In addition to being the main economic engine in Europe, Germany is the epicenter of the European Union’s overall goal to chase the green energy agenda.
For the past several years Germany has been deconstructing their fossil fuel energy production and replacing it with far more expensive alternatives. This has led to large increases in overall energy prices, and downstream increases in manufacturing costs.
The consequences have been snowballing throughout 2025, while cheap competitive alternatives coming into the EU from China have compounded their problem. Recently a survey of major industries was conducted in Germany to determine the forecast for 2026, the results are not good.
Approximately half of the industrial sectors in Germany are anticipating job losses, cuts or layoffs this year.
22 out of 46 business associations are preparing to downsize their labor force. Only 9 of the 46 are expected to increase hiring.
At a top-line this looks bad. However, when you look at the sectors contracting versus the sectors stable or expanding, you suddenly realize there is a bigger geopolitical problem within the forecast.
Job losses are expected in auto manufacturing, the textile sector, wood and paper fabrication. Job gains are expected in aerospace, shipbuilding and defense production – i.e. the war machinery.
When the largest and most developed industrial economy in Europe is pinning its economic survival on war machinery, a particular momentum is created. It is never a good outcome for Europe when Germany becomes reliant on war to maintain employment.
Unfortunately, that economic forecast does provide context to the German position for continued Ukraine/Russia conflict. You might say that without a war, Germany could slip into a severe economic contraction; not good.
BERLIN, Dec 29 (Reuters) – A majority of German business associations expect job cuts in 2026 as the country’s economic crisis persists, with industry hit hardest by global protectionism and weak exports, a survey by the German Economic Institute IW showed on Monday.
Of 46 business associations surveyed, 22 anticipate workforce reductions next year. Only nine expect to increase hiring and 15 foresee stable employment levels.
[…] Some bright spots emerged in sectors benefiting from increased defense spending, including aerospace and shipbuilding. (read more)
We will keep watching with additional background context for the Ukraine/Russia negotiations.
