Germany, Europe’s largest economy once hailed as the continent’s unshakable economic titan, is stumbling through a period of political turmoil and economic stagnation that feels more like a midlife crisis than a bad quarter. Meanwhile, Greece, the former poster child for fiscal irresponsibility, is strutting onto the global stage with newfound confidence. Greece was Europe’s punching bag not long ago, a “sick man” wheezing under the weight of debt, painful recessions and high unemployment. At the time, Germany provided much-needed fiscal support, but not without a good deal of finger-wagging on proper economic policy. Today, Greece is one of the region’s fastest-growing economies and its Germany that may need to change its playbook.
Germany: A Titan Stumbles
Germany’s GDP is steadily ebbing away. After shrinking 0.3 percent in 2023, the economy is forecast to shrink another 0.2 percent in 2024. This would mark its second consecutive year of contraction—a dismal turn for a nation accustomed to steady pre-pandemic growth rates of around 2 percent annually. In 2023, it held the dubious honor of being the only G7 economy to shrink, while even the broader European Union eked out a 0.6 percent growth rate. Of course, the short-term factors are well-documented: energy prices spiked after Russia’s invasion of Ukraine, inflation soared into double digits, and industrial output sagged under the weight of high interest rates. Inflation has since dropped to a manageable 2 percent, but consumer confidence hasn’t rebounded.
But Germany’s woes aren’t just about bad timing—they’re structural. The country boasts the fastest-declining working-age population in the G7, and a bureaucratic quagmire stifles entrepreneurship. Starting a business in Germany takes an eye-watering 120 days, more than double the OECD average. The government’s digital services are equally behind the times, with a paltry 43 percent of forms pre-filled for businesses—well below the EU average of 68 percent. Add to that chronic underinvestment in public infrastructure, lower even than the United States, and you have a recipe for stagnation that no amount of German efficiency can fix.
Greece: The Comeback Kid
On the other side of the Aegean, Greece is basking in its glow-up. Growing at an average of 5.3 percent annually since 2021, the Greek economy is projected to expand by another 2.3 percent in 2024. In 2023, it grew at three times the Eurozone average. For a country that once epitomized economic dysfunction, these numbers are nothing short of miraculous. Unemployment peaked at a soul-crushing 28 percent in 2013 and has fallen to a still-high-but-manageable 10.9 percent. Foreign investment is pouring in, hitting $7.3 billion in 2023. Greek sovereign bonds—downgraded to “junk” status during the debt crisis—were upgraded to investment grade last year—a neon sign to global markets that Greece is back in business.
The secret sauce of Greece’s recovery is painful but effective austerity. Between 2000 and 2017, the country passed 14 austerity packages, slashing pensions and welfare programs while jacking up taxes on just about everyone. The measures were deeply unpopular—protests were practically a national pastime—but they worked. Greece has chipped away at its debt load and rebuilt enough fiscal credibility to dream of a brighter future.
The Ironic Reversal
Still, Germany’s GDP per capita is more than double Greece’s. Germany boasts more Fortune 500 companies than any other European nation, while Greece has exactly none. But the irony is palpable: Germany, the former overachiever, is now grappling with stagnation, while Greece, once a cautionary tale, is writing one of Europe’s most unexpected success stories. A decade ago, no one would have believed this role reversal.