section_path: Abstract
section_name: Abstract
paragraph_text: The German economic crisis is a significant downturn of Germany's economy that marked a dramatic reversal of its previous "labour market miracle" period of 2005–2019. The country, which had been considered to be Europe's economic powerhouse in prior decades, became the worst-performing major economy globally in 2023 with a 0.3% contraction, followed by minimal growth in 2024 leading to recession. Several economists, business figures, and other experts expressed concern that Germany's economic downturn could cause the nation to reclaim its reputation as the " sick man of Europe " from the 1990s. Economists stated that Germany's economy was in a "permanent crisis mode", with the Handelsblatt Research Institute declaring that it was in its "greatest crisis in post-war history" after projecting a third consecutive year of recession in 2025.
  
  This decline was attributed to multiple factors: A lack of urgency in diversifying its energy supply before 2022 leading to increased energy prices (coinciding factors include the Russian invasion of Ukraine, its nuclear power phase-out, slow pace of energy transition, and increased cost of fossil fuels), comparatively lower productivity due to slow adaptation of digital technologies, German politics (specifically the debt brake, the CDU/CSU -filed application to the Federal Constitutional Court successfully deeming a €60 billion climate fund unconstitutional as well as the subsequent in-fighting within the governing Scholz cabinet) obstructing economic stimuli, global shifts in demand hurting the country's export-led economy while its higher internal real wage growth -led demand is delayed due to high cost of living, as well as a skilled worker shortage arising from demographic challenges such as population ageing, low participation of women in the workforce and slowing immigration to Germany.
  
  The crisis has had broader implications for German society, including a severe housing shortage affecting 9.5 million people. It also significantly contributed to a radical shift in political dynamics, with support for traditionally dominant parties, including the members of the concurrent traffic light coalition headed by German Chancellor Olaf Scholz, declining greatly, with alternative populist political movements such as the right-wing Alternative for Germany or the left-wing Sahra Wagenknecht Alliance gaining traction.