German economy grows for first time since 2022 - The revival is good news for the eurozone as a whole
Europe's largest economy showed signs of recovery last year after almost a decade of stagnation, but falling exports, fierce competition from China and ensuring that Berlin's massive stimulus funds are used effectively remain challenges to sustainable growth.
Germany's gross domestic product grew by 0.2% in 2025, a turnaround after the economy shrank by 0.9% and 0.5% in 2023 and 2024 respectively.
Annual GDP growth averaged 1.1% in the 2010s thanks to its export-oriented economic model, while globalization continued apace, an attractive performance at a time when other countries in the eurozone struggled to recover from the financial crisis or the subsequent euro debt crisis.
But before the pandemic, Germany's industrial base began to weaken as car production slowed and government investment shrank under former Chancellor Angela Merkel.
Industrial weakness accelerated as energy prices rose sharply after Russia's full-scale invasion of Ukraine, automakers moved away from internal combustion engines, and competition from Chinese manufacturers intensified.
Merchandise exports fell by 0.7% in 2025, driven by lower exports of vehicles and chemicals, while imports rose by 3.6% after two years of decline.
Plunged into a manufacturing recession, the center-right government led by Friedrich Merz reversed course toward fiscal austerity early last year, partly in response to the threat of a withdrawal of U.S. military support under President Trump. Berlin pledged to unlock more than $1 trillion in defense and infrastructure projects.
Germany's revival is good news for the eurozone as a whole. Industrial production in the currency zone rose more than expected in November, according to data also released on Thursday by the European Union's statistics agency.
However, with growing geopolitical challenges, including US tariffs and a stronger euro currency, the economy will rely more on Germany's domestic market than its traditional export model.
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