Mass layoffs and welfare cuts: Germany at the center of the European crisis

Peter Schwarz

A social counterrevolution is developing in Europe, the likes of which has not been seen since the 1930s. Hundreds of thousands of well-paid jobs are being destroyed, alongside the dismantling of pensions, healthcare and social spending, upon which the livelihoods of millions of people depend. At the same time, enormous sums are being poured into armaments and war and into further enriching the already wealthy.

In March 2024, 10,000 employees demonstrated against layoffs in front of the Bosch headquarters in Gerlingen near Stuttgart

In its latest report on the economic situation in Europe, the International Monetary Fund calls for “deep cuts in the European model and the social contract” in order to plug the budget holes created by increased military spending and handouts to the banks during the financial and coronavirus crises. The report is aptly titled: “How Can Europe Pay for Things It Cannot Afford?”

An unprecedented jobs massacre is taking place in industry and, increasingly, in administration. Advances in electric mobility, information technology and artificial intelligence, which could greatly facilitate social life and solve social problems such as poverty and the climate crisis, are being used to increase profits and wage a bitter struggle for markets, raw materials and the redivision of the world—all at the expense of the working class.

This is not an economic downturn that will eventually be followed by an upswing but rather a structural crisis. The entire capitalist system is bankrupt. All the symptoms that led to fascism and two world wars in the last century are back: unrestrained speculation, the bitter struggle for raw materials and markets, trade wars, wars and dictatorship.

Germany at the center of the crisis

Germany, which accounts for almost a quarter of the economic output of all 27 EU members with a Gross Domestic Product of €4.3 trillion, is at the center of the crisis. What was long considered the strength of the German economy—its large share of exports and high foreign trade surpluses—is now proving to be its Achilles’ heel. Trump’s punitive tariffs and China’s rise as a high-tech producer are hitting it particularly hard.

Exports to the US slumped by 7.4 percent in the first nine months of this year. Trump has imposed tariffs of 15 percent on most imports from Europe, plus an additional 50 percent on metal components. As a result, many German cars and machines can no longer be sold in the US.

The country’s trade deficit with China has reached a record €87 billion this year. Between 2010 and 2022, German exports to China doubled, reaching a peak of €107 billion. Since then, they have fallen back to €80 billion, while imports from China continue to grow. For the first time, China is achieving a trade surplus this year not only in consumer goods but also in capital goods.

The market share of the three major German car manufacturers—Volkswagen, BMW and Mercedes—has fallen from 22.6 to 16.7 percent in China and from 21.7 to 19.3 percent worldwide over the past two years. The decline is even greater for electric cars.

Since 2019, the German economy has grown by only 0.3 percent. During the same period, the Chinese economy grew by 27 percent and the US economy by 12 percent, although growth in the US is largely based on speculative gains. The German Council of Economic Experts is predicting growth of just 0.9 percent for the coming year.

Corporations are passing on the full brunt of this crisis to the working class. In the industrial sector alone, 160,000 jobs have been destroyed in the last 12 months, or 3,000 per week. The three largest industries—mechanical engineering, auto and chemicals—which together employ more than 2.5 million people, are particularly affected.

According to a study by the German Economic Institute (IW), 55,000 jobs have been lost in the auto and supplier industry, which employs a total of 760,000 people, since 2019, with another 90,000 to follow by 2030. While large corporations, such as VW, Bosch and ZF, are cutting tens of thousands of jobs or gradually withdrawing from Europe, as Ford and Stellantis (Opel) are already doing, smaller suppliers are going bankrupt in droves.

Moritz Schularick, president of the Kiel Institute for the World Economy, doubts whether the three major German car manufacturers will even still exist in their current form at the end of the decade. This would affect over 600,000 jobs and hundreds of thousands more that depend directly or indirectly on them.

The situation is similar in mechanical engineering, which employs around 1 million people, many of whom manufacture highly specialized products for the global market. Here, production fell by 7 percent in 2024 and 5 percent in 2025. In the chemical industry, which employs 326,000 people, sales slumped by 10 percent in 2022 and 11 percent in 2023. The plants are now only operating at 71 percent capacity, with 82 percent considered profitable. The steel industry is facing complete liquidation, with 55,000 of the remaining 70,000 jobs under acute threat.

The only industry still growing in Germany is the arms industry. Over the next five years, Germany will invest a trillion euros into the business of death. Industry leader Rheinmetall increased its sales by 38 percent last year and by 30 percent this year. Its share price has risen twelvefold since 2022 and threefold since the beginning of this year.

