Gottfried Leibniz argued that each individual substance reflects the whole world. The great philosopher was proven wrong by modern science, but he may have been right about the economics of his native country: the current state of Germany appears to mirror that of Europe as a whole.
This is not just because, as the EU’s largest and most industrialized nation, Germany is particularly vulnerable to the bloc’s current ills, including high energy prices, all-inclusive american fareAND tough competition from Chinese manufacturers.
This is also because, as much as the EU’s share of global output has fallen in recent years, of Germany the percentage of of the EU Total GDP has fallen. Europe matters less in the world – but Germany also matters less within Europe.
According to International Monetary Fundthe current share of the EU’s 27 member states in global output has halved since 1980, falling from 27.43% to just 13.99% in 2025. Germany’s decline has been particularly rapid, falling from 6.98% to 2.94% over the same period – meaning Berlin’s share of more than a quarter of output has fallen from just one fourth in the EU during the same period.
The IMF also expects both of these trends – that is, the decline of the EU relative to the rest of the world and that of Germany within the EU – to continue over the coming years.
To some extent, this is inevitable; maybe even right.
After all, the 450 million citizens of the EU, ACCOUNT for only 5.5% of the world’s population. Germany’s 84 million citizens make up less than a fifth of this total. In economic terms, Germany and the EU are still punching well above their demographic weight.
What is not inevitable, however, is how rapid Germany’s decline has been. While India, China, and even some EU countries have expanded at a breakneck pace in recent years, Germany’s economy has effectively stagnated since 2019. It’s much easier for others to catch up if you stand still.
More importantly, Germany’s weakening economic power also appears to be weakening it politically.
In the year 2024, Berlin failed to prevent EU from imposing tariffs on Chinese electric vehicles. Its attempt last year to tap 210 billion euros worth of frozen Russian assets was blocked by small Belgium. Hers the last proposition to speed up Ukraine’s accession to the EU was angrily rejected by Kiev. And hers fierce opposition The loosening of EU fiscal rules was carefully ignored by Brussels earlier this month – to appease (oh god no!) consumer Ital.
But is this causation or correlation? Might not Germany’s waning political importance be due to other factors—such as the inexperience or even incompetence of Friedrich Merz, the country’s chancellor—rather than its diminished economic weight?
Many doubt it could be.
“Economic factors may contribute, but I think the whole reconfiguration of the European system is more due to the lack of political leadership and political initiative in Germany and its unwillingness to take risks,” says Linn Selle, head of the European Center at the German Council on Foreign Relations.
Or like Leibniz can have said: Germany may be suffering from the pre-made economy AND political (dis)harmony.
Geopolitical entropy
But shouldn’t that be celebrated?
After all, many smaller EU countries have long complained that power has been too centralized in Germany and the bloc’s other traditional agenda-setter, France.
Moreover, globally, many developing countries – especially those in the 11 countries ‘BRICS‘ group, which includes China, India and Brazil – have warmly welcomed “multipolarization” of the world, which they argue creates a “less unequal” global geopolitical order.
While there are certainly reasons to welcome this distribution of power—developing countries certainly deserve a greater say on the world stage—it also involves significant risks.
One is her others the centers of power within the EU do not seem to be emerging.
This fact is somewhat surprising. After all, one might have thought so Spain – whose economy has far outpaced Germany’s in recent years – would have become an alternative EU powerhouse by now. of Poland rapid military expansion and status as Europe’s eastern bulwark against Russia may well have seen the same.
But they haven’t.
“I would say that power is currently moving away from Paris and Berlin,” says Selle. “But I’m not moving anywhere in particular.”
This point was emphatically demonstrated by this week’s EU summit in Brussels, where the leaders, in various combinations and coalitions, disagreed on almost everything. Regardless of the issue – enlargement, migration, Russia or the EU long term budget – No one in Europe seems capable of taking the reins. And, inevitably, nothing of substance was agreed upon.
“You can have different coalitions on different issues,” says Selle. “(But) there has to be a driver, because otherwise nothing will move.”
Fragment order
Unfortunately, we are seeing a similar dynamic globally.
Fabian Zuleeg, chief executive of the European Policy Centre, argues that the current “distribution” of power means the world is better understood as “fragmentation”, rather than “multipolarisation”.
Multipolarization “means that power is shifting,” says Zuleeg. “Whereas, in fact, what I think we’re seeing is that it’s just getting harder to have joint decisions (and) actions… I think all the actors have lost the collective power to do things together.”
But not the rise of China argued without result from EU leaders this week, do you oppose this? Certainly, Beijing’s growing manufacturing capability, dominance over critical supply chains, and increased geopolitical assertiveness indicate that it IS becoming – indeed, that it it’s already done – an alternative energy center?
Zuleeg, however, argues that Beijing’s rise at best shows that the world is becoming bipolar, not multipolar.
“If we really had a multipolar world … we would see a shift away from China as well,” he says. “And I don’t see that happening.”
Unfortunately, the structural forces underpinning this fragmentation – the rise of economic nationalism, the rise of populism and the rise of great power competition – mean that it may only moderate, rather than reverse.
However, even bucking this trend would require leaders who have strong domestic support or, more importantly, political courage – something Europe’s current crop of prime ministers and presidents lacks.
“I think we don’t have the kind of leaders who can convince the reluctant population,” Zuleeg says, adding that, ironically, the political paralysis of the leaders only strengthens the power of the anti-establishment parties.
“We don’t do anything because we’re too afraid… and then it’s easy for the populists to say, ‘You’re not delivering,'” he says.
Such pessimism, of course, would not deter Leibniz – a tireless optimist who believed that we live in the best possible world.
Given the current state of Europe, one would almost like to be right.
Economy news roundup
Brussels urges EU banking sector to ‘avoid zero risk tolerance’. A draft of the European Commission’s long-awaited report on banking competition, seen by Euractivstates that revitalizing Europe’s financial sector will require a “cultural shift” away from the “zero risk tolerance” of banking supervisors and regulators. “Improving the competitiveness of the EU single market for banks could boost the competitiveness of the EU economy,” says the report, which is expected to be officially published in July. “However, this also requires a cultural change from all stakeholders in the banking market.” Read more.
Businesses sound the alarm about the EU economy. BusinessEurope, a Brussels-based lobby group, now forecasts the bloc will expand by just 1.2% this year, after warning that the bloc’s economic outlook “continues to be weighed down” by high energy prices, low levels of investment and geopolitical uncertainty. The group also urged EU leaders to speed up efforts to deepen the bloc’s single market, deepen trade ties with third countries and “stabilize relations with the US and find a new balance in relations with China”. Read more.
EU-China relations reach boiling point. European leaders discussed the EU’s increasingly strained relationship with China when they gathered in Brussels on Thursday, in a meeting one analyst described as “one of the most important moments in Europe’s China debate in years”. The meeting, however, ended up focusing mostly on the EU’s relations with Russia, as António Costa, the president of the European Council, tasked his top aide with contacting the Kremlin informally. Read more here AND here.
