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Why Germany's Industrial Engine Is Losing Steam

Published July 27, 2026 at 7:02 AM UTC

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Germany, long Europe's manufacturing powerhouse, is facing a deepening competitiveness crisis. High energy costs, skilled labor shortages, and bureaucratic red tape are driving companies to invest elsewhere. The industrial sector, which accounts for about 20% of GDP, has seen a sharp decline in new orders, especially in energy-intensive industries like chemicals and steel. The government has pledged to cut corporate taxes and speed up planning for infrastructure projects, but business confidence remains low. Without swift action, the erosion of Germany's industrial base could ripple through supply chains, weaken exports, and reduce economic growth.