While the livelihoods of workers and their families are being destroyed and entire regions are being deprived of their economic basis, the rich cannot get enough and continue to enrich themselves despite the crisis. There are now 3,900 people in Germany with assets in the hundreds of millions, an increase of 500 persons compared with a year ago.

Despite a slump in profits, job cuts and an urgent need for investment, Mercedes is buying back 2 billion euros worth of its own shares, thereby driving up its share price. While the company is cutting up to 20,000 jobs, the members of the board of directors are reaping double rewards: through the increase in their million-euro salaries linked to the share price and as owners of large blocks of shares. CEO Källenius alone owns around 50,000 Mercedes shares.

War at home and abroad

Germany’s ruling class is responding to the economic crisis with the same methods it used in the 1930s: by declaring war on the working class and returning to its criminal militarist traditions.

Ten years ago, the government had already announced that Germany sought to play a military role in the world in line with its weight as the third-largest economy. The Russian invasion of Ukraine, provoked by NATO, then served as a welcome pretext to put these plans into action.

The previous government led by Olaf Scholz (SPD) decided on a special fund of €100 billion for the rearmament of the Bundeswehr. The current government led by the Christian Democrat Friedrich Merz is providing 10 times that amount in loans and intends to build the strongest conventional army in Europe. By 2029 at the latest, this army should be capable of waging war against Russia. In that year, German military spending will have risen to €168 billion, about six times as much as at the beginning of the century.

Germany has spent €76 billion to date solely to support the war in Ukraine, making it the largest donor after the US. Its aim is not “defense” and “freedom” but rather economic dominance in Eastern Europe and Ukraine and the subjugation of Russia with its vast mineral resources, i.e., the same war aims Germany pursued in the First and Second World Wars.

The government is passing on the costs of this massive armament and war offensive to the working class, pensioners and the needy. This summer, Chancellor Merz announced that the welfare state in its current form was no longer financially viable. Economics Minister Katherina Reiche warns that pensions “will probably not be enough to live on later, despite high contributions.” She is calling for longer working lives and an “Agenda 2030”—a “comprehensive program based on the principle of more competition, and less government.”

Even maintaining the current pension level, which after 45 years of average contributions stands at 48 percent of an average salary—and thus well below the poverty line—is rejected by sections of the government.

The Financial Times cites the “dangerous illusion that generous social benefits can coexist with high productivity” as the cause of Germany’s malaise and urges it to set an example: Germany, “the anchor of budgetary discipline and industrial strength on the continent,” must “teach Europe how to face the truth about welfare states—before they collapse under their own weight.”

Socialist perspective

The onslaught against jobs, pensions and social gains won by the working class after World War II is in full swing worldwide and is meeting with increasing resistance.

In France, President Macron is sticking to his pension reform, even though mass protests have forced him to replace his prime minister five times. The hated “president of the rich” remains in office only because the Socialists are backing him. In Italy, Belgium and Portugal, general strikes and mass protests against social cuts and austerity budgets will take place in the coming weeks.

In the US, President Trump is cutting social benefits on which millions depend. American companies have announced 1.1 million layoffs this year. In China, millions of jobs have been lost in recent years to automation and the crisis in the construction industry, and youth unemployment in cities stands at 19 percent. In African and Asian countries, Generation Z has been protesting for three years against the lack of any prospects for the future.

This movement of the international working class and youth, however, lacks a viable perspective.

The corporatist trade unions, which used to negotiate social compromises within the framework of “social partnership,” have become the spearhead of social cuts and mass layoffs. In Germany, the trade union federation (DGB) and its works councils develop layoff plans within the framework of legally regulated “co-determination” and suppress resistance to the layoffs. Union bureaucrats sit on company supervisory boards and often move on to the executive.

The reason for this is not only the—undoubtedly widespread—corruption of highly paid union officials and works council members but the nationalist perspective upon which the unions are based. This perspective is geared toward strengthening the competitiveness of their “own” companies because, according to union logic, this is the only way to preserve jobs.

On this basis, the unions agree to job cuts, wage reductions and poorer working conditions. They play one location off against another, divide workers from their colleagues in other countries and boycott any serious resistance. A typical example of this is the so-called bidding war between the Ford plants in Saarlouis, Germany and Almussafes, Spain in which the works councils undercut each other with concessions until both plants were largely shut down.

The unions also support their government’s respective war policies. Whereas the IG Metall union used to promote the slogan “swords to plowshares,” it now advocates converting auto factories into tank factories.

