Germany posts weak 1% growth as economy enters fifth year of stagnation

Europe’s largest economy Germany is stuck in its fifth straight year of weakness, as the so-called “sick man of Europe” just looks tired everywhere you look, as of early 2026.

A new economic outlook says growth may hit 1% this year, which is only a bit higher than the earlier guess of 0.7%, according to data from the German Chamber of Industry and Commerce (DIHK).

Helena Melnikov says, “That is too little; our competitors are more dynamic.” Melnikov also points to numbers that show how far behind Germany has fallen since 2019. She says the global economy grew by 19% in that time.

The U.S. economy grew by 15%. Italy grew by 6%. Germany grew by 0.2%. She adds that higher public spending on security and defense gives some areas a small push, but she also notes that across the country “too little of that is being felt.”

Business survey shows companies still cutting investment and hiring

A large survey taken by the DIHK from around 26,000 companies shows the business climate index rose a little to 95.9 points, but the long-term average is 110, which shows how far confidence has dropped. The government announced a 500 billion euro plan for infrastructure, plus new steps to help corporate investment.

Even with these steps, companies are only a bit more hopeful than they were in October. One in four firms expects the situation to get worse this year.

Melnikov says, “With the handbrake on, we won’t get out of the valley.” She pushes for faster cuts to paperwork and lower energy and labor costs. Companies list their top problems clearly. Weak demand inside the country hits 59% of firms. Rising labor costs also hit 59%. Uncertain policy hits 58%. High energy and raw material prices hit 48%.

Investment is still weak. Only 23% of companies plan to increase spending. 31% plan to cut. Melnikov says private investment is still 11% below the level seen before the virus. Hiring plans are also weak.

A quarter of companies expect to cut staff. Only 12% expect to add workers. One area with a little hope is exports. Even with trade tension, 22% of companies expect exports to rise this year, which is three points higher than the number reported in October.

Industry leader warns about long decline in national performance

Ola Källenius, the boss of Mercedes-Benz, gives a sharp warning in an interview with Der Spiegel. He says the economy has been going in the wrong direction for ten to fifteen years.

He also warns that this long slump could give right wing parties like the AfD more support, since, as he says, “the populists on the right will come along, and they have no solutions for anything.”

Ola says Germany once covered many problems with stronger productivity, but that advantage is now weak because of slower work habits and less willingness to perform. Ola compares the country to a football team that believes it trains enough while others train twice as hard. He also supports the right to part-time work for people who care for children or older family members.

At the same time, he says the country needs people to “work more” or “work more hours” so the “unique productivity engine” does not slow more.

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