The BASF factory in Ludwigshafen, one of the pillars of German chemical industry, faces cuts in production amid recession. The high cost of energy and the loss of competitiveness aggravate the economic crisis, deepening political instability and boosting the far right in the country Photo: BASF/ SE

Germany’s economy went back to the second year in a row. According to data released by the Federal Office of Statistics of Germany (DESIGATIS, in the acronym in German), the country’s Gross Domestic Product (GDP) fell 0.2% in the fourth quarter of 2024, compared to the previous period.

The fall of the economy in the last quarter of last year consolidated the annual contraction of 0.2% compared to 2023. The worsening in economic indicators intensifies the political crisis that reaches the largest economy in Europe, feeding the discourse of social dissatisfaction that drives the Alternative to Germany (AFD), the far right party, on the eve of the February elections.

The economic crisis unfolds in a scenario of political instability. In November, the governing coalition led by Chancellor Olaf Scholz of the Social Democratic Party (SPD, German), collapsed after the refusal of the Democratic Liberal Party (FDP) to support the 2025 budget, scoring The political collapse that led to the anticipation of the elections.

Social democrats and green defend state investment to leverage the country’s economy, while liberals dogmatize fiscal austerity, which deepened the political crisis and the fragmentation of the coalition.

The rupture of the coalition not only led the government to collapse, but also allowed AFD to reach its first victory in Bundestag by supporting a CDU motion of immigration policies, demonstrating radicalization of the traditional right.

The gesture became known as “Freibrief de Merz”, referring to the permissiveness of conservative leader Friedrich Merz in accepting votes from the far right, which broke a political tradition in Germany. Merz leads the polls, while succumbing electoral pressures for the anti-immigration package.

Economic retraction was already foreseen by analysts, but the greater contraction than expected highlights the fragility of the German economy. According to the Federation of German Industries (BDI, in the acronym in German), the situation has been the worst since reunification in 1990.

Industry sectors with intensive energy use have been a strong drop since the beginning of the war in Ukraine, affected by the increase in energy costs and the interruption in the supply of Russian inputs.

Economic retraction has especially reached the highly energy -dependent industries, such as paper, glass, steel and chemical sectors.

Since the beginning of the conflict, these industries have registered a drop of approximately 20% in production. Rise in natural gas and electricity prices have compromised the competitiveness of German industry, which historically depends on cheap energy to maintain its leadership position in Europe.

The scenario of uncertainty has led many companies to reduce investments and even consider relocating part of production to countries with lower energy costs. According to a survey by the Confederation of German Commerce and Industry Chambers (DIHK), 45% of Energy -intensive companies evaluate decrease or transfer their operations abroad.

The impact is visible on the chemical industry, one of the pillars of the German economy, where multinationals such as BASF have already announced significant cuts in local production. The fragility of these sectors reinforces the fears of progressive deindustrialization, further deepening the country’s recessive framework.

Germany drags economy from the euro zone and expands political instability in the block

German recession occurs and contributes to the moment of economic stagnation in the eurozone, highlighting a worrying scenario for the continent’s economy, as the analysis of the challenges faced by the G7 countries highlights.

According to Eurostat, the bloc’s GDP was stagnant in the fourth quarter of 2024, with France also recording 0.1% and Italy no growth in the period. Spain, on the other hand, stood out with a 0.8%increase, becoming one of the few major European economies to expand.

The German economic crisis has effects that go beyond the country’s borders. Germany, as the block’s largest economy, directly influences European economic performance.

European leaders Ursula Von Der Leyen (European Union), Emmanuel Macron (France), Olaf Scholz (Germany) and Pedro Sánchez (Spain) face a moment of economic stagnation and political instability in the bloc. With the recession in Germany dragging the economy of the eurozone, the advance of the far right, and geopolitical tensions expand the challenges to the European Union. Photo: Reproduction

The loss of dynamism of its industry and the exports of exports press the region’s productive chains and expand pessimism among investors. In addition, high energy costs and fiscal stiffness imposed by the government after collision of the traffic lights increase the country’s vulnerability to a more prolonged recessive cycle.

The impact of war on Ukraine is also reflected in the European economy as a whole, but in Germany the effects were especially severe.

Berlin directed billions of euros to Military and Financial support to Kiev, while expanding his defense budget to meet NATO’s requirements, especially with Donald Trump’s pressures.

In 2024 alone, the country allocated 2% of GDP for military spending, which occurs amid a technical recession and inflation for the population.

The energy cost was also decisive for recession. With the end of the supply of Russian gas, Germany came to depend on more expensive energy sources, pressing inflation and making industrial production more expensive.

The combination of economic crisis and political instability generates a warning to the entire European Union. Countries such as France, Italy and the Netherlands face the advance of the far right, which takes advantage of social dissatisfaction to consolidate their political presence. The German February election may have developments that go beyond the country’s borders, influencing the bloc’s future at a critical time for the European economy.

Recession and social insecurity as catalysts of the far right

Economic instability has been a fuel for social dissatisfaction and political radicalization in Germany and worldwide. Increased cost of living, precarious labor market, and turbulence in public services in some regions have generated a fertile environment for xenophobic and ultranationalist speeches.

Research indicates that AFD is consolidated as the country’s second political force, threatening CDU’s hegemony in the conservative spectrum, a phenomenon that has been driven by Elon Musk’s direct influence on the electoral scene. The party takes advantage of economic fear to spread conspiracy theses against migrants, suggesting that the social democratic government prioritizes foreigners to the detriment of the native population.

German recession, coupled with the fragmentation of the traditional right, creates a warning scenario for political analysts, which see parallels between the current crisis and historical moments that preceded democratic setbacks in Europe.

The response of civil society

The reconfiguration of the German political scenario generated a forceful response of civil society. Last weekend, protests brought together thousands of people in various cities of the country, with the demonstration “Wir Sind Die Brandmauer!” (We are the barrier for fire, in free translation and in reference to the sanitary cord against AFD) gathering 200,000 in Berlin. Football was also the scene of protests, with fans of Werder Bremen and Bayern Munich displaying banners against the far right across and warning of Nazifascism on International Holocaust Memory Day.

The protests are part of a growing mobilization against the advance of the far right, as highlighted the coverage of acts across the country.

German recession, coupled with political instability, is redesigning the country’s balance. The CDU, in identity crisis, needs to decide whether to maintain its traditional position or continue its approach movement with AFD. Meanwhile, the left seeks to reorganize and contain the advance of the far right, which uses the economic crisis as a springboard for its political project.

Source: vermelho.org.br



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