Germany's Economy Contracts Amid Political Turmoil

Germany's economy, the largest in Europe, contracted by 0.2% in 2024, marking its second consecutive year of decline after a 0.3% contraction in 2023. This downturn has been attributed to weak global demand, competition from Chinese products, high energy costs, and a shortage of skilled labor. The economic challenges have led to political turmoil, resulting in the collapse of Chancellor Olaf Scholz's coalition government and prompting a snap election set for February 23, 2025. Volkswagen, Germany's largest manufacturer, has also been affected, announcing significant job cuts and production shifts to Mexico. The German economy's outlook remains bleak, with the potential for a winter recession if negative growth continues into early 2025. Analysts and officials emphasize the need for long-term economic reforms to address these structural issues.