What hope for Germany?

Neuhardenberg, a municipality located in Brandenburg, in north-eastern Germany, is by all accounts a gem of a place to visit. Situated at the heart of the former kingdom of Prussia, it’s famous for its classical architecture, including a monumental castle that was once the residence of noted Prussian statesman Prince Karl August von Hardenberg.During the Third Reich, the castle’s capacious estate was used as a secret test site for rocket motors and rocket boosters developed by Hellmuth Walter and Wernher von Braun. Later, the Count of the day, Carl-Hans Graf von Hardenberg, held clandestine meetings at the mansion in preparation for the (failed) July 20, 1944, plot to kill Adolf Hitler.Over the years, then, sleepy Neuhardenberg has seen its fair share of action.This August, it was selected by German Chancellor Friedrich Merz for a spot of quiet rumination with his cabinet. Addressing a press conference at the end of the two-day event, the German leader sought to launch a rocket booster all his own, a rallying call intended to sweep the nation to its feet amid a great gush of unity.“We need to move beyond the recession”, Merz intoned. “Beyond our economy’s weaknesses, beyond dissatisfaction and distrust and towards a new optimistic stance.”In short, let hope prevail.Exhorting dispirited people, sapped by years of austerity while watching things decline still further, to buck up, take it on the chin, and somehow contrive to lift the nation out of the deep pit dug by its rulers: this is part of the mindset of Europe’s current crop of leaders. In the UK, freshly ordained (if unelected) Prime Minister Andy Burnham duly vowed to “bring back hope” during his first statement to Parliament, on September 1. Over in France, President Emmanuel Macron made sure to include hope in his triad of New Year wishes to the nation at the turn of the year (the other components, to no one’s surprise, were “unity” and “strength”).Stirring invocations along these lines, with hope and resolution underlined in thick black ink, are typical of leaders enmeshed in crisis, whether war (recall Winston Churchill’s deft deployment of the English language to rally the nation) or bottomless recession (”We have nothing to fear but fear itself”, as Franklin D. Roosevelt poetically put it back in 1933). Indeed, both war and recession are currently casting deep shadows across Europe, nowhere more so than in Germany.It’s now more than a year since Merz and the Christian Democratic Union of Germany/Christian-Social Union (CDU/CSU), Germany’s “traditional” centre-right formation, took the reins of Europe’s leading economy and foremost political player. Since forming his government back in May 2025, Merz has achieved a string of unintended outcomes, including becoming the country’s least popular elected leader since its formation in 1949 (surveys suggest that something in the region of 80 per cent of German voters disapprove of his performance).Among the many factors contributing to this catastrophic haemorrhage of support, the state of Germany’s economy takes pole position. Contrary to Merz’s election-time promises of decisive steps to end years of stagnation, the situation is fast deteriorating. There seems to be no end in sight for the stagnation that, since 2019, has become the signature feature of Europe’s top economy. Last year, close to 2,00,000 companies across the country ceased operation, the highest number for more than 20 years. Manufacturing has been hit particularly hard: a body blow for Germany, where one in four jobs is linked to the industrial sector.In May this year, the German Council of Economic Experts bluntly told the Chancellor of its decision to cut back its earlier growth forecasts for the year. “We now expect the gross domestic product (GDP) to grow by just 0.5 per cent this year and 0.8 per cent next year.” With inflation set to rise to 3 per cent in 2026, business leaders and industry associations are in a mutinous mood. It’s no exaggeration to say that never since the end of the Second World War has Germany’s position in the global economy been more precarious.Mainstream commentators, in Germany and elsewhere, tend to steer clear of serious structural analysis, preferring to link the economy’s travails to a sequence of fickle, unpredictable events: the COVID-19 pandemic, the Russian invasion of Ukraine, the subsequent energy crisis, and the ongoing US-Israeli war on Iran. Hence, a “cumulative” crisis for which the country’s leaders should be judged to bear limited responsibility.In reality, the country’s economic woes have deeper, systemic roots. If Germany’s longstanding dependence on cheap natural gas imports from Russia has proved a fatal area of vulnerability, so too has the inability of its giant carmakers to rise to the challenge from the East. China’s transformation from a lucrative market for German-made products (cars in particular) to an unstoppable, technologically savvy competitor has, over the past few years, shrivelled the market share of Germany’s big three auto manufacturers: BMW, Mercedes-Benz, and Volkswagen. Inevitably, the axe has fallen on jobs: a staggering 1,00,000 Volkswagen workers have just been told they are to lose theirs as the company embarks on what its chief executive Oliver Blume describes as the Volkswagen group’s “most strategically profound transformation programme”, one that will send “a strong signal for the future”.

