FRANKFURT: Business leaders across the German economy say they are expecting a fall in employment levels in their sectors in 2025, according to a think tank study published Friday. The latest gloomy forecast for Europe’s economic motor comes two months before an early general election in which Germany’s economic malaise is sure to play a key role.

According to the IW institute, the number of employers’ federations expecting a drop in employment levels in 2025 has risen to 25, out of the 49 surveyed in late November and early December, up from 23 in 2024 and 16 in 2023. They include key sectors for the German economy such as chemicals and automobiles, as well as machine production, construction and metalworking.

There are seven sectors which say they are expecting a rise in employment, including pharmaceuticals, aeronautics, energy and recycling. Many industries are being squeezed by high costs for energy, materials and labor and by the country’s knotty bureaucracy, with firms in Germany’s flagship car industry already announcing cost-cutting plans in recent months.

Steelmaker Georgsmarienhuette has been trying to soften the blow by reducing employees’ hours but has warned that a wave of redundancies cannot be ruled out. “I say it clearly: if energy is this expensive and industry is getting ever weaker, we just won’t be able to do it any more in Germany,” co-owner Anne-Marie Grossmann told the Handelsblatt daily on Friday.

“We are standing just before the abyss,” she said. In previous years, IW’s studies found businesses inclined to keep staff even in the face of an expected drop in production, citing a lack of available labor. “This retention effect has weakened strongly in 2024,” the IW says.

The federations surveyed by IW said they consider the current general economic outlook to be worse than it was a year ago. Germany’s central bank has forecast GDP will expand just 0.2 percent in 2025, after a 0.2 percent contraction in 2024. — AFP