European powers denounce proposed US peace deal on Ukraine

Alex Lantier

French Foreign Minister Jean-Noel Barrot, center, talks with Dutch Foreign Minister David van Weel, right, and Romania's Foreign Minister Oana Țoiu as they arrive for an EU general affairs meeting at the European Council building in Brussels, Thursday, Nov. 20, 2025. [AP Photo/Geert Vanden Wijngaert]

The major European powers have reacted with dismay to the Trump administration’s proposed peace plan, worked out in US negotiations with Moscow. Desperate to continue the war with Russia in Ukraine, which they have made a central justification for their own remilitarization and cuts to social spending to fund the “war economy,” they rejected the plan as a “capitulation” to Russia.

At a meeting of European foreign ministers last Thursday, French Foreign Minister Jean-Noël Barrot said: “Peace cannot be capitulation. You must understand that Ukrainians who have mounted heroic resistance for over three years against a shameless act of aggression from Russia will always refuse any form of capitulation.”

While Barrot’s Swedish counterpart Maria Stenergard dismissed the US-Russian deal, stating, “There cannot be peace without Ukraine, and Europe must be at the negotiating table,” German Foreign Minister Johann Wadephul insisted that peace required a Russian surrender. He said: “The precondition [for peace] is that Vladimir Putin end his war of aggression against Ukraine, that we arrive at a ceasefire without preconditions and that we then negotiate together equitably.”

The European powers have little hope, however, of convincing Moscow to surrender and give up the position it now holds on the battlefield. Wadephul’s remark underscores the complete disconnect between official propaganda in Europe and military-political realities in Ukraine. Washington’s signing of a deal with Moscow behind the backs of its nominal European “allies” shows the narrative of the war presented to the European public was a pack of lies.

It was not a war to preserve Western democracy from Russian aggression, nor were Russian troops bumbling fools suffering lopsided losses at the hands of superior, NATO-backed Ukrainian forces. The NATO imperialist powers armed the Ukrainian regime to the teeth, successfully goading the reactionary post-Soviet Russian capitalist regime to attack it. They all competed in a war aiming to crush Russia and secure domination of Eurasia. This war has now failed, leaving Ukrainian President Volodymyr Zelensky deeply unpopular, and Ukraine bled white.

Trump’s deal would leave much of eastern Ukraine in Russian hands, rule out NATO membership for Ukraine and force Zelensky—who has collapsed in the polls and cancelled elections—to suddenly hold new elections. It would cement raw material deals that give Washington, not the European powers, the lion’s share of rare earth minerals in Ukraine. Washington would get 50 percent of the profits from the reconstruction of Ukraine, which Europe would have to fund to the tune of $100 billion.

Bitter conflicts erupted at a meeting last Friday between US and European diplomats in Kiev, chaired by US Army Secretary Daniel Driscoll. According to transcripts European officials present at the meeting gave the Financial Times, Driscoll bluntly informed European negotiators they would have no say in the terms of the peace deal.

“We are not negotiating details,” Driscoll told them in a foul-mouthed tirade, declaring: “We need to get this shit done.” He said, “The US Armed Forces love Ukraine and stand behind Ukraine, but it is the honest US military assessment that Ukraine is in a very bad position and now is the best time for peace.”

The top US diplomat in Kiev, US Chargé d’Affaires Julie Davis, argued similarly. “As much as we can support Ukraine continuing the war, there are limits,” she told the European officials assembled at the meeting. “There are strong indications that Russia has a strong industrial base and it is a matter of time until Ukraine has to cut a deal.”

European newspapers and officials denounced the deal, from the reckless standpoint that peace with Russia is unacceptable. The Frankfurter Allgemeine Zeitung called the proposed deal “a complete surrender not only of Ukraine but also of the free West to the aggressor,” while France’s Libération called it a “terrible ultimatum [that] would probably sound better in Sicilian.” European politicians, for their part, issued calls for military escalation against Russia.

While German Chancellor Friedrich Merz again called last week to give Ukraine Taurus missiles for long-range strikes on Russia, French President Emmanuel Macron said he would keep trying to send French or European ground troops to Ukraine despite mass popular opposition. French head of the army general staff General Fabien Mandon demanded that French people be prepared “to sacrifice their children” in a war against Russia.

Such remarks underscore the enormous danger of military escalation that still exists, particularly as the Trump administration threatens to launch new wars, from Iran to Venezuela.

