This, he says, is a serious warning—for the labor market as well as the overall economy.

The main brakes, according to Grömling, lie on the investment side. He calls for what many entrepreneurs see as essential: a reduction of bureaucratic hurdles. Added to this are structural issues such as high energy prices, rising raw material costs, and increasing global trade tensions, a burden that noticeably weakens Germany’s competitiveness.

It is noteworthy that only the U.S. managed to push China into temporarily shelving the threat of a rare earth export ban—not German politics. This highlights a structural leadership problem in Berlin and Brussels.

European policymakers have simply failed to develop a trade strategy that serves the interests of exporters—diversification, new markets, and solid partnerships. Instead, attention on the Mercosur agreement with South America, which promised growth impulses, has largely faded.

Again and again, Brussels prioritizes climate protectionism, even at the expense of domestic industry. For an economy like Germany, whose prosperity depends heavily on exports, this risks exacerbating recessionary tendencies.

Where is the bureaucracy reduction?

Problems exist everywhere. The debate over cutting bureaucracy has stalled, as has nearly every other reform promised by the government. Just weeks ago, the Chancellor pledged to reduce annual bureaucratic burdens of €60 billion by 25% and shrink the public sector by 8 percent.

In reality, around 100,000 new public-sector positions were created over the past year, and since 2020, half a million additional employees have been added at taxpayer expense. The technological dividend of AI and automation remains invisible—so far, taxpayers see none, quite the opposite.

These announcements are now largely forgotten. The topic is de facto dead—likely because the government’s new debt package, pumping €50 billion into the system each year, requires further expansion of the state apparatus rather than streamlining it.

Status quo defended

The IW survey shatters any hope of a rapid economic recovery. At its core, it confirms what has been visible for years: over-bureaucratization amid green transformation, growing fiscal burdens, and a self-inflicted energy crisis—triggered by the exit from cheap Russian gas, the end of nuclear power, and a grotesquely centralized energy market design that requires ever more state intervention to compensate for renewable energy volatility.

The problem is structural, deeply embedded, and permeates operational processes. Even a heavily subsidized industrial electricity price will not stop Germany’s deindustrialization. The necessary breakthrough lies not in Berlin, but in Brussels—and concerns the entire eco-socialist regulatory complex.

Until the EU has the courage to return to free-market principles, nothing will change economically.