(From left to right) German Finance Minister and Vice Chancellor Lars Klingbeil, German Chancellor Friedrich Merz, and German Interior Minister Alexander Dobrindt give a press statement in front of Schloss Neuhardenberg Palace following a two-day retreat meeting of the German cabinet on August 26, 2026, in Neuhardenberg, Germany. | Photo Credit: Odd Andersen/AFP Significantly, news of Volkswagen’s “night of the long knives” coincided with another big story: the revelation, by the news outlet Handelsblatt on September 3, that German factories have already started production on more than 5,000 medium- and long-range drones for Ukraine. The joint venture between German-American arms company Auterion and Ukrainian drone producer Airlogix will reinforce the redirection of Germany’s industrial capacity towards arms production while embroiling the country still deeper in Russia-baiting and uncritical, no-holds-barred material support for Ukraine.Full-throttle militarisation, but still the far right risesFor Germany’s current rulers, militarisation has the allure of a magic potion, a quick-fix response to the morbid symptoms of imploding German capitalism. Following Merz’s success in getting Parliament to circumvent the so-called debt brake, a rule imposing limits on the level of government debt, half a trillion dollars have been freed up for spending on the military. Over the past year, the country has become one of the largest providers of aid to Ukraine, where Merz is said to be more popular than in his native land. Germany is now the world’s fourth-largest military spender, after the USA, China, and Russia, with a defence budget projected to reach 162 billion euros by 2029 (more than the French and British equivalents combined). There’s talk of reintroducing conscription as Merz pursues his goal of creating Europe’s strongest conventional army; the government currently requires all German men from the age of 18 to complete a form indicating their readiness to sign up.Against this building drumbeat of war, popular grievances rooted in declining living standards, stagnant wages, deteriorating infrastructure, and the budgetary shift away from welfare are being left to fester.In the absence of political alternatives, including an assertive and credible force on the Left, the far-right Alternative für Deutschland (AfD) is pulling ominously clear of its opponents. The latest polls have it currently commanding the support of 28 per cent of voters nationally, against 21 per cent for the CDU/CSU. The once-mighty Social Democratic Party of Germany (SPD) currently hovers around 12 per cent, behind the Greens (14 per cent) and neck-and-neck with Die Linke, Germany’s party of the radical left.Support for the AfD zooms upwards in parts of the country hit particularly hard by years of neglect, austerity, and uneven development. A case in point is the state of Saxony-Anhalt, located in east-central Germany. Formerly part of the German Democratic Republic, it’s home to 2 million people and is noted for its cultural heritage and lion’s share of Germany’s UNESCO World Heritage sites. In July this year, its unemployment rate stood at 8.1 per cent, significantly above the German average of 6.4 per cent. Last year, its real GDP contracted by 0.2 per cent. Unsurprisingly, inhabitants list job security, wages, and the overall economic situation as their main concerns.As I finish work on this column today, September 6, 2026, voters in Saxony-Anhalt are going to the polls to elect a new state government. No one is in any doubt about the outcome: a game-changing victory for the AfD. While earlier polls tipped the party to take 42 per cent of the vote, this evening’s exit polls are predicting the significantly higher figure of 44.5 per cent.Germany’s neo-Nazis are on course for a historic breakthrough: forming the country’s first far right state government since the days of the Third Reich.Susan Ram has spent much of her life viewing the world from different geographical locations. Born in London, she studied politics and international relations before setting off for South Asia: first to Nepal, and then to India, where fieldwork in Tamil Nadu developed into 20 years of residence.Also Read | Jean-Luc Melénchon: Indefatigable fighter for a new FranceAlso Read | More lions than donkeys among European leaders