Germany is facing serious economic challenges, and while support for the right-wing Alternative for Germany (AfD) has reached its highest level, the country's export-oriented economic model is under unprecedented pressure.
Challenges Facing the German Economy
Chinese competitors are continuously reducing the market share of major players in the German industry, while high energy prices, high labor costs, and excessive bureaucracy are exacerbating the structural crisis. According to data from the Federal Statistical Office of Germany, real GDP grew by only 0.2 percent last year after two years of recession. Additionally, exports to China are projected to decrease by 9.7 percent in 2025, and exports of German cars and parts have dropped to one-third.
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Government Plans for Economic Growth
The German government forecasts that economic growth will reach 1.3 percent in 2026, which is still negligible compared to the years before the pandemic. Meanwhile, the AfD has surpassed other political parties in polls, and the country's economic challenges are cited as one of the main factors in the party's rise. Germany's domestic intelligence agency has observed evidence of the AfD's complete right-wing extremism.
The party has promised to return Germany to a path of growth, including ending the transition to renewable energy, reducing taxes, and revising European Union treaties. At the same time, the government led by Chancellor Friedrich Merz is seeking a new strategy for economic growth, focusing on six priority sectors such as artificial intelligence, quantum computing, and clean energy.
A new report published by the Made for Germany initiative estimates that this and other innovative technologies could attract up to 4.1 trillion euros in investment. However, realizing this potential does not depend on large industrial companies like Volkswagen and Siemens; rather, it requires innovative startups.
For this reason, creating favorable conditions for the emergence of startups, including proximity to top universities and access to private capital, is essential. Additionally, venture capital investments increased by 44 percent in the first half of 2026, reaching 5.8 billion euros.
Germany faces serious challenges from its competitors, especially China, which has much lower energy and labor costs. In this context, increasing Germany's defense spending could also help strengthen some of the priority sectors.
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