Maybe even this news isn't as bad as it seems at first glance. The car manufacturer VW is cutting another 50,000 jobs, something the supervisory board agreed to after a long struggle. And the credit insurer Allianz Trade registered 33 bankruptcies of larger companies in the first half of the year, three more than in the previous year. The automotive industry was particularly affected here.
At the same time, news that looks good at first glance is piling up. What caused the most stir was that the Federal Statistical Office corrected the growth figures for the second quarter to plus 0.3 percent, which in turn caused the economic institutes to raise their forecast for the full year to 1.2 to 1.4 percent: Finally there is a little bit of growth again after three years of recession and stagnation.
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Behind this perhaps not all that impressive number, there are developments in individual areas that are far more impressive - whether it is increased exports or fresh money for German start-ups, the growing trend towards changing careers or a significant increase in foreign investments.
This text comes from the Frankfurter Allgemeine Sonntagszeitung.
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Maybe the good and bad news fit together better than many people think. As bitter as the job cuts are for those affected, the overall picture of the reports about reductions and expansion could be that of a country that is already in the middle of the long-heralded structural change. And that may be able to cope with it better than some previously feared.
Compared to the major world crises that affect Germany and its economy more than many other developed countries, even small growth is actually quite astonishing. What is always said is true: the successful German model of cheap Russian gas, expensive car sales in China and free defense from the USA has collapsed.
Constantly new horror scenarios
With each new crisis, economists indulged in horror scenarios. The energy crisis after the Russian attack on Ukraine? It was initially said that it could cause economic output in Germany to shrink by three percent if gas deliveries were abruptly stopped. A new China shock? One to two percent less, according to a study from back then. The US President's tariffs? Scientists calculated with astonishing precision that this could cost the republic 1.4 percent of its economic output. Trump's campaign against Iran and the high price of oil? Another half a percent, they said. Not to mention the hot summer and dry shipping lanes. If you go by these forecasts, the German economy should not have stagnated in recent years, but should have contracted significantly.
And now this: Hardly a day goes by without several positive messages arriving. And this has been going on for some time.
Not only that, according to an analysis by the management consultancy EY, the DAX companies earned more money in the second quarter of 2026 than ever before. The Munich Ifo Institute reported in the spring that companies were now planning more investments again. Investment expectations rose from minus 3.1 to plus 0.2 on the Ifo scale. “The improved order situation in the industry has brightened the mood somewhat,” it said.
The export prospects have improved
Recently, the prospect of higher exports has grown even more clearly. “The mood in the German export industry has improved significantly,” announced the Ifo researchers. The Munich export barometer rose from minus 2.9 to plus 9.6 between July and August - the highest value since February 2022 and the strongest increase since June 2020.
This was also reflected in the institute's business climate index. “Confidence among companies in Germany has increased,” it said: from 86.7 to 88.8 points. “Despite the renewed rise in energy prices, the German economy is recovering.”
The upswing hit the hardest in an industry that was perhaps least thought of recently: chemistry. Here the Munich index made a real jump, from minus 26.3 to minus 2.4. “The ongoing blockage of the Strait of Hormuz and the resulting delivery failures in Asia are increasing demand for chemical products from German production,” the statement read.
The feared total crash did not materialize
No matter where you look, the feared total collapse due to geopolitical risks and technological change is not happening because new markets are at least partially replacing the old ones, because the crisis-hit sectors of the economy are also countered by growth sectors.
This is perhaps most evident in a number that has received little public attention. The Nuremberg Institute for Labor Market and Occupational Research (IAB) regularly determines how many people in Germany change their profession within a year. Between 2013 and 2024, this professional mobility increased by 13 percent. According to the researchers, there are two motives for this. Either the employees voluntarily switch to a job that is in high demand and therefore better paid. Or they do it involuntarily due to job loss. “In any case, professional mobility can make a significant contribution to adapting the economy and the labor market to economic transformation processes,” write the researchers.
At the beginning of the year, the startup association announced that there would be more start-ups in 2025 than ever before. 3,568 new companies were created, an increase of 29 percent compared to the previous year and more than in the previous record year of 2021. And they also recently collected record amounts of venture capital, as the US data service Pitchbook reported: According to media reports, it was a good nine billion euros by July, more than ever before.
Export markets have shifted
The markets for German exports have also shifted, as the Eastern Committee of the German Economy emphasized. “Central and Eastern Europe has a significant share in this,” it said about export growth: exports to this region increased by 7.4 percent, “especially to Poland and the Czech Republic.” The return of these countries, which are closely linked to Germany, to their long-term growth path also plays a role: after a slump caused by the energy price crisis, Polish growth was back at 3.6 percent last year.
Foreign investment is also coming from new directions. The employer-related Institute of the German Economy (IW) calculated that foreign investments in Germany in 2025 were half as high as in the previous year. Even if you compare the numbers with the average for the previous decade, they were still ten percent higher. Great Britain had the highest share, which more than offset the decline in investments from the USA.
Merz calls for an end to the discontent
The Chancellor's attempt to encourage more optimism in the country was not free of empirical foundations. "We have to get out of the climate of sullenness and annoyance. We have to work together to shake off the widespread discontent that has paralyzed our country for a long time," he recently demanded after the cabinet meeting in Neuhardenberg Castle in the summer. The government team had just been intoxicated by the euphoric lecture of a founder and watched the drone flight of a defense start-up.
However, Merz himself contributed a lot to this bad mood. During his time as opposition leader, his statements about the state of the economic nation became increasingly bleak, right up to the federal election a year and a half ago. “We are probably behind us – at least for a while – at the peak of our prosperity,” he announced after the start of the Ukraine war. “Something is happening here at the moment that may no longer be reversible,” he commented on deindustrialization the following year. The German business model was at an end, he stated on the radio at the end of 2024, and shortly before the election he spoke of the “deepest economic crisis in decades”.
Now he is trying to chalk up the gentle upswing as a success for his government. However, only a few of the projects are already in force. The health care reform will take effect at the turn of the next year, the pension reform has yet to be decided, as have relaxed rules for temporary new hires. Investments in armaments and infrastructure, which were purchased with high levels of debt, are most likely to have an impact. However, economists believe that the growth impact of military spending is limited. And due to budgetary tricks and tough planning, less of the money for roads and rail arrives than expected. There is much to suggest that there are things happening in the economy and society that are largely independent of politics.
For Merz, this primarily raises the question of what this means for his government's reform plans. On the other hand, there is an assumption in politics that reforms can only be implemented in times of extreme necessity, whether it was Schröder's agenda reforms in the face of record unemployment or cuts in the European crisis countries in the face of impending national bankruptcy. On the other hand, psychologists claim that people need to be given a positive vision during change processes. Most recently, Merz, who is often accused of having a grumpy facial expression, obviously opted for the second option. At least for the election month of September.
