- ‘The crisis and the geopolitical shocks make it even more clear that Germany has to do its homework at home,’ says David Deissner, head of a foundation representing more than 500 of Germany’s largest family-owned companies
BERLIN
Germany’s fragile economic recovery is facing a new test as the war in the Middle East drives up energy prices and disrupts global supply chains, raising concerns among business leaders about the outlook for Europe’s largest economy.
For German industry – already struggling with the fallout from the Ukraine war and years of high energy costs – the US-Israel war with Iran risks deepening existing pressures rather than creating a new crisis.
“It’s now really a very difficult period for us. Gas prices are very, very high. Oil prices are also rising. We have some of the highest energy prices here in Europe,” said David Deissner, Stiftung Familienunternehmen und Politik, which represents more than 600 of Germany’s medium-sized and large family-owned businesses.
He warned that rising costs are eroding competitiveness across key sectors of the economy.
Germany has avoided an immediate energy shortage thanks to diversified supplies, including increased deliveries from Norway and imports of US liquefied natural gas (LNG), as well as the use of strategic reserves.
But the impact of higher global prices is already being felt.
“Of course, if prices spike globally in this highly interconnected energy market, that naturally affects German industry and consumer prices. We see the effect now at petrol stations for private consumers, but also for medium-sized businesses,” Deissner told Anadolu.
Energy-intensive industries such as glass manufacturing, textiles and pharmaceuticals are among the most exposed, he added.
Economic projections suggest the costs could be significant. According to the German Economic Institute (IW), if oil prices remain at around $100 per barrel, Germany could lose 0.3% of its gross domestic product in 2026 and 0.6% in 2027 – amounting to roughly €40 billion ($46 billion) in economic losses over two years.
Supply chains under strain
Beyond energy, the war is also disrupting global trade routes.
Shipping through key waterways has been affected, forcing vessels to take longer routes around Africa and pushing up transport costs. The Strait of Hormuz, a chokepoint for much of the world’s oil and gas, also serves as a critical artery for other essential materials.
Deissner highlighted particular risks for supplies of aluminum, sulfur and helium – a resource essential for medical technology, semiconductor production and other advanced industries.
“Europe gets roughly 40% of its helium from Qatar, which is crucial for production here in Europe, particularly in Germany,” he said.
Export-oriented German companies are already feeling the impact as disruptions to global logistics networks drive up costs and delay shipments.
“We already see now that the prices for shipping, for transport logistics are spiking,” Deissner said. “Ships have to be rerouted around Africa, and all these things are, of course, worrisome and drive up prices.”
The effects could spread further through global manufacturing networks, particularly via China.
If higher oil prices slow Chinese production, German industry would feel the consequences quickly, he warned.
“Because we do import quite a lot of high-tech components, intermediate products from China in order to make sure that our production here in Germany is running. So, this is something that we see with great concern,” he said.
At the same time, uncertainty is weighing on long-term business decisions.
“We don’t know how this will develop,” Deissner said, referring to investments in the Middle East and Gulf region that have largely been put on hold.
‘Germany has to do its homework’
While the German government has introduced measures to support businesses, Deissner said these have provided only limited relief.
He argued that deeper structural reforms are needed, particularly as geopolitical shocks continue to expose weaknesses in the economy.
Small and medium-sized enterprises, which employ millions and form the backbone of Germany’s economy, are especially vulnerable to rising costs and tighter financial conditions.
“The crisis we see at the moment and the geopolitical shocks make it even more clear that Germany has to do its homework at home,” he said.
Germany must also cut non-wage labor costs, reduce bureaucracy, and provide swift tax relief for companies, Deissner said, describing these as the biggest challenges facing German businesses.
“We have to become more dynamic, we have to do our domestic homework to stay competitive,” he said. “It has become more important in these difficult times.”
Despite the mounting challenges, Deissner expressed hope that the conflict can be resolved quickly before the economic damage deepens.
“We hope this crisis will end very soon. We need a fast solution to prevent further harm. The costs for the economy, and for the rest of the world, are enormous due to the interdependence of our global markets.”
