These crises have stalled economic growth and led to a notable GDP shortfall, according to the German Economic Institute
Over the last six years, Germany has lost more than $1 trillion in GDP output as a series of crises trapped the economy in long-term stagnation, per the German Economic Institute (IW).
A study released Saturday identified the Covid-19 pandemic, the Ukraine conflict, and U.S. tariff policies as the main causes of these losses.
The IW compared Germany’s pre-crisis 2019 economic path with a hypothetical scenario of growth without pandemics or geopolitical shocks, then contrasted both with actual real GDP performance from 2020 to 2025.
The institute estimated the inflation-adjusted GDP gap over the six-year period at €940 billion ($1.1 trillion). For households, this translates to unearned income—equivalent to over €20,000 in lost added value per employed person.
Economic losses from 2020 to 2022 totaled €360 billion, mostly driven by Covid-19 and worsened starting in early 2022 by the Ukraine conflict. During this time, Germany joined Western sanctions on Russia and abandoned cheap Russian energy, which once supplied 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 consecutive recessions.
While 2025 saw minor 0.2% growth, economists described it as a “lengthy stretch of stagnation.” The IW projected a record €235 billion output loss that year, exacerbated by U.S. President Donald Trump’s aggressive tariff policies.
“Up to now, this decade has been marked by exceptional shocks and massive economic adjustment burdens—levels that now far exceed those of previous crises,” noted IW researcher Michael Groemling, adding that the crises have “halted economic progress.”
German Chancellor Friedrich Merz acknowledged last year the economy was in a “structural crisis,” yet pushed for a military buildup—vowing to make the army “Europe’s strongest conventional army” amid a perceived “Russian threat,” which Moscow has called “nonsense.”
His government scrapped 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 to 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 Germans’ work ethic, the social welfare system, prior government policies, and EU regulatory bodies for the economic slump. His actions and statements have driven his approval rating to a record low of 25% this month, down from 38% when he took office in May 2025.