Are We Witnessing a Rewrite of the Global Economic Power Map?

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I remember that I returned from the United States on a short visit to Egypt at the beginning of 2012, and a group of colleagues interested in public affairs asked me to prepare a lecture on the economic situation in Egypt at that time. The central question during the presentation was about the country that I considered to be the leading economic model that I hoped Egypt would follow.

It was a great surprise when I decisively answered that the most successful economy and the best model to emulate at that time was the German model, not the American one. I recalled this incident again as I followed the news of the alarming bankruptcy crisis of German companies; during the years 2020-2026, more than one million and fifty-six thousand companies declared bankruptcy, at a rate of 486 bankruptcies per day, with estimates of 24,650 companies collapsing in 2026.

It is worth noting that for consecutive decades, Germany has been described as the "engine of the European economy" and the "global export champion." Its exceptional model was based on a highly effective golden equation: low-cost energy from Russia, an advanced industrial base, highly skilled labor, a euro lower than its theoretical value, and vast and hungry export markets like China. However, today, the pillars of this equation have collapsed one after another, bringing back the specter of the "sick man of Europe" to loom over Berlin amid massive geopolitical and technological transformations that are redrawing the balance of power.

From waiting for Jackson Hole to building credibility... Egypt's lesson in times of deficit and debt. First: Features of deterioration from illusory rise to structural recession... The German economy may seem prosperous as it rises to the third position globally, surpassing Japan between 2023 and 2024, with an output estimated at about 4.5 to 4.7 trillion dollars. However, this apparent rise directly resulted from the collapse of the Japanese yen and the rapid decline of Tokyo's economy. Historically, after the severe contraction of 2009 by (-5.7%), Berlin experienced a "golden decade" that extended from 2010 to 2019, with an average annual growth rate ranging between 1.5% and 2%, and unemployment close to 5%.

However, the series of successive crises began with the COVID-19 pandemic in 2020, resulting in a contraction of (-3.8%), followed by the Russian-Ukrainian war, leading the economy into a concealed recession with growth rates around (0.1% to 0.2%) during 2024 and 2025. Despite the International Monetary Fund's expectations of a slight acceleration to about 1% in 2026 and 1.5% in 2027, structural problems continue to deeply undermine the economy.

Secondly: The roots of the crisis and the reasons for the structural decline..

The current recession is not a transient crisis but a fundamental structural disease resulting from the energy shock: the German industry lost its major competitive advantage due to the interruption of Russian gas, which feeds heavy industries such as chemicals, mining, and paper, making operational and energy costs in Germany two to three times higher than their American counterparts.

The Chinese transformation: Beijing has shifted from a docile importer to a predatory competitor, displacing Berlin from its markets. In 2025, German imports from China reached 170.6 billion euros, an increase of 8.8%, while Berlin's exports to China fell by 9.7% to 81.3 billion euros.

The automotive industry crisis: This historic sector is facing a real existential crisis with the shift to electric vehicles, as the value has transitioned to batteries, software, and data, where China excels. In 2025, Europe imported more than 1.1 million Chinese cars, capturing 20% of battery electric vehicle sales.

Demographic suffocation: With the retirement of the Baby Boomers generation, the German labor market will lose 7 million workers by 2035, and the country needs 400,000 skilled migrants annually amidst challenges of complex bureaucracy and the rise of the far-right.

Thirdly: The repercussions of the decline on Europe and the US-China race extend the impact to reshape the global geoeconomic map.

The contagious European recession: Germany represents a quarter of the eurozone's GDP, and its industry relies on a complex supply chain extending to countries like Poland, the Czech Republic, Hungary, and Slovakia, meaning that a decline in its production will lead to factory closures and layoffs there, reducing its political capacity to fund the European budget.

Widening the gap in favor of Washington: America is the biggest winner; after their economic rapprochement in 2008 of about $14 trillion each, the American economy surpassed $28 trillion in 2026. Thanks to the availability of cheap energy and the 'Inflation Reduction Act', major German industrial giants have started relocating their significant investments to America.

Consolidating Chinese dominance: The decline of German industry is a strategic victory for China, as it solidifies its dominance over the supply chains of the green economy and electric vehicles, depriving the West of one of its most important industrial strongholds.

Professor of Economics at Ohio State University and Nile University

Quoted from "Al-Masry Al-Youm"