Thousands of German workers began on Tuesday nationwide strikes to press for higher wages, compounding woes of companies worried about staying globally competitive as high costs, weak exports and foreign rivals chip away at their strengths, adding to gloom and uncertainty.
The strikes by unionized workers in the nearly 4-million-strong electrical engineering and metal industries hit companies such as Porsche AG, BMW and Mercedes.
Also this week, car giant Volkswagen could announce shutting three plants on home soil for the first time in its 87-year history, as well as mass layoffs and 10% wage cuts for workers who keep their jobs.
A worsening business outlook in Europe's largest economy has piled pressure on Chancellor Olaf Scholz's rickety coalition government, which could be on the verge of collapse ahead of federal elections next year as policy cracks widen.
Scholz is hosting a meeting with business leaders on Tuesday, including Volkswagen boss Oliver Blume, but his team has already played down expectations of quick results. In a sign of government dysfunction, his finance minister has also announced a separate summit on the same day.
Germany has a long history of so-called "warning strikes" during wage negotiations, but they come at a time of employers' deepening concerns about the future. A leading business group said a survey of companies pointed to Germany experiencing another year of economic contraction in 2024 and no prospect of growth next year.
"We are not just dealing with a cyclical, but a stubborn structural crisis in Germany," said Martin Wansleben, managing director of the German Chamber of Commerce and Industry (DIHK) that conducted the survey.
"We are greatly concerned about how much Germany is becoming an economic burden for Europe and can no longer fulfill its role as an economic workhorse," he said, calling for "profound reforms."
A separate survey by the VDA auto industry association suggested the transformation of the German car industry could lead to 186,000 job losses by 2035, of which roughly a quarter have already occurred.
"It is becoming increasingly clear that there is no room for interpretation: Europe – especially Germany – is losing more and more international competitiveness," the VDA report said.
"The price of electricity for German companies is up to three times higher than for international competitors, e.g. from the USA or China. Germany is a country with the highest taxes and the bureaucratic burdens are constantly increasing."
Workers want their share
The International Monetary Fund (IMF), too, joined those calling for reforms in Germany, suggesting the government ditch a constitutionally enshrined borrowing cap known as the debt brake so it can boost investment.
The debt brake is supported by Finance Minister Christian Lindner, who is at odds with Economy Minister Robert Habeck, who has called for a multi-billion euro fund to stimulate growth.
Offering some respite for the government, a separate survey by the Ifo Institute last week showed business morale had improved more than expected in October.
Tuesday's strikes were orchestrated by the powerful IG Metall union, which also staged a walkout during the night shift at Volkswagen's plant in the city of Osnabrueck, where workers worry the site may be shutting down.
IG Metall is demanding 7% pay rises compared to the 3.6% raise over 27 months offered by employers' associations.
Companies say the demands are unrealistic.
"Wage restraint does not create jobs. Our difficult situation has completely different causes than high wages," said Harald Buck, works council chairman of Porsche AG at the Zuffenhausen plant in Stuttgart.
Some 500 employees walked out during the night shift and then around 4,000 employees went on strike during the early shift to join a demonstration, according to a statement.
"We are not the cause. We have earned our share and are fighting for 7%."
Separately, the next round of talks between Volkswagen and labor representatives is due on Wednesday, though the company's works council chief has threatened to break off the talks.