Europe’s hysterical war propaganda is not driven by any real military threat facing Europe but by the imperialist interests and antidemocratic political agenda of European capitalism. The European Union has more than three times Russia’s population of 143 million and more than seven times its economy of approximately US$2 trillion. Russian forces have neither the capacity nor the intention to conquer Europe.

By waging the Ukraine war, the European powers hope to enforce both their commercial and military interests in Eurasia, and—inextricably bound up with this—an ultra-reactionary political climate at home. Fully 89 percent of Western Europeans opposed sending troops to Ukraine, and there was explosive social anger at pension cuts and other austerity measures used to fund the war. Yet the war proceeded, plunging US and European governments ever deeper into debt, and working class opposition to war was politically suppressed.

Some of the political calculations underlying the militarism of the European powers were laid out in an interview by former French President François Hollande in Le Monde. With Macron massively unpopular amid a deep social crisis in France, Hollande laid out a nightmare scenario for European capitalism: the fall of Zelensky could trigger a domino effect, with governments collapsing across Europe, including in France.

Denouncing the Trump administration’s plan as making “a complete break with Europe and with the order that has prevailed for 75 years,” Hollande bemoaned that the European powers had not more aggressively armed Ukraine with long-range weapons. “We must say we will send as many weapons as possible,” he said. “We were too careful with arms deliveries. We thought that Putin would use the nuclear threat if we sent missiles and missile batteries.”

Hollande stressed that he had the gravest fears about the survival of the unpopular Ukrainian regime, in which the European powers have invested hundreds of billions of euros: “If Zelensky signs, he is finished; if he does not sign, he can be crushed. The Trump plan already foresees eliminating him, as it proposes elections in 100 days.”

Given the deep unpopularity and the insoluble budget crisis in France and other European countries, Hollande feared the fall of Zelensky could bring down other governments, too. He said, “Everything is connected: the state of our democracy, the strength of our defense and the credibility of our security. … [Zelensky] has become the first line of defense of the European continent. For that reason, our obligation is to support him. If he falls, our security is threatened. And, one day or other, we also will fall.”

The US Military is No Answer to Narcotraffickers

John Feffer

Photo by Diego González

Ecuador, once one of the most peaceful countries in Latin America, is now one of its most dangerous. The murder rate in 2020 was 7.7 homicides per 100,000 people. That was roughly comparable to the United States where it was 6.4 that year. In nearby Brazil, on the other hand, it was 22.3.

By 2023, Ecuador’s homicide rate had leapfrogged over its neighbors to an astounding 46 per 100,000. In a mere three years, the number of murders had increased six-fold.

The reason: narcotraffickers. Ecuador had become a convenient transshipment hub, and various gangs were warring over territory, particularly in coastal cities.

In 2023, in a presidential election that featured the assassination of one of the candidates, Ecuadorians voted in Daniel Noboa, an undistinguished but telegenic conservative politician who promised an iron-fist approach to fighting drug kingpins. His tactics boiled down to unleashing the military to attack specific gangs. However, as Tiziano Breda points out in a report for ACLED, “the same measures that contributed to reining in violence in the first months of 2024—increased military pressure in prisons and on the streets—had the unintended consequence of further fostering intra-gang power struggles and fragmentation.”

As a result, homicides in Ecuador have superseded even the totals for 2023, with the expected rate rising to 50 per 100,000 in 2025.

All of which makes the result of the recent referendum all the more remarkable.

Last week, Ecuadorians rejected all four of the proposals coming from the Noboa government. In addition to preserving the “rights of nature” provision of their constitution—by rejecting a constitutional overhaul—Ecuadorians said no to foreign military bases. The Trump administration was practically salivating at the prospect of returning to a U.S. base in Ecuador that the military had been kicked out of in 2009 when then-president Rafael Correa let the lease expire.

Even in a country where people are dying left and right, voters overwhelmingly opposed any outside military intervention to address the problem of narcotraffickers. The national government’s own militarized response has failed. Voters reasoned that U.S. intervention would only make things worse.

It’s a powerful statement of popular sovereignty at a time of executive overreach (by Noboa) and an expanded war on drugs (by Trump). “We respect the will of the Ecuadorian people,” Noboa commented on X when the results had come in.

Trump, however, has shown no interest in respecting the will of any people.

Plan Mexico

The Trump push for regime change in Venezuela is only part of a larger effort to expand the U.S. military footprint in the Western hemisphere. With Venezuela, Washington is moving against an adversary of 25 years.

