The crises have paralyzed growth and resulted in a significant GDP shortfall, the German Economic Institute has said
Germany has lost more than $1 trillion in GDP output over the past six years as successive crises pushed the economy into prolonged stagnation, according to the German Economic Institute (IW).
A study released on Saturday cited the Covid-19 pandemic, the Ukraine conflict, and US tariff policies as the main drivers of the losses.
The IW compared Germany’s pre-crisis 2019 economic trajectory with hypothetical growth absent pandemics and geopolitical shocks against actual real GDP performance from 2020 to 2025.
The institute estimated the shortfall in price-adjusted GDP over the six-year period at €940 billion ($1.1 trillion). In household terms, this represents income Germany failed to earn, translating into a loss of over €20,000 in added value per employed person.
Economic losses from 2020 to 2022 totaled €360 billion, largely due to Covid-19 and compounded from early 2022 by the Ukraine conflict, which saw Germany take part in the Western sanctions on Russia and abandon cheap Russian energy, which previously accounted for 55% of its gas imports.
As the conflict dragged on, losses rose to €140 billion in 2023 and over €200 billion in 2024, when Germany entered back-to-back recessions.
While 2025 saw minor 0.2% growth, economists described it as a “prolonged period of stagnation.” The IW estimated a record €235 billion output loss that year, exacerbated by US President Donald Trump’s aggressive tariff policies.
“The current decade has so far been characterized by extraordinary shocks and enormous economic adjustment burdens, which now significantly exceed the burden levels of previous crises,” IW researcher Michael Groemling stated, adding that the crises have “paralyzed economic development.”
German Chancellor Friedrich Merz acknowledged last year that the economy was in a “structural crisis,” but prioritized a military buildup, pledging to make the army “Europe’s strongest conventional army” amid the perceived ‘Russian threat’ – which Moscow has called “nonsense.”
His government abolished the constitutional debt brake to fund the buildup and passed the 2026 budget with a record €108.2 billion for defense and €11.5 billion in military aid for Ukraine. It also committed to raising defense spending to 3.5% of GDP by 2029 as part of broader NATO-led militarization.
Merz has blamed the work ethic of Germans, the social welfare system, previous government policies, and EU regulatory bodies for the economic slump. His policies have driven his approval rating to a record low of 25% this month, down from 38% when he took office in May 2025.
