Germany’s economy is spiraling downward at an accelerating pace. Bankruptcies are exploding, and unemployment has quietly crossed the 3 million mark. The government's response? The same tired playbook: more debt, more spending, more control.

In the name of “stabilization,” Berlin prepares its next mega-stimulus — hundreds of billions in borrowed money aimed at propping up a collapsing system. The central planners are sharpening their pencils. From wage subsidies to “green” infrastructure, from defense budgets to welfare programs — the debt orgy is ready to begin.

But this is no recovery. It’s a systemic refusal to let economic reality bite. Political elites are clinging to a dying model built on suppression of pain and the illusion of fiat-fueled growth.

The Real Jobless Numbers

Officially, unemployment just hit 3 million — the first time in over a decade. But real figures are much worse. Add in part-timers, early retirees, and pseudo-jobs funded by “activation” schemes, and the actual jobless count is far higher. May’s surprise increase of 34,000 unemployed came despite seasonal trends. Over the last five years, half a million jobs vanished. Social welfare funds are hemorrhaging, yet reforms remain taboo.

What’s fueling this collapse? A wave of bankruptcies — 5,200 in Q1 alone, a 14.8% YoY increase. Around 50,000 jobs were vaporized as corporate zombies — artificially kept alive by zero-interest rates and subsidies — finally crumbled under even modest rate hikes. Germany’s real economy is being euthanized by the consequences of its own stimulus addiction.

State Capitalism Crowds Out Innovation

Public sector bloat has diverted capital from innovation into bureaucracy. Since 2017, productivity has declined. More people now generate less GDP per capita. It’s a structural rot fueled by political denial and an over-leveraged welfare state.

The illusion of stability — kept alive by fiat credit, media messaging, and social transfer payments — masks the underlying fragility. Like drug addicts needing ever-stronger doses, Western democracies suppress economic pain rather than allow correction. But the credit mechanism is breaking down. Private banks are pulling back. The state is left alone to print, spend, and pretend.

Tocqueville’s Nightmare: Voters Bought with Their Own Money

Germany's political class has mastered the art of manufacturing artificial demand — inventing ever more “vulnerable groups” in need of government programs. All parties, from center-left to nominally conservative, now compete only in how to redistribute wealth — not how to create it.

This is French philosopher Alexis de Tocqueville’s nightmare: a democracy that bribes voters with their own money. When real crises hit, this dynamic accelerates into parody. Forgotten are past debt crises. Ignored are bond market warnings. Instead, we get “visionary investments” — meaning climate subsidies and military contracts — all wrapped in moralistic packaging.

As the real economy breaks down, Germany moves deeper into debt — not out of necessity, but out of habit. Politicians tie every spending spree to climate goals or global leadership ambitions. Failed projects like Northvolt and Lilium are blamed on “market inertia,” not central planning hubris.

And so, the pain-prevention cycle rolls on. Politicians promise recovery while killing the very risk-taking that growth depends on. The German economy, like its stock market, is heading toward the final act: a crack-up without a boom.

_______________

Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.