Germany at Risk of Losing Its Business Backbone as Growth Stalls and Startups Fade

Entrepreneurial Decline Threatens Economic Stability

Germany, once hailed for its robust business landscape and thriving middle class, is facing an alarming trend: a steep decline in entrepreneurial activity. More than 250,000 companies are at risk of closure by the end of the decade due to a lack of successors, according to the German Chamber of Industry and Commerce (DIHK). Meanwhile, interest in founding new companies is near historic lows, particularly among younger generations. Many potential entrepreneurs see Germany as increasingly unattractive for launching businesses, citing rigid bureaucracy, high costs, and dwindling trust in political support for private enterprise.

DIHK President Peter Adrian has called on the federal government to reverse this trend urgently. He emphasized the need to remove barriers to self-employment and to restore confidence in Germany as a business-friendly environment. “We need people willing to take on responsibility and invest in the future,” Adrian said, urging policymakers to cut red tape and ease tax and labor burdens. The coalition government’s pledge to enable company formation within 24 hours offers some hope, but concrete action remains sparse.

A Faltering Economy Amid Global Pressure

The growing hesitation among Germany’s potential entrepreneurs comes at a time when the broader economic outlook is also grim. According to the latest report from the Organisation for Economic Co-operation and Development (OECD), Germany remains one of the worst-performing industrialized economies. For 2025, Germany’s GDP is expected to grow by just 0.4%, placing it third from the bottom among more than 50 countries examined—only Norway and Austria are forecasted to do worse.

Even more striking is that this subdued growth comes despite a stronger-than-expected first quarter. The OECD reaffirmed its March forecast, warning that the overall economic momentum remains weak. Though modest improvements are predicted for 2026, with growth potentially reaching 1.2%, structural issues persist. Consumption remains fragile, investment is lagging, and export-oriented industries are under strain due to escalating global trade tensions.

Policy Changes Bring Temporary Relief

Recent political developments in Berlin have somewhat reduced investor uncertainty. A quickly formed government and adjustments to Germany’s strict debt rules have encouraged cautious optimism. Public investments, especially in defense and infrastructure, are expected to increase in the coming years, potentially stimulating the sluggish economy.

Nonetheless, economists warn of counterforces. Rising government spending, while supporting consumption, may also reignite inflation. Combined with a persistent shortage of skilled labor, this could further increase business costs and discourage expansion. The OECD strongly recommends prioritizing the recruitment of qualified workers from abroad to offset domestic demographic decline and sustain productivity.

Global Trade Tensions Cast a Long Shadow

A significant external threat to Germany’s economy stems from its dependence on exports. Around 10% of German goods are sold to the United States, making the country particularly sensitive to shifts in American trade policy. New tariffs introduced under former U.S. President Donald Trump have already rattled markets and injected further uncertainty into global supply chains. These tensions, coupled with growing protectionist policies worldwide, could further dampen Germany’s economic outlook.

The OECD expects the world economy to slow down to 2.9% growth in both 2025 and 2026, compared to 3.3% in 2024. This global slowdown is likely to hit export-heavy economies like Germany the hardest.

Climate and Growth: A Delicate Balance

Despite economic turbulence, Germany has made strides in decoupling growth from emissions. Thanks to advances in energy efficiency and a shift toward renewables, the country has managed to grow economically while steadily reducing carbon output. However, these achievements are fragile. The COVID-19 pandemic and the energy crisis contributed to lower emissions largely because of reduced industrial activity rather than lasting structural change.

Germany’s reliance on fossil fuels continues to show in its climate balance. If economic recovery is not coupled with sustainable energy practices, gains in emission reductions could be reversed. The challenge now is to sustain climate progress while reigniting business confidence and economic growth.

Restoring Entrepreneurial Spirit Key to Long-Term Health

The intersection of stagnant growth, uncertain global trade, and domestic disillusionment with entrepreneurship paints a troubling picture for Germany’s future. Reviving the economy will require more than fiscal stimulus—it demands cultural and systemic change. That includes fostering a national environment where business founders are supported, successors are cultivated, and taking risks is once again encouraged rather than punished by regulation.

Adrian argues that incorporating entrepreneurship into career education could play a critical role. Introducing young people to the idea of building and inheriting businesses might be the only way to reverse the current downward trend.

Without bold, decisive steps, Germany risks not only falling further behind its international peers but also losing the very engine that powered its post-war economic miracle: its entrepreneurs.