How Germany Became the World’s Worst-Performing Economy
Once Europe’s economic engine, Germany now confronts stagnation, soaring labor costs, and a welfare burden with one pensioner supported by every two workers. Chancellor Friedrich Merz broke a major political taboo by stating,
“The welfare state as we know it today can no longer be financed by our economy.”
This bold admission challenges the previously untouchable status of the welfare state at a time when its economic strain is undeniable.
Germany’s Postwar Economic Success
For decades, Germany was hailed as Europe’s economic success story. Its postwar Soziale Marktwirtschaft (social market economy) blended free-market dynamism with limited welfare provisions aimed at helping those genuinely in need. This model fueled West Germany’s transformation from wartime devastation into one of the world’s richest nations.
Signs of Economic Strain
- Stagnant economic growth
- Declining global competitiveness
- The highest welfare burden in the country’s history
These indicators suggest Europe’s economic powerhouse is slowing down, weighed down by the costs of its social system.
The Foundation of Germany’s Economic Miracle
Germany’s resurgence was based on Ludwig Erhard’s vision, combining free enterprise with a modest social safety net to create a competitive economy. Erhard’s policies included:
- Liberalizing prices and trade
- Stabilizing the currency
- Cutting taxes
These reforms ended inflation and sparked the Wirtschaftswunder—the “economic miracle” that delivered rapid growth, full employment, and higher living standards.
Author’s summary: Germany’s historic economic model is faltering under modern pressures, challenging the sustainability of its welfare state and threatening its once-leading role in Europe’s economy.