Who’s Really Crashing the Economy?

The British Guardian recently asked: “Do populists always crash the economy?” An amazing question, given that one of Europe’s erstwhile strongest economies—Germany—is currently being crashed by its anti-populist elites.

“Germany has been in economic decline for years. The situation is now dramatic,” said Clemens Fuest, head of Germany’s economic research institute ifo last Sunday.

The numbers tell a brutal story: GDP has stagnated since 2018, while government spending (including pensions, schools, and infrastructure) has risen steadily and now stands 25% higher than a decade ago. Company investments remain stuck at 2015 levels. Unemployment jumped to 3 million in August—a ten-year high. As Fuest warns, this puts Germany’s prosperity in acute danger—stagnant investment means less growth, less tax revenue, and ultimately less money for public services.

Germany has faced external shocks, yes. The Trump tariffs threaten the country’s struggling car industry. But this is a convenient scapegoat. Germany’s sluggish growth and manufacturing decline stretch back much further. Trump derangement syndrome, sadly very strong among German elites, merely obscures the true causes: catastrophic policy decisions made at home.

The world’s dumbest energy policy

Germany’s decision to dismantle functioning energy sources and bet everything on renewables continues to puzzle observers worldwide. The Wall Street Journal famously called it the “world’s dumbest energy policy” in 2019. The consequences speak for themselves:

• Hundreds of billions in taxpayer money spent subsidising unreliable, weather-dependent renewables—mostly compensating producers for the gap between market prices and guaranteed rates, and offsetting spiralling energy costs for industry. A recent study by Germany’s chamber of commerce (DIHK) shows no end in sight for these unsustainable expenses. To most ordinary Germans, former Chancellor Olaf Scholz’s 2023 promise of a new economic miracle powered by renewables now sounds like a bad joke.
• Dangerous dependencies created: Before the Ukraine war, Germany’s natural gas imports from Russia as a share of total gas consumption were 54 % (30% of gas imports, 32% of oil imports, and 46% of hard coal imports came from Russia, according to official data). Now U.S. LNG makes up a large share of total purchases.
• Accelerated deindustrialisation: Electricity costs are the highest in the EU—two and a half times higher for industry than in the U.S. Energy-intensive sectors are fleeing abroad or shutting down entirely. Two in five industrial companies plan to cut investment. Last year alone, 114,000 manufacturing jobs vanished—2.1% of all such jobs in just 12 months.

If voters increasingly mistrust the political establishment, they have every reason to.

The fake consensus

When the nuclear exit was decided in 2011, the government claimed to have majority support. Even then, however, this claim was shaky: a majority of Germans saw the move as a tactical election manoeuvre. And they were right. The decision was opportunistic and motivated by the governing CDU’s fear of losing an important local election in Baden-Württemberg, where the Greens were playing the ‘Fukushima card’. 

The media, dominated by journalists leaning towards the Greens, amplified nuclear fears rather than fostering a balanced debate. A more rational debate would have shifted public opinion further still.

Today, around 60% of Germans oppose the nuclear phase-out. Yet elites remain paralysed, unable to reverse course. For far too many, admitting failure would expose the moral emptiness at the core of their green agenda—one of the few issues that seemed to give our exhausted leaders a sense of purpose and urgency.

Tellingly, in the early years, even industry leaders offered little resistance. Companies like Siemens and BASF, dependent on state contracts, saw opportunities in renewables. They aligned with politics rather than economic reality.

At the heart of Germany’s failures lies a culture of fake consensus—a belief that political conflict is always negative. As Merkel’s CDU adopted Green demands and the hollowed-out SPD followed suit, the political landscape became uniform. Dissenters were marginalised, removed from electoral lists or expelled outright.

Now, nearly 15 years later, many in industry—and in the government—do admit mistakes were made. Yet now, the establishment is locked in a desperate retreat battle against the populist challenge. Friedrich Merz, once a critic of the nuclear phase-out, has proven incapable of initiating necessary reforms since returning to politics. His ‘firewall’ against the populist AfD exemplifies elite determination to stick together at all costs—even as the AfD becomes the only parliamentary party campaigning for nuclear energy, upholding some common sense in the energy and climate debate. 

Parallel disasters

The energy catastrophe reflects a broader pattern: uncritical embrace of the euro (which masked crisis by artificially boosting exports), enthusiastic promotion of EVs without industrial strategy, and resistance to policy debate across migration, climate, and economic governance.

For years, anti-populists like journalist John Kampfner (author of Why the Germans Do It Better) portrayed Germany’s consensus culture as a strength. They were wrong. Robust debate might have prevented the worst mistakes—or at least enabled better solutions.

Two events last week crystallised the crisis:

• VW’s Wolfsburg plant—employing over 60,000—nearly halted production when China stopped chip exports, exposing Germany’s dependency. Even without chip shortages, the plant faces an existential threat: VW is cutting 35,000 jobs over the next four years. If production stops, thousands of smaller suppliers will collapse in the domino effect. German carmakers are losing ground as China pulls three years ahead in EV production.
• The demolition of Gundremmingen’s cooling towers: broadcast live on TV, watched by thousands on site. The Bavarian nuclear plant once supplied a quarter of Bavaria’s electricity. According to American studies, it could have been reactivated to power over 30 million households.

As the economy falters, Germany literally demolishes its own industrial base.

The populist uprising shows the German public won’t watch quietly. We can only hope their anger intensifies. The establishment elite’s fake consensus—their vow to stick together “until death do us part”—is dragging the country into the abyss they claimed only populists could create.