With Mexico, however, Washington is confronting an ally of even longer standing. In the past, the United States has assisted Mexican army and police in their battle with drug lords. Direct intervention is something different. Given opposition from the Mexican government, Trump is planning to operate independently in the country.

According to administration sources:

Under the new mission being planned, U.S. troops in Mexico would mainly use drone strikes to hit drug labs and cartel members and leaders, the two current U.S. officials and two former U.S. officials said. Some of the drones that special forces would use require operators to be on the ground to use them effectively and safely…

It seems likely that the administration will wait to see how the operation in Venezuela proceeds before initiating something in Mexico.

Meanwhile, Mexico has agreed to conduct its own interdiction of suspected drug shipments at sea. It’s a marriage of convenience: Mexico wants to prevent the Trump administration from indiscriminately attacking ships in the waters off the country, and Trump wants countries in the region to shoulder more of the burden of this “drug war.”

This is how Trump’s former Secretary of Defense Mark Esper applies lipstick to this particular pig:

The United States is sending a clear signal that it will not tolerate bad behavior in its hemisphere. While some measures are controversial, if not legally dubious, they are part of a broader truth: Regional security demands not only American strength and focus, but also shared action and responsibility by our partners.

Certainly, countries in the region could do a better job dealing with narcotraffickers. But this is a question of law enforcement, not lawbreaking. The U.S. military is not a responsible partner in addressing “bad behavior” precisely because it is engaging in seriously bad behavior itself. The strikes against boats around Venezuela amount to extrajudicial murder, and those executing the policy might one day face indictment by the International Criminal Court. Any intervention in Mexico, against that government’s expressed wishes, would be a violation of sovereignty no different (in kind) from Russia’s “self-defense” rationale for invading Ukraine.

Trump’s Larger Strategy

Trump wants complete freedom of movement in this hemisphere. It’s not exactly a sphere-of-influences approach, since he frankly wants access, minerals, and privileged trade relations everywhere.

But Latin America is close, and the United States has a rich and noxious history of intervention in the region on which Trump can build. His administration has been beefing up its military presence in Puerto Rico as a staging area. In Panama, it established over the summer a new jungle warfare school at a U.S. military base abandoned 25 years ago. According to ABC News,

By August, the military had set up the “Combined Jungle Operations Training Course” with Marines and Panamanian forces training as part of a pilot program. A military spokesperson said there have since been 46 graduates of the three-week course: 18 Marines, one Army soldier and 27 personnel from Panama’s National Aeronaval Service, National Border Service and National Police.

Last month, the United States began stationing combat aircraft in El Salvador. Because of Trump’s immigration policies, the Honduran government threatened to close down the U.S. military base that hosts the Southern Command. But that hasn’t stopped U.S. forces from creating a new Combined Joint Operation Center at the base to coordinate with the Honduran military and other entities.

The military is only a means to an end—of transforming the politics of the hemisphere. Trump has lavished $20 million to support his buddy Javier Milei, the far-right leader in Argentina, a cash infusion that gave his party a boost in the mid-term elections last month. Trumps has tried to use additional tariffs to keep his Brazilian buddy Jair Bolsonaro out of jail for his attempted coup, presumably so that he could return to power just the way Trump has. He hosted Daniel Noboa at Mar-a-Lago before the Ecuadorian election last spring to convey the message that the conservative politician had the ear of the American president. Trump wants Xiomara Castro’s successor to lose the elections in Honduras at the end of the month, the far-right Jose Antonio Kast to dislodge the left in Chile’s presidential runoff next month, and a comparable rightist to replace Gustavo Petro in Colombia next year.

If Trump hates having a democratic socialist, Zohran Mamdani, in his backyard of New York, it’s even worse to have them leading countries in America’s backyard of Latin America. The “drug war”—on top of the deportation of hundreds of thousands of Venezuelans, Hondurans, and Ecuadorians—is a lever that the United States can use to impose MAGA throughout Latin America. More money and power for militaries in the region increase the likelihood that generals there will revive the “good old days” when coups were commonplace.

The United States has an addiction problem—opioids, cocaine, meth—that has been driving supply. Having slashed addiction treatment funding and contributed to worsening the economic conditions that fuel addiction, Trump is now entirely focused on the quixotic mission of suppressing this supply.

The president, too, has addictions far more dangerous than fast-food burgers. He is addicted to the expansion of U.S. power and the consolidation of his own. He won’t voluntarily seek treatment. Only the voters can force him into rehab.