- The recession in Germany and the fall in its industrial production are negatively impacting the European economy, slowing growth and affecting supply chains across the region.
- Mario Draghi proposes an annual injection of 800 billion euros to revitalise European industry, with digitalisation, strategic autonomy and energy transition as the keys to the continent’s economic future.
The German recession and its impact on Europe
Germany: the economic engine in trouble
In 2024, Germany recorded a GDP contraction of 0.2%, marking its second consecutive annual recession after a 0.3% drop in 2023. Manufacturing, the mainstay of its economy, has experienced a marked decline in industrial production, with a year-on-year fall of 6.7% in June 2024, the steepest since the COVID-19 crisis.
Effects on the European economy
This industrial weakening has direct repercussions on the European economy. The reduction in German production and exports negatively affects supply chains and demand for goods and services across Europe, slowing economic growth in the region.
Despite these challenges, the German labour market has shown some resilience, remaining relatively stable. However, economic uncertainty has led consumers and businesses to adopt a more cautious stance, increasing savings and reducing investment and consumption.
Economic forecasts and strategies for growth
Moderate growth in 2025
Projections for 2025 indicate slight growth in Germany, estimated at 0.1% to 0.4%, conditional on the implementation of necessary structural reforms. However, the possible imposition of tariffs by the new Trump administration adds an additional risk factor, threatening jobs related to exports to the United States.
Draghi’s proposal to revive Europe
In this context, it is essential that Europe takes strategic measures to revitalise its industrial competitiveness. Mario Draghi has proposed an annual injection of €800 billion of public and private funds to boost Europe’s industry and economy. His aim is to maintain the social model, economic prosperity and democratic stability in a changing world.
The main challenges for implementation are to be found in:
- Political resistance and differences between member states: Countries such as Germany and the Netherlands, traditionally more conservative in terms of public spending, might be reluctant to an expansionary investment policy.
- Financing and borrowing: The EU would have to define mechanisms to finance these plans without generating an unsustainable increase in public debt in some countries.
- Geopolitical risks: Instability in global markets, uncertainty over trade relations with the US and tensions with China could affect the viability of some projects.
Similarly, if Draghi’s proposal is successfully implemented, Europe could experience GDP growth of between 1.5% and 2% per year until 2030, according to estimates by the European Investment Bank. In addition, millions of jobs are expected to be created in technology sectors, green industry and digitalisation, consolidating Europe as one of the most innovative economies in the world.
The future of Europe: challenges and opportunities
Industrial transformation and digitalisation
Europe needs to strengthen its technological and digital industry to reduce its dependence on third countries and compete in the global economy. Automation, artificial intelligence and energy transition will be key to the continent’s reindustrialisation. Likewise, to ensure the sustainability of growth, the EU must make progress in economic and financial integration, promoting greater cohesion between member countries. Fiscal flexibility, investment in education and attracting talent will be key factors to avoid a new structural crisis.