In 2024, the EU’s gross domestic product, which is the sum of the GDPs of its 27 member states, reached $19 trillion. The EU’s GDP makes it the world’s second-largest economy and it is the USA’s largest international trading partner. China’s GDP was approximately $18 trillion, making it the world’s third-largest economy, while the USA held the largest GDP at $29 trillion in 2024.

Germany is the EU’s largest driver of economic growth. Its GDP in 2023 was $4.6 trillion, Germany's is the largest of the EU's 27 member states.

However, Germany’s economy has contracted in two out of the past three years: -0.3% in 2023 and -0.2% in 2024, with the Bundesverband der Deutschen Industrie (BDI), the Federation of German Industries anticipating a contraction of -0.1% in 2025. According to statistics from Destatis, German energy prices have significantly risen since 2020, with natural gas prices surging by 103% and electricity prices increasing by 43%. This outpaces the cumulative rise of food prices, which is 37%. This creates persistent challenges for the German consumers alongside excessive debt and stagnant wages.

Germany’s Election Results

On February 23rd as a the result of Germany’s Bundestag elections, Friedrich Merz, the head of the CDU/CSU party, won 208 seats (26% of the total 630). Merz’s victory necessitated that his pro-war and pro-fiscal stimulus party form a coalition “partnership” with other parties to gather enough votes to pass legislation and effectively govern Germany.

AfD, Germany’s equivalent of a “common sense” anti-war MAGA party, received record of support, with 120 seats (21%) in the vote. AfD is now Germany’s second-largest political party, despite legislators from all other parties’ attempts to ban AfD, calling them far-right. AfD’s economic policies are not far-right; their policies are right so far for the German voters!!

           Germany’s 23 February election results

Economic Risks Under Merz

Last week, Friedrich Mertz, the leader of Germany’s CDU/CSU party, pieced together a coalition in the Bundestag, with the support of SPD and the Greens, which was strong enough to pass legislation amending Germany’s constitution. Mertz eliminated the 2009 Constitutional “debt brake,” allowing his new government to massively increase Germany’s debt to fund military and infrastructure spending.

According to different sources, Mertz plans to spend as much as €1.4 trillion on military spending and other economic stimulus. It’s a safe bet that Mertz’s removal of the debt brake will result in debt levels over the next five to seven years that will negatively impact the German economy, potentially leading to Germany’s exit from the European Union (EU) and culminating in Weimar Republic-style inflation.

Broader Economic Implications for the EU

Many G7 countries have suffered decades of coordinated central bank policies, aka money printing, massive government spending, open borders, excessive debt creation, rising inflation, implementation of burdensome environmental regulations, and stagnating wages, the sum of which have all contributed to GDP contractions and led to the brink of an economic recession.

The primary driver of every economy is consumer spending. Inflation, manifesting itself with surging energy and food prices, combined with stagnant wages, has restricted consumers’ ability to spend money, stifling economic growth.

International trade differences among nations are important indicators that compare the monetary value of each country's final goods and services, or GDP. When a country’s GDP increases, its population has plenty of money to spend, but when the economy contracts, voters face hardships and difficult financial times. This is commonly called an economic recession or more severe, a depression.

Trade Imbalances and the USA’s $125 Billion Deficit

GDP data influences the “balance of trade” between countries. Balance of trade figures determines if a country has a trade “surplus,” meaning the value of its exports exceeds that of its imports. Alternatively, when a country runs a “deficit,” it indicates that its total purchases surpass its sales. In 2024, the US Bureau of Economic Analysis (BEA) reported a trade deficit of $125 billion with the EU.

Long-Term Consequences for Germany and Beyond

If CDU/CSU’s Mertz and his weak coalition with SPD and the Greens manage to magic up over a trillion Euros and prolong the Ukraine war, it will devastate future generations, burdening them with unmanageable debt, soaring inflation, record corporate bankruptcies, and Germany’s worst economic crisis in history.

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Mitch Feierstein knows the financial industry inside out. For the past four decades he consistently created opportunity and value where others have failed to look. He is a successful investor and CEO of the Glacier Environmental Fund Limited. Prior to Glacier, he was Senior Portfolio Manager of the Cheyne Carbon Fund, part of one of the largest and best-respected hedge-fund groups operating in Europe. He has acted as a consultant for a number of governments in their disaster and contingency planning. He is the author of Planet Ponzi, the only insider's account of the credit crisis detailing; How we got into the mess, what happens next, and what you need to do to protect yourself. He divides his time between London and New York.