The German economy is facing deepening structural difficulties. According to the latest report from EY, in 2025 alone, industrial employment fell by 120,000 people, a rate almost twice as fast as the previous year. Simultaneously, an analysis by the ifo institute indicates a massive price disparity between states, where eastern Germany is acutely feeling the effects of inflation, despite optimistic signals regarding real wage growth.

Drastic decline in employment

German industry lost 124,000 workers in 2025, representing a year-on-year employment decline of 2.3%.

Unequal regional inflation

From 2020 to 2025, prices in Brandenburg rose by 1.8 percentage points more than the national average of 21.8%.

Dark clouds over Berlin

Nearly 25% of enterprises in the Berlin-Brandenburg region fear ceasing operations due to prolonged stagnation.

Weak investment sentiment

The ZEW expectations index fell to 58.3 points, heralding a difficult start to 2026 for German financial markets.

The situation in the German industrial sector deteriorated sharply at the end of 2025. Data collected by EY shows that the number of people employed in industry in our western neighbor fell to 5.38 million. This represents a reduction of 124,000 jobs in just twelve months. The automotive sector, traditionally the country's export engine, was hit the hardest. Experts point out that the wave of layoffs mainly affected larger economic entities employing more than 50 workers. For decades, the German economic model relied on cheap energy from Russia and strong exports to China. Russia's aggression against Ukraine in 2022 and the change in Beijing's trade policy forced Berlin into a painful energy and industrial transformation. Parallel to the labor market crisis, Germans are grappling with the effects of years of price increases. Analysis by the ifo institute shows that from 2020 to 2025, the prices of goods and services in Germany rose by an average of 21.8 percent. The highest inflation dynamics were recorded in Brandenburg, where this indicator was 1.8 percentage points higher than the national average. At the opposite pole was Hamburg, which weathered the period of high prices most mildly. Nevertheless, economists note a positive trend in the eastern states, where strong wage growth largely offset the loss of purchasing power. 124 thousand — people lost their jobs in German industry in 2025 Forecasts for 2026 remain ambiguous. Although the IHK predicts economic growth at a modest 1 percent, investor sentiment measured by the ZEW index unexpectedly fell. Entrepreneurs in Berlin and Mecklenburg-Vorpommern complain about a lack of growth impulse, and every fourth company in the capital fears having to cease operations in the face of persistent stagnation. „The scale of employment reduction in German industry at the end of 2025 was almost twice as high as in 2024.” — EY Report Brandenburg: 23.6, Saxony: 23.5, Saxony-Anhalt: 23.4, Bremen: 23.4, National average: 21.8, Hamburg: 19.8 Change in industrial employment in Germany: : → ; : →

Mentioned People

  • Manja Schreiner — Managing Director of the Chamber of Industry and Commerce in Berlin, responsible for the report on the crisis in the capital.