Watching Germany talk itself into decline is a strange experience when you watch it from Central and Eastern Europe.
For thirty years Germany has been our benchmark: the industrial model we plugged into, the Mittelstand we tried to copy, the institutional seriousness we often envied. Its supply chains run through Poland, Czechia, Slovakia, Hungary and western Romania. When order books thin out in Stuttgart, factories in Timișoara and Žilina feel it within weeks. So when Europe’s largest economy starts calling itself the continent’s sick man again, we listen. We also have good reasons to doubt the diagnosis.
The problems are real. The economy shrank in 2023 and 2024 and barely grew in 2025. Energy prices have hit chemicals and metals hard. China has turned from customer into competitor, American tariffs have dented the export model, and demography does not negotiate. Ask a German executive what hurts most and bureaucracy usually comes up before taxes. But diagnosis is not destiny. The Bundesbank still sees the country on a recovery path, with growth firmer in the first half of 2026 and part of the recent slowdown down to temporary factors such as low Rhine water levels. Germany does not lack problems. It lacks a convincing story about what comes after them.
Whoever explains the pain writes the prescription
That is where economics becomes politics. The AfD understood earlier than its rivals that whoever explains people’s frustration gets to define the remedy. Migration, energy, Brussels, deindustrialisation and identity are folded into one simple tale: Germany lost control, and prosperity returns if the country turns back.
The centre uses many of the same words, from competitiveness to controlled migration, but has not yet stitched them into a direction. Before any major message goes public, I put it through a test I call RED: Reality, Emotion, Direction. Say what is true, including the uncomfortable part. Acknowledge what people feel about it instead of lecturing them. Then show where you are going. Mainstream German politics is good at reality. It is much weaker on the other two.
Nostalgia has one huge advantage: nobody ever has to deliver yesterday. The Germany people miss ran on cheap Russian gas, Chinese demand, American security and a globalisation tailor-made for German machinery. That world is gone. The real question is what the next model looks like.
Upgrade, don’t embalm
Germany’s edge was never producing cheaply. It was producing complicated things very well. That skill still pays if it connects to where value is moving: AI-driven manufacturing, robotics, industrial software, defence, energy systems. The Mittelstand has to meet AI, and industrial Germany has to meet Europe’s new security economy. Call it an upgrade of the operating system.
Business has a part to play beyond lobbying. Too many German CEOs either reassure Berlin that everything is under control or announce the death of Standort Deutschland at every conference while quietly investing elsewhere. Neither builds confidence. What helps is optimism with commitments attached: investment at home, apprenticeship pledges, plants modernised rather than closed, and clear terms on which energy prices and permitting times would unlock the next euro. Confidence backed by a balance sheet is hard to dismiss as spin.
Look east: the hinterland has changed
From Warsaw, Prague or Bucharest, one part of the German debate looks dated. Berlin still too often sees our region as an extended workbench, cheap plants feeding Western headquarters. The numbers say otherwise. In the first half of 2026, German exports to the 29 countries tracked by the Ost-Ausschuss rose 7.4 per cent to 154.4 billion euros, more than a third of Germany’s total export growth, while sales to the United States and China fell. Germany now sells more to Poland than to China. In this year’s German-CEE Business Outlook, German companies named Poland, Ukraine, Romania and Czechia as their top regional investment targets.
CEE has outgrown the role of Germany’s workshop. It is now a growth market, an energy and defence partner, a technology base and a strategic hinterland. Poland brings scale and, increasingly, its own capital. Czechia and Slovakia sit at the core of advanced manufacturing. Romania adds a large market, Black Sea access, energy, tech talent and proximity to Ukraine. The Baltics have become laboratories for digital government and defence innovation. And Ukraine will become one of Europe’s largest reconstruction stories.
The old relationship was hierarchical: German brands, technology and capital on one side, CEE factories, components and labour on the other. The next one can be complementary. Polish capital is going abroad, Romanian and Czech tech firms are scaling, defence production is spreading along the eastern flank. The opportunity is to move from German supply chains located in CEE to European value chains built jointly, with CEE firms entering German networks as partners rather than subcontractors, and German companies using our capitals as springboards toward Ukraine, the Black Sea and the Caucasus. With Chinese demand fading, this is a growth strategy, not a cost exercise.
Europe as multiplier
In hard times it is tempting to blame Brussels, and Brussels does produce needless complexity. But next to American platforms and capital markets and Chinese industrial ecosystems, even Germany is small. Europe suffers from too little usable scale, not too much. A real capital markets union, an energy union, a single defence-industrial market and a deeper single market in services would give German and CEE firms the home base their competitors take for granted. Berlin should present Europe less as a historical duty and more as an instrument of economic power, and CEE capitals should make that case alongside it.
The same logic applies to migration and security. Germany needs borders it controls, and it needs workers; the formula is control plus contribution. Our region, having sent doctors and engineers westwards for decades, now faces its own shortages, which makes demography a shared European file rather than a source of national panic. On security, Germany has become one of Ukraine’s biggest backers, and for the eastern flank that matters existentially. Yet security should be told as capability as well as danger: energy that keeps flowing, bridges that carry tanks and trucks, networks that survive attacks, factories that produce at scale. Germany has the capital and industrial depth to turn resilience into a sector. Its eastern neighbours have the geography, the urgency and the growing ecosystems. The partnership writes itself.
Credible optimism
German self-criticism is a democratic virtue, and the country’s history gives it good reason to distrust triumphalism. But permanent pessimism has an economic cost. Companies, founders and skilled people decide on expectations, and a country told often enough that its best years are behind it starts to behave accordingly. Germany does not need boosterism. It needs credible optimism: tell the truth about what is broken, show the resources to fix it, set measurable targets, and deliver progress often enough for reality to outrun the mood.
It still has the engineers, the industrial networks, the capital and one of the world’s richest markets. And it has something the old model never fully used: a Central and Eastern Europe that is richer, more ambitious and more strategically important than at any point since reunification.
From Warsaw to Bucharest, we do not need a weaker Germany to become stronger ourselves. We need a Germany willing to reinvent itself and to see its eastern neighbours as partners in its next success, not the periphery of its last one.
Germany is not finished. It is unfinished. And the next chapter of its economic story may be written much further east than Berlin yet realises.
Photo: Dreamstime.