Written by Udit MisraNew Delhi | November 14, 2025 01:18 PM IST 4 min readUS Secretary of State Marco Rubio (left) and Germany's Foreign Minister Johann Wadephul at the G7 Foreign Ministers' meeting in Ontario, Canada, Nov. 11. (Mandel Ngan/Pool Photo via AP)Germany, the world’s third-largest economy after the US and China, with a total GDP (gross domestic product) of $5 trillion, is stagnating this year. In other words, it is registering barely any growth.This stagnation — the German GDP is pegged to grow by just 0.2% this year — is coming at the back of two successive years of recession (that is, a year when, instead of growing, the GDP of an economy contracts). These are the findings from the annual report of the German Council of Economic Experts, which is an independent academic set up by law in 1963 and tasked with providing periodic assessments of macroeconomic developments in Germany.As the TABLE alongside shows, far from leading the euro area, Germany is lagging behind in Europe, which incidentally lags far behind the global averages. The council of experts has laid out several reasons that have led to the German economy stalling.Story continues below this ad TABLE.“In addition to cyclical factors, this weakness reflects structural changes and geopolitical shifts that are undermining the traditional German export model,” said the annual report by experts.Also from this author | The loss of Europe’s competitive edgeThe biggest geopolitical upheaval this year has been the change of US leadership and that leadership’s approach towards providing economic and security guarantees to traditional allies such as Germany. This has forced European countries such as Germany to rethink their security framework and figure out resources to plug the gaps created be it in the spheres of defence or trade.Within Europe, too, the continued fragmentation of the European Single market for goods, services and capital has prevented European countries from finding an effective response to new global challenges.Lastly, there are contributory factors even within Germany. “Domestic aspects such as a sustained decline in the competitiveness of German industries and the ongoing demographic aging are also contributing factors,” states the report.Story continues below this adWhen he first came to power six months ago, German Chancellor Friedrich Merz had pledged that he would boost growth. The government led by Merz had unveiled a new fiscal package to boost the economy by way of spending money towards bolstering the country’s infrastructure and investing in Germany’s defence capabilities. But bold announcements notwithstanding, the implementation has left a lot to be desired. Not surprisingly, Merz has slid sharply in popularity.So, what can Germany do to reverse the trend? For one, the council of experts suggest that the increased fiscal spending by the government should be better targeted so as to boost investments.Second, Germany should work towards closer integration of the European economies, including removing hurdles from achieving a genuine single market for goods and services; the European Union is after all the world’s second-largest economically integrated area.Third, cut corporate taxes to incentivise businesses. And lastly, reducing wealth inequalities by making it easy for the worse off to accumulate wealth through initiatives such as the introduction of a state-subsidised long-term investment account, designed to strengthen financial security mainly in old age.Story continues below this adHowever, if Germany doesn’t quickly address its subdued pace of economic growth, India, which has a GDP size around $4 trillion, will find it easier to overtake Germany in terms of overall size of economy, thus becoming the third-largest economy in the world.Udit Misra is Senior Associate Editor. Follow him on Twitter @ieuditmisra ... Read More© The Indian Express Pvt LtdTags:Explained EconomicsExpress Explained