A growing number of forecasts indicate that Germany could face up to 15 years of prolonged stagnation. The shift in perspective among economic research institutes is noteworthy, as their earlier assessments were long considered overly optimistic and had to be regularly revised downwards, resulting in a significant loss of confidence. Now, the warnings are considerably more dire because the institutes themselves no longer believe in a rapid recovery. They point to persistent weak growth, which is structurally burdening Germany’s economic position, while a deeply entrenched backlog of reforms increases the risks of a entrenched economic crisis. This brings the prospect of economic standstill lasting over a decade and a half closer, extending far beyond a mere cyclical downturn and accompanied by a substantial loss of prosperity. (faz: 11.12.25)
A 15-Year Period of Stagnation Becomes Realistic for Germany
The assessments of economic researchers are unusually stark. The Ifo Institute has not only lowered its growth expectations for the coming years but has also reassessed its long-term potential. Ifo’s head of economic forecasting, Timo Wollmershäuser, says: “If we don’t see structural reforms and an increase in the workforce, then potential growth will shrink to almost zero by the end of the decade and turn negative in the 2030s.” This would make prolonged stagnation the new normal, which would be historically unprecedented.
This would have concrete consequences for the population, as per capita incomes would barely increase. At the same time, the number of pensioners is growing, which is why Wollmershäuser emphasizes: “The ticking time bomb is the social security system.” Without economic dynamism, pensions, long-term care, and healthcare come under considerable financial pressure, while political room for maneuver shrinks.
Reform gridlock deepens Germany’s economic crisis for years
A key obstacle remains the gridlock of reforms, which has been entrenched for years. Companies criticize complex procedures, lengthy approval processes, and high operating costs. These factors exacerbate the economic crisis in Germany, even if it is unfolding gradually rather than abruptly. Many businesses are hesitant to invest or prefer alternatives abroad because they do not see reliable conditions in Germany.
Economists are also critical of current political measures. Consumer-oriented tax relief measures incur high costs but generate little additional value. As a result, weak growth persists, while political stagnation delays crucial decisions. For Germany as a business location, this means a gradual loss of attractiveness.
Prolonged Stagnation Burdens Growth and Social Systems in the Long Term
The long-term effects of prolonged stagnation extend far beyond business cycles. It is already evident that government spending alone cannot generate sustainable growth. Even extensive debt programs, according to the German Council of Economic Experts, provide only limited stimulus. The economic imbalance persists because productivity and private investment are not increasing sufficiently.
The situation is particularly critical for social security systems. Rising expenditures meet stagnant revenues, widening funding gaps. In a period of low growth, the buffer needed to absorb demographic burdens is lacking, further exacerbating the economic crisis in Germany.
Weak Growth and Demographics Are Burdening Germany as a Business Location
Demographic change is exacerbating structural problems. In the coming years, millions of people will leave the labor market, while the number of employed people is declining. This development is intensifying weak growth because skilled workers are lacking and innovation processes are slowing down. At the same time, the political backlog of reforms is becoming more difficult to resolve, as public acceptance of far-reaching changes is waning.
Economic researchers are therefore calling for clear incentives for longer working lives and targeted support for innovation. New ideas must be transformed into marketable products more quickly to make Germany more competitive again. Without this step, the current sluggish growth risks becoming entrenched.
Trust Will Decide Whether Germany Loses 15 Years as a Business Location
Whether Germany achieves an economic turnaround depends largely on confidence in its capacity for reform. Currently, this confidence is undermined because political conflicts and contradictory signals are unsettling investors. If the reform backlog persists, prolonged stagnation could become entrenched for many years. However, if a credible change of course is achieved, there is still a chance for renewed dynamism.
The coming years will therefore determine whether Germany enters a prolonged period of stagnation or whether the economic crisis can be overcome. Much is at stake for politics, business, and society.