According to a survey conducted by the German Mittelstand Business Association (BVMW), eight out of ten Mittelstand companies anticipate a rapid contraction of the German economy in 2025.

The Mittelstand refers to traditional German companies, many of which dominate up to 90% of the export market. These firms cannot be classified as classic SMEs (small and medium-sized enterprises). Companies within the Mittelstand category form the backbone of the German economy, particularly in terms of employment.

As reported in WELT, 58% of the surveyed companies expect an economic downturn. One in five companies is already preparing for a crisis within the next twelve months.

The survey also revealed that 40% of Mittelstand companies experienced a decline in turnover over the past year. Another 40% of respondents indicated plans to reduce investments in the coming year compared to the previous year.

Beyond the general economic outlook, Mittelstand companies are particularly concerned about the shortage of skilled labor: 62% fear they will be unable to fill vacant training positions in the upcoming year.

Christoph Ahlhaus, Federal Managing Director of the BVMW, stated: “Not only our economy but also confidence in the recovery has been shaken by the political upheavals of recent years. Anyone assuming political responsibility in Germany must clearly articulate how our economy can move forward again.”

Hans-Jürgen Völz, Chief Economist at the BVMW, emphasized the importance of implementing reform policies in areas such as red tape reduction, energy costs, the labor market, and social policy. These measures are crucial to restoring hope and encouraging companies to invest in Germany.

Völz added, “It is essential to focus on the 3.5 million Mittelstand companies rather than large corporations and organizations that can relocate globally. Well-meaning speeches praising the Mittelstand on Sundays must be matched by concrete political actions in parliament from Monday to Friday.”

A submarine power cable connecting Finland and Estonia was damaged on Wednesday, Finnish Prime Minister Petteri Orpo announced. This marks the latest in a series of incidents involving submarine cables and energy pipelines in the Baltic Sea.

Arto Pahkin, operations manager for Finland’s electricity grid, informed public broadcaster Yle that the possibility of sabotage could not be excluded. However, Orpo assured that Finland’s electricity supply was unaffected by the blackout. “The authorities remain vigilant even at Christmas and are investigating the situation,” he wrote.

The energy operator Fingrid reported that the flow of electricity through the EstLink 2 cable, which transmits power to Estonia, was disrupted at 12:26 local time (13:26 TSI). This event follows a similar pattern of recent disruptions in the Baltic Sea.

Last month, two telecommunications cables linking Sweden and Denmark in the Baltic Sea were severed. Suspicion quickly fell on the Chinese ship Yi Peng 3, which monitoring websites indicated was near the cables at the time of the damage. Despite these suspicions, Sweden announced last Monday that Chinese authorities declined a request by Swedish prosecutors to investigate the vessel, which has since left the area.

Earlier incidents include the damage to the Arelion cable, running from the Swedish island of Gotland to Lithuania, on November 17, and the severing of the C-Lion 1 cable, which connects Helsinki to the German port of Rostock, on November 18 south of the Swedish island of Öland.

European authorities have suggested that these incidents may be acts of sabotage connected to the ongoing war in Ukraine. However, the Kremlin has dismissed these allegations, labeling them as “absurd” and “ridiculous.”

German companies, which form the backbone of the German economy and dominate 95% of the global export market in their respective niches, have outlined their expectations for 2025.

The so-called Mittelstand companies, often referred to as “family enterprises” rather than traditional SMEs, have voiced concerns about the anticipated rise in protectionism by 2025. They urged policymakers to adopt a pragmatic approach when negotiating free trade agreements.

A survey conducted exclusively for WirtschaftsWoche by the business associations Die Familienunternehmer and Die Jungen Unternehmer reveals that few expect a resurgence of free trade. Instead, over 75% of respondents fear the continued expansion of global protectionism by 2025.

In this context, approximately 820 business leaders surveyed in October called for greater pragmatism in European trade policies. A majority advised that the signing of new European free trade agreements should not be conditional on compliance with stringent environmental or social standards in partner countries. Only 31% of respondents supported such conditions.

“Increasing protectionism poses a significant threat to Germany’s position as an export powerhouse,” cautioned Marie-Christine Ostermann, President of the Association of Family Businesses. She added, “Eliminating non-tariff trade barriers simplifies bureaucracy, delivering a cost-free boost to growth. The German government must actively support this.” Ostermann emphasized that free trade agreements not only reduce tariffs but also create new jobs, thereby promoting widespread economic growth.

Open markets, she explained, are essential for ensuring economic stability, not just in Germany or Europe, but globally.

On a cautionary note, Ralph Ossa, Chief Economist of the World Trade Organization (WTO), warned of a “new narrative of globalisation.” He observed that many citizens and policymakers increasingly view trade as a contributor to inequality and environmental degradation rather than a solution. Consequently, Ossa does not foresee improvements in globalisation in the near future, as the global economy remains at a crossroads where key trade policy decisions will have profound impacts.

A recent study by the United Nations Conference on Trade and Development (UNCTAD) projects that global trade will reach a record level of nearly $33 trillion USD by 2024, driven primarily by a 7% growth in the services sector. However, UNCTAD’s outlook for 2025 is less optimistic, warning of potential trade wars and escalating geopolitical tensions.