Socialist policies advocate for the public (government) ownership of the means of production, such as major industries, infrastructure, energy and natural resources. This often involves the expansion of public services, including healthcare, education, housing and transportation, which are provided free at the point of use. But this comes at a cost and taxpayers foot the bill.
Socialist policies in Germany, which have been expanding since the late 1950s, has resulted in a welfare state which is now such a heavy burden that Chancellor Friedrich Merz has stated that the current system can no longer be financed.
Let’s not lose touch…Your Government and Big Tech are actively trying to censor the information reported by The Exposé to serve their own needs. Subscribe to our emails now to make sure you receive the latest uncensored news in your inbox…
How Germany Became the World’s Worst-Performing Economy
By Mohamed Moutii, as published by The Daily Economy on 3 November 2025
“The welfare state as we know it today can no longer be financed by our economy.”
With that single sentence, Chancellor Friedrich Merz broke one of Germany’s and Western Europe’s greatest political taboos, daring to question the welfare state’s sacred status at a time when its economic costs can no longer be ignored.
For decades, Germany was celebrated as Europe’s economic success story. Its postwar Soziale Marktwirtschaft – the social market economy – combined free-market dynamism with a limited welfare for those truly in need, powering West Germany’s rise from post-war devastation into one of the world’s most prosperous nations.
Today, however, that model is faltering. Germany faces stagnating growth, declining competitiveness, and the heaviest welfare burden in its history – signs that Europe’s economic engine is seizing up under the weight of its own system.
From Economic Miracle to Welfare Trap
Germany’s rise from post-war ruin was built on Ludwig Erhard’s economic vision – a system that balanced free enterprise with a modest social safety net within a competitive framework. By liberalising prices and trade, stabilising the currency and cutting taxes, Erhard unleashed competition, ended inflation and sparked the so-called Wirtschaftswunder – the “economic miracle” that brought rapid growth, full employment and rising living standards.
Yet Erhard’s vision of a modest safety net gradually gave way to extensive welfare expansion – proving why the state should never be trusted with the power to engineer social balance through taxpayers’ money. Once governments gain legitimacy to intervene in the economy “for fairness,” intervention rarely stops; it only grows.
Starting with the 1957 pension reform and continuing through the 1960s and 1970s, successive governments expanded health insurance, education support, family benefits, housing subsidies and unemployment protection – laying the foundations of one of Europe’s most generous welfare systems. Today, Germany spends 31 per cent of its gross domestic product (“GDP”) – roughly €1.3 trillion – on social programmes, one of the highest levels among Organisation for Economic Co-operation and Development (“OECD”) countries.
The pension system is the clearest example of this excess, consuming 12 per cent of GDP – over twice the share spent in the UK (5.1 per cent). As the population ages and the workforce shrinks, the strain on public finances has become unavoidable. In 1962, six workers supported each retiree; today, barely two do, and that number is expected to continue falling in the years ahead. A system built on such demographics cannot last – it can survive only through higher taxes, mounting debt and growing deficits.
To sustain this model, German employers are paying the price. Under German law, they must cover half of their workers’ insurance contributions, so every welfare expansion directly raises labour costs. Since the pandemic, non-wage labour costs have risen faster than total wages, eating into profits and leaving little room for pay increases. Social security contributions – long stable below 40 per cent of salaries – have now climbed to 42.5 per cent and are projected to reach 50 per cent within a decade. The result is predictable: squeezed employers, fewer hires, smaller raises and declining competitiveness.
How Welfare Expansion Undermined Germany’s Prosperity
The economic toll of Germany’s overgrown welfare state is now unmistakable. Once Europe’s growth engine, Germany has become one of its laggards. Since 2017, GDP has grown by just 1.6 per cent, compared to 9.5 per cent in the rest of the eurozone. By 2023, it had ranked as the world’s worst-performing major economy, shrinking by 0.3 per cent and 0.2 per cent in two consecutive years – the first contraction since the early 2000s – and continued to slide under the new current government, with GDP falling by 0.3 per cent in Q2 2025.
