A recent survey by the Ifo Institute, involving around 2,000 industrial companies, has revealed a significant decline in Germany's competitiveness, marking the worst downturn since the survey's inception in 1994.

This decline is largely attributed to high energy costs and taxes, which have led to increasing pessimism among German industries, particularly affecting energy-intensive sectors and the automotive industry.

Companies have cited high energy prices, bureaucratic burdens, rising costs of raw materials, and tax pressures as key issues, exacerbated by structural problems like a shortage of skilled workers.

The automotive sector is particularly hard-hit, with a 53% drop in job postings in October compared to the previous year, reflecting a slowdown in the transition to electric mobility.

The Ifo Institute has called for swift government formation following federal elections as a short-term solution, while advocating for long-term strategies to avert significant industrial production relocation from Germany.

Negative evaluations of competitiveness span all industrial sectors, with energy-intensive industries suffering the most, reflecting a widespread concern among businesses.

Since 2018, Germany's industrial production has decreased by over 12%, with stagnation in gross value added in manufacturing, indicating a troubling trend for the economy.

Experts recommend urgent measures to enhance competitiveness, including reducing energy costs, cutting bureaucratic obstacles, and modernizing infrastructure to prevent further deindustrialization.

The VDMA reported a 5.2% decline in exports during the first nine months of 2024, primarily due to decreased orders from Europe and America, further highlighting the challenges faced by German manufacturers.

Increased business uncertainty, fueled by geopolitical tensions and the failure of the German coalition government, has prompted calls for immediate economic policy measures.

The Ifo analysis aligns with international competitiveness rankings, showing Germany's drop to 24th place in the IMD rankings over recent years, underscoring the need for reform.

The decline in competitiveness has been evident since 2017, predating the COVID-19 pandemic and the energy crisis triggered by geopolitical events.