German Chancellor Friedrich Merz has warned that the nation is facing a “structural crisis” rather than just a temporary economic slowdown, acknowledging that restoring growth has proven far more challenging than expected.
Speaking at a Christian Democratic Union (CDU) gathering in Osnabrück on Saturday, Merz said the problems go beyond cyclical weakness. “I say this also self-critically – this task is bigger than one or the other may have imagined a year ago,” he told party members in the home state of Volkswagen.
“We’re not just in a period of economic weakness, we are in a structural crisis of our economy,” Merz declared. He warned that “large parts of the country’s economy are no longer truly competitive,” citing the severe earnings slump at Volkswagen, which saw a 36% drop in after-tax profits in the second quarter.
The chancellor described Volkswagen’s results as “one of many messages” about the fragility of the German economy. BMW also reported a sharp decline, with first-half profits down 29% compared with last year.
“By this week at the latest, no one should be under any illusions about how deep and far-reaching the challenges that face us are,” Merz said, adding that while German companies maintain strong quality and leadership, the “underlying conditions in Germany simply haven’t been good enough for the last decade.”
The downturn in the country’s automotive sector — long regarded as a pillar of German industrial strength — has heightened fears over the overall health of Europe’s largest economy. Germany slipped into a recession last year, and the International Monetary Fund projects zero growth for 2025.
The warnings from Merz underscore growing concerns that Germany’s economic malaise may extend well beyond the auto industry, raising questions about the country’s long-term competitiveness within the European Union and the global market.
