If all goes well, the German economy will finally grow again this year after three years of recession and stagnation. Estimates vary from 1.2% of the European Commission to 1.3-1.5% of the IFO, while the Bundesbank appears more prudent with a forecast between 0.7% and 1%. But in Germany the problem is still there export crisis. In the first 11 months of 2025, the trade balance was in surplus of 182.3 billion euros against 225.11 billion in the same period in the previous year. A drop of around 43 billion (-19%), which accounts for almost 1% of GDP. In detail, exports increased by 0.9% and imports by 4.6%.
Crisis in Germany due to exports
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Everyone in Berlin understands what is happening: exports to the United States are collapsing and imports from China are soaring. In the first 10 months of 2025, the trade surplus with the superpower fell from 69.64 to 58.28 billion dollars (-16.3%). And in the first 9 months, the deficit with China went from 47.8 to 69.3 billion euros (+45%). In detail, purchases from the Dragon increased by 17.2% and sales towards it decreased by 2.1%.
The other side of fiscal austerity
Germany had based its general trade and economic policy on the assumption that it would conquer the Chinese market without losing the traditionally rich US and Eurozone markets. What is happening is that China has conquered the German market and that Germany is losing the American market without being able to replace it with the rest of Europe. THE’fiscal austeritywhich in the first phase was thought to be Berlin’s key to imposing its supremacy on the continent, produced opposite results.
The Southern European allies had to consolidate their public finances, doing without internal demand. For this reason they had to reinvent themselves on international markets to find an outlet for their goods.
Between 2007 and 2024, Italian exports grew by over 70%, going from 22.5% to 28.3% of GDP. At the same time, imports increased by 54%, rising from 23% to 26.1%. The Italian trade balance has gone from an almost chronic deficit to a chronic one. This means that we have steadily become net sellers of goods abroad, in part by doing competition with Germanypartly by selling to the same, as for car components. Our small and medium-sized businesses have been driven by necessity to become more efficient and resilient to crises. The German competitors are larger and theoretically more financially robust, but also less flexible in managing events.
German model in trouble
The export crisis in Germany is not cyclical. It’s the German model to have entered into structural crisis. First there was the loss of foreign markets with the pandemic, then of low-cost Russian oil and gas and, finally, the dismantling of globalization by the USA already before Trump 2.0 with the repatriation of production chains (see IRA) and now with tariffs.
Europe’s largest economy finds itself having to remedy decades of political investments that have proved unsuccessful in light of the new geopolitical balance. How to get out of this tunnel?
Although Germany remains committed to the idea of pursuing solid budget policies, things have already changed under Chancellor Friedrich Merz. Even before forming the government, last March he caused the explosion of German yields by announcing a maxi-plan rearmament in deficit. Including infrastructure investments, Berlin will spend 1 trillion euros more than it receives. The constitutional provision on the “debt brake” was also reformed, a move that continues to attract criticism in practice.
Tight fiscal margins in Europe
Merz would need to relaunch domestic demand and exports at the same time. Mathematics says that if you increase consumption and investments, you find yourself importing more from abroad and the trade surplus is reduced. Unless the others do the same, ending up increasing imports too. The problem is that almost no one in Europe can afford it expansionary fiscal policies. France itself risks definitively transforming itself into the Italy of 2011. Its returns have already exceeded those offered by BTp. This constitutes a major limit to German hopes of replacing the US market as soon as possible.
What if allies were allowed to spend more? Yet another loosening of the Stability Pact after the pandemic and the war. The justification would be the unprecedented geopolitical situation since 1945. Since we could no longer trust even our American allies, we are forced to react with extraordinary measures. It’s a shame that it is not written laws that allow states to get into debt or not, but rather those of the market. And investors have been signaling for months that they do not want to finance the growing liabilities of governments. They are demanding ever higher yields almost everywhere, especially in the UK, Japan, France and even the US and Germany.
Crisis in Germany, opportunity and risk for Italy
For Italy, the export crisis in Germany is opportunity and risk at the same time. Brussels’ surveillance of public finances could become less obsessive and offer the government some more room for maneuver.
It remains to be seen what the markets would think, which at this stage have fallen in love with BTps precisely because of our relative austerity. It must also be said that if Germany remains in crisis and produces less, our own exports to its factories will contract. We are talking about our main trading partner with trade in 2024 of 156 billion, of which 71 billion of exports and 85 billion of imports.
giuseppe.timpone@investireoggi.it
