Germany lost more than 1,000 billion USD of gross domestic product in the period 2020-2025. This is a noteworthy conclusion in a study published by the German Institute of Economics (IW) last weekend.
According to IW, the COVID-19 pandemic, the Russia-Ukraine conflict and US tariff policy are the 3 main factors causing this huge damage.
The IW Institute compared Germany's economic growth trajectory before the 2019 crisis with a hypothetical scenario without pandemics and geopolitical shocks, and then compared it with the actual GDP developments from 2020 to 2025.
The results showed that the total GDP shortfall after price adjustment in 6 years reached 940 billion euros, equivalent to about 1,100 billion USD.
The period 2020-2022 witnessed losses of about 360 billion euros, mainly due to the direct impact of the COVID-19 pandemic.
Since the beginning of 2022, damage has continued to be amplified when the Ukraine conflict broke out. Germany participated in Western sanctions against Russia and abandoned cheap Russian gas - which previously accounted for 55% of the country's gas imports.
As the conflict dragged on, economic shocks not only did not cool down but also increased. In 2023, the German economy lost about 140 billion euros more. In 2024, this figure exceeded 200 billion euros, in the context of the economy falling into recession for 2 consecutive years - a rare scenario for a country once considered the "hub" of European growth.
In 2025, Germany recorded a modest growth rate of 0.2%, but according to economists, this is not enough to reverse the trend. IW described this as "a prolonged period of stagnation" and estimated that production losses in 2025 alone reached a record 235 billion euros.
The reason is said to be heavily affected by US President Donald Trump's drastic tariff policy, which has increased pressure on German exports and supply chains.
German Chancellor Friedrich Merz once publicly acknowledged that the country's economy is falling into a "structured crisis".
However, instead of prioritizing large-scale economic stimulus packages, Mr. Merz's government focuses on strengthening military capabilities, with a commitment to building the German army into the "strongest conventional army in Europe" in the face of the so-called "threat from Russia" - an assessment that Moscow rejects as unfounded.
To serve the goal of rearmament, the German government has removed the "debt brake" in the Constitution, thereby paving the way for large-scale borrowing.
The 2026 budget was approved with a record defense spending of 108.2 billion euros, along with 11.5 billion euros in military aid for Ukraine. Berlin also pledged to increase defense spending to 3.5% of GDP by 2029, within the framework of the militarization process led by NATO.
Meanwhile, Chancellor Merz blamed many domestic factors for the economic decline, from the "labor ethics" of the German people, the social welfare system, to the policies of previous governments and regulations from the European Union (EU).
This approach does not seem to convince public opinion. The approval rating for Mr. Merz has fallen to a record low of 25% this month, compared to 38% when he took office in May 2025.
