Last month, U.S. President Joe Biden visited Germany and was awarded the Order of Merit—one of the nation’s most prestigious honors—for his purported contributions to strengthening Europe’s security and democracy. German officials lauded Biden’s leadership in countering Russian aggression. But beneath the surface of these accolades lies a troubling reality: Germany is grappling with one of the worst economic and political crises in decades. Astonishingly, many of the nation’s woes can be traced back to decisions rooted in its relationship with the U.S. government.
The Fallout from U.S.-Led Policies
Germany’s enthusiastic commitment to the Ukraine war, paired with its crumbling industrial base and strained relationships with key global players like China, has left Europe’s former economic powerhouse fighting for survival. To make matters worse, just two weeks after Biden’s visit, the U.S. greenlit Ukraine’s use of American missiles to strike inside Russia, escalating tensions and introducing one of the gravest security threats Europe has faced in decades.
At the heart of Germany’s economic success was its industrial might. For decades, the nation’s engineering excellence set the gold standard, powering a robust manufacturing sector that employed millions and fueled economic growth. Key to this success was access to cheap Russian natural gas, which kept German factories running efficiently. Before the Ukraine conflict, 55% of Germany’s natural gas supply came from Russia. The abrupt severance of this energy lifeline has been nothing short of catastrophic.
A Self-Inflicted Energy Crisis
The summer of 2022 marked a turning point. Martin Brudermüller, CEO of BASF—the world’s largest chemical company—warned against imposing an embargo on Russian energy. “Do we knowingly want to destroy our entire economy?” he asked, predicting mass unemployment and poverty. His warnings have since become reality. German manufacturing is in freefall, with factories shuttering and industries relocating abroad. More than one in five Germans now faces poverty or social exclusion, a stark contrast to the nation’s post-World War II prosperity.
Adding to the crisis is a sharp rise in social ills. Drug abuse has surged, with a staggering 12% increase in drug-related deaths in 2023 compared to the previous year. Urban centers like Hamburg and Stuttgart are increasingly likened to Detroit, emblematic of industrial decline and economic hardship.
The U.S. Gains While Germany Suffers
Germany’s economic struggles have coincided with significant benefits for the United States. With the destruction of the Nord Stream pipeline, Germany has been forced to turn to American liquefied natural gas (LNG). In 2023 alone, the European Union spent $65 billion on U.S. LNG, a 70% increase from previous years. However, American gas is significantly more expensive than Russian supplies, further eroding Germany’s manufacturing advantage.
Meanwhile, U.S. companies are capitalizing on Germany’s misfortune. Two-thirds of German manufacturers have relocated parts of their operations abroad, many to the U.S., attracted by lower energy costs and weaker labor protections. This industrial exodus mirrors the deindustrialization that devastated the U.S. Rust Belt in the 1970s.
A Diplomatic Tightrope with China
Germany’s strained relationship with China has further complicated matters. Historically, collaboration with China was a cornerstone of Germany’s industrial strategy. Yet, under pressure from the U.S., Germany has increasingly adopted an adversarial stance toward Beijing. German Foreign Minister Annalena Baerbock’s confrontational rhetoric during a visit to China earlier this year exemplifies this shift, undermining opportunities for economic cooperation.
While some German firms continue to partner with Chinese companies in the electric vehicle (EV) sector, these efforts are overshadowed by Berlin’s broader political antagonism. This disconnect between private sector pragmatism and government policy risks jeopardizing Germany’s competitiveness in emerging industries.
A Nation in Political Turmoil
Domestically, Germany’s political landscape is unraveling. Rising poverty, industrial decline, and public disillusionment have fueled polarization and radicalization. Chancellor Olaf Scholz’s coalition government is crumbling, with voters demanding new elections and a shift in direction. Yet, Germany’s leaders remain committed to policies that prioritize U.S. interests over national well-being.
The Path Forward
Germany stands at a critical crossroads. It can choose to reclaim its economic sovereignty by pursuing peace with Russia, restoring access to affordable energy, and fostering partnerships with global powers like China. Alternatively, it can continue on its current path, deepening its dependence on the U.S. and risking long-term decline. The stakes could not be higher—not just for Germany, but for the future of Europe as a whole.
For decades, Germany was the engine of Europe’s prosperity. Whether it can reclaim that mantle or succumb to external pressures remains to be seen. One thing is clear: the decisions made today will shape the trajectory of the nation for generations to come.
