Submitted by Thomas Kolbe

Deutsche Bank sees the German economy on the verge of a turnaround. The debt-financed stimulus blaze is supposed to deliver it. Meanwhile, the collapse of the real economy is accelerating.

Storm clouds are gathering over Germany’s economy. 2025 will bring a new insolvency record – that much can already be predicted with certainty. 

More than 22,000 companies are expected to file for bankruptcy, with at least 160,000 jobs lost according to the Institute for Labor Market Research (IAB). Given the accelerated wave of layoffs in recent months, the number could easily surpass 250,000.

Just days ago, the machinery sector – one of the most reliable leading indicators of the industrial heart of Germany – reported an expected 5% decline this year. Industry and construction are now producing 15–20% below their 2018 peak output. An economic collapse – no more, no less.

Deutsche Bank’s Miracle Forecast

At the very moment Baden-Württemberg reported a 0.8% contraction in the first half of 2025, Deutsche Bank forecasts 0.5% growth for the full year – and even a miraculous 2% boom in 2026. The bank’s economists actually speak of a “turning point.” Rising real incomes and, of course, the fat stimulus impulse from Chancellor Merz’s debt package are supposed to deliver the long-awaited breakout for Germany’s anemic economy. 

But these credit-fueled packages are well-known: they create short-term statistical flares, siphon resources from the free market, and make life harder for the real economy – the private sector that actually produces goods and services people demand. Politicians, meanwhile, can declare “jobs created” by including bureaucracy costs in GDP.

For politicians this is a badge of honor, whose planning horizon rarely extends beyond the next election. Serious economists know this statistical fraud and its disastrous consequences – which is why they are excluded from the public debate.

High on Credit

Deutsche Bank’s optimism may be a product of the gigantic debt packages unleashed by Berlin, bolstered by the ever-expanding EU subsidy machine in Brussels. Hundreds of billions in guarantees and direct grants flow into the green “transformation” – and banks are at the table. Deutsche Bank, which reported €5.3 billion in pretax profit in 2024, has long been a major player in the “green business.”

Last year alone it brokered €93 billion in “sustainable finance and investments” – up 50% year-on-year. That shows two things: how deeply the big banks are now embedded in the state-guaranteed subsidy and regulatory architecture, and how predictable profits are in this sector – with the taxpayer ultimately carrying the risk.

Thus, Deutsche Bank’s “forecasts” read less like neutral analysis and more like an extension of the political narrative: this is not organic growth, but a debt-financed flash in the pan, distributed through banks. It fills the pockets of select interest groups – but not the shelves of the real economy.

Subsidy Rain, EU-Style

And those interest groups can expect a true deluge. Berlin plans to flood channels with up to €500 billion through its “Infrastructure and Climate Neutrality” special fund. In Brussels, Commission President von der Leyen unveiled her own seven-year plan – €2 trillion, with more than a third earmarked for “climate, energy and resilience.”

Plenty of grease for the EU’s redistribution machine. Failures in hydrogen projects, green steel, and other subsidy ruins will be whitewashed with fresh credit – if necessary, straight from the ECB’s printing press. This is EU economics: industries kept artificially alive, financed on credit, detached from real demand.

War Economy Keeps the Pump Running

The EU’s new focus on building a joint “war economy” fits the same mold. In the illusion that prosperity can be printed, even the specter of Putin’s invasion is used as a pretext to crank the debt pump harder. Germany’s 2025 defense budget will hit €86.5 billion, €15 billion more than last year. For 2026, €108.2 billion is already penciled in, while the EU’s 2028–2034 budget raises defense and space spending to €131 billion.

It’s all financial capital guaranteeing excess returns for insiders, while the real economy is drained. Resources are tied up in subsidy networks, skilled labor is diverted, and illusions of security are bought on credit – with state guarantees, unattainable in a free market.

Business As Usual

Banks have no ethical or accounting scruples about funneling funds where the state directs – it’s business, stupid. The fat cut from these funds guarantees them returns they could never achieve in open competition. For the economy at large, it is poison: scarce resources are tied up, skilled workers siphoned away, productivity stagnates, and the industrial core has collapsed by up to 20% since 2019.

We are witnessing an unprecedented level of state intervention in peacetime, unmatched since WWII. Given the scale of the subsidy machine, the silence of the economic elites – call them cadres – is no surprise. They know: the real problems of the German economy will not be addressed, ensuring the flow of subsidies continues.

The self-inflicted energy crisis, the failed green transition, the trail of destruction and industrial ruins – Germany is on the path to becoming Europe’s Rust Belt. Even a return to reason and market economy would not heal this blow for a very long time.

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About the author: Thomas Kolbe, a German graduate economist, 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.