The crisis of the German economy is accelerating. The latest figures from the Federal Statistical Office show a sharp increase in job losses across the industrial sector.
On Tuesday morning, consultancy firm EY released alarming numbers based on official data: Germany’s industrial sector has been shedding jobs at a dramatic pace across nearly all segments.
Over the past twelve months alone, the industry lost a cumulative 114,000 jobs -- a 2.1% decline in total employment. Since 2019, the year before the COVID lockdowns, a staggering 245,000 jobs have disappeared in German industry, representing a 4.3% contraction.
What was once considered a safe haven of “crisis-proof” engineering jobs is now collapsing. Core sectors such as mechanical engineering have seen production volumes shrink by up to 15% compared to 2019.
Automakers at the Epicenter
The automobile sector is at the center of the storm. In the past year alone, 51,500 jobs were cut, a reduction of around 7% in the workforces at Mercedes, VW, Bosch, Continental, and others. These companies are not only suffering from Germany’s energy crisis, but also from the disastrous mismanagement of the transition to electric mobility. Fierce competition from China and Tesla’s technological lead have further undermined the industry, while German automakers still face a punishing 27.5% tariff in the U.S. market.
More than just storm clouds are gathering over the sector: collapsing margins and another 1.6% decline in revenues this year will weigh heavily on employment. Since 2020, German automakers have lost around 13% of their sales volume. The numbers point to an economic depression and reflect structural problems long debated -- high energy costs, suffocating bureaucracy under the EU’s Green Deal, and weak domestic demand.
Bleak Outlook in Other Sectors
The outlook is equally grim in other industrial branches. Mechanical engineering shed 17,000 jobs last year, the metal industry 12,000. Only the chemical and pharmaceutical industries have so far avoided major cuts.
Jan Brorhilker, Managing Partner for Assurance at EY Germany, underscored the importance of the U.S. market for German exports. He warned: “The U.S. is the most important export market for German industry. The sharp drop in exports to the U.S. has hit German companies hard -- and there is no recovery in sight. High import tariffs make German products more expensive, which will further depress sales in the U.S. market throughout the year.”
Social Security System Under Strain
The consequences for Germany’s social welfare system could be dramatic if the downward spiral in employment continues. There is no sign of a turnaround. The financial situation of the country’s social insurance funds is already dire.
Unemployment insurance is expected to post a deficit of at least €1.3 billion this year, as higher spending on jobless benefits collides with falling contribution revenues. Germany’s statutory health insurance faces an even bigger shortfall: a record €18 billion hole is projected for 2025, driven by rising costs and stagnant revenues. Contribution rates have already climbed to an average of 2.9% -- another blow to both workers and employers.
Long-term care insurance is also buckling under rising costs, while the pension system fell into a €2.5 billion deficit in the first half of 2025.
Germany’s welfare state is at a crossroads: deficits, higher contributions, and exploding costs are colliding in a perfect fiscal storm that will hammer taxpayers and workers alike.
Berlin’s Response: Higher Taxes
In Berlin, policymakers are now openly discussing tax hikes to plug the holes. The governing coalition is expected to agree quickly on raising the top income tax rate, inheritance taxes, and possibly reintroducing a wealth tax. But such measures will only deepen Germany’s recessionary spiral.
The country has entered an economic doom loop.
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