Nowhere is this decline more apparent than in the automotive sector – the backbone of Germany’s post-war prosperity. Once global pioneers, Volkswagen, Mercedes-Benz and BMW now lag behind leaner Chinese and American rivals. Soaring labour costs (€62 per hour, compared to €29 in Spain and €20 in Portugal), combined with heavy regulation and rigid labour rules, have eroded competitiveness. A slow transition from combustion engines to electric vehicles (“EVs”) has enabled BYD and Tesla, with faster innovation cycles, advanced technology and competitive pricing, to seize the lead in the industry.
The energy crisis has deepened their woes: the sudden loss of cheap Russian gas, combined with the government’s arguably short-sighted decision to phase out nuclear power, has left German industries paying up to five times more for electricity than their American or Chinese competitors. Weighed down by high costs and slow adaptation to new technologies, automakers have been forced into painful cost-cutting measures, from plant closures to mass layoffs. Since 2019, the industry has already lost 46,000 jobs, and another 186,000 could follow by 2035.
Meanwhile, welfare and debt continue to grow. Germany’s famed fiscal discipline – once anchored in its constitutional “debt brake” – has all but collapsed. Repeatedly suspended since the pandemic, the rule has been bypassed through off-budget funds and “emergency” spending to finance welfare spending and energy subsidies. Now, Berlin plans to borrow €174 billion in 2026, three times the level of two years ago and the second-highest in postwar history – threatening not only its own stability but also the credibility of Europe’s fiscal rules.
At the root of Germany’s malaise lies a dangerous illusion: that generous welfare can co-exist with high productivity. When redistribution outpaces wealth creation, prosperity tends to fade. Left unchecked, welfare states expand faster than the economies that fund them, eroding productivity and burdening future generations. Yet reform remains untouchable – ageing voters resist cuts, politicians fear backlash, and the young bear the cost of a system that may not survive. Europe is watching closely. If Germany – the continent’s anchor of fiscal discipline and industrial strength – exposes the limits of its oversized welfare state, the European faith in expansive welfare systems could finally collapse. The first step is to end the denial; the next is to rediscover the realism that once fuelled the Wirtschaftswunder. Germany once taught Europe how to rebuild prosperity from ruins. Now it must teach Europe how to confront the truth about welfare states – before they collapse under their own weight.
About the Author
Mohamed Moutii is a Research Associate with the Arab Centre for Research, a Research Fellow with the Institute for Research in Economic and Fiscal Issues (IREFeurope), and a member of the Ibn Khaldun Initiative for Free Thoughts. He has translated numerous works from English to Arabic, contributing to the spread of free-market literature in the Arabic-speaking world, while also contributing original articles, analyses and reports with various Western and Arab think tanks.
Featured image: German Chancellor Friedrich Merz. Source: Ghana Business News
The Expose Urgently Needs Your Help…
Can you please help to keep the lights on with The Expose’s honest, reliable, powerful and truthful journalism?
Your Government & Big Tech organisations
try to silence & shut down The Expose.
So we need your help to ensure
we can continue to bring you the
facts the mainstream refuses to.
The government does not fund us
to publish lies and propaganda on their
behalf like the Mainstream Media.
Instead, we rely solely on your support. So
please support us in our efforts to bring
you honest, reliable, investigative journalism
today. It’s secure, quick and easy.
Please choose your preferred method below to show your support.
Categories: Breaking News, World News
Hi Rhoda,
Interesting article about Germany.
To be honest, you could just change the title to UK.
Exactly the same has happened to our country.
This has all been planned 100 years ago.
The main aim is to get rid of German Christians and Christians in the UK.
Might as well add, USA, Australia, Canada, and New Zealand.
Now who would hate Christians, let me think ?
No, I am not allowed to say, best make your own mind up.