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.

On Monday, December 23, French Prime Minister François Bayrou announced the formation of the country’s fourth government for 2024, maintaining the political trajectory of the past seven years. The new cabinet comprises “Macronites,” key allies from previous administrations, and two former prime ministers, reinforcing continuity in governance.

The collapse of Prime Minister Michel Barnier’s government earlier this month, prompted by a no-confidence vote, appeared to signal opposition demands for substantial change. However, Bayrou’s cabinet largely maintains the status quo. The team is composed of pro-Macron figures, Bayrou’s confidants, seasoned conservative politicians, and other familiar faces, indicating that President Emmanuel Macron’s political line remains unaltered.

Expectations that the government might open up to social democrats were unmet. This iteration is less politically diverse than Barnier’s administration, which lasted only two and a half months. Former Prime Minister Élisabeth Borne, who handed over power to Gabriel Attal in January 2024, returns as Minister of Education, Research, and Innovation. Another former Prime Minister, Manuel Valls, will oversee Overseas Territories. Once a socialist, Valls has faced criticism for what some perceive as “political opportunism.”

Key ministerial appointments include Gérald Darmanin transitioning from Interior Minister to Justice Minister, Conservative Bruno Retailleau stepping into the Interior Minister role, and Eric Lombard, a former banking executive, taking over as Minister of Economy and Finance. He will collaborate with Amélie de Montchalin, the former EU minister and France’s permanent representative at the OECD, to prepare the 2025 budget.

Many ministers retained their posts, including Defence Minister Sébastien Lecornu, Culture Minister Rachida Dati, Labour Minister Catherine Vautrin, Agriculture Minister Annie Genevard, Foreign Minister Jean-Noël Barrot, and Europe Minister Benjamin Haddad.

This cabinet’s makeup raises questions about its stability. The New Popular Front (NFP), a left-wing coalition, is poised to oppose the liberal 2025 budget unless the controversial 2023 pension reform—raising the retirement age from 62 to 64—is suspended. Bayrou has expressed openness to “tweaks and improvements” but ruled out halting the reform entirely.

The National Rally (RN), led by Jordan Bardella, has adopted a watchful stance. While it declined coalition talks, it offered conditional support to Bayrou’s government, similar to its approach with Barnier’s administration. However, tensions arose over Xavier Bertrand’s potential appointment as Justice Minister, a move the RN opposed. Bertrand refused to serve, citing his values and unwillingness to align with a government influenced by Marine Le Pen’s party.

Bayrou has set a goal to reduce France’s budget deficit to approximately 5% of GDP by the end of 2025, down from over 6% in 2024. Speaking to BFM TV, he emphasized the need to cut “inefficient public spending” and floated the possibility of temporary corporate tax increases to achieve fiscal balance.

Eric Lombard echoed this sentiment during his swearing-in ceremony at the Finance Ministry, stating, “We must reduce the deficit without killing growth. It is this balance that we must seek, and this is what the 2025 budget entails.”

Lombard’s extensive financial background includes leadership roles at BNP Paribas and insurance giant Generali. Most recently, he headed the French public investment fund Caisse des Dépôts, focusing on public housing, infrastructure, and green projects.

Bayrou faces an uphill battle in securing parliamentary support for the 2025 budget and broader governance goals. His reliance on opposition forces, particularly the RN, has sparked criticism and uncertainty. RN leader Bardella dismissed the new government as a “failed coalition,” setting the stage for contentious months ahead.

Increased demand due to cold weather and reduced liquefied natural gas (LNG) imports by sea are causing the European Union (EU) to deplete its gas storage reserves at the fastest rate since the energy crisis three years ago.

The Financial Times (FT) cites data from Gas Infrastructure Europe, indicating that gas volumes in the bloc’s storage fields have dropped by approximately 19% between late September and mid-December, the traditional end of the filling season in gas markets. In contrast, the previous two years saw single-digit declines during the same period, supported by milder-than-average winters and reduced industrial demand due to elevated prices.

“Europe has had to rely much more heavily on underground storage this winter than in the past two years to compensate for the decline in liquefied natural gas imports and meet stronger demand,” explained Natasha Fielding, head of European gas pricing at Argus Media.

Europe’s reliance on stored gas reserves is further intensified by increased competition for LNG imports from Asia, where lower prices have attracted buyers. This shift has reduced European imports and necessitated greater use of existing reserves.

Currently, the EU’s gas storage levels stand at 75%, which is slightly above the 10-year average before efforts to reduce dependence on Russian imports. A year ago, storage levels were close to 90% in mid-December.

European gas prices have plummeted by approximately 90% compared to the peak prices of over €300 per megawatt hour during the summer of 2022 energy crisis. However, the rapid depletion of storage this winter raises concerns about the challenges and costs of refilling reserves for the next heating season.

Market dynamics reflect these challenges: traders are already pricing gas for summer delivery at higher rates than for the following winter, signaling rising replenishment costs.

The European Commission mandates that EU countries fill their gas storage facilities to 90% capacity by early November. However, some member states have lower targets, further complicating regional supply strategies.

A substantial portion of Europe’s gas now comes as LNG, which is increasingly influenced by geopolitics. The United States, the EU’s largest LNG supplier, has demanded long-term commitments to purchase U.S. gas or face potential tariffs. Qatar, the third-largest supplier, has threatened to halt shipments if the EU enforces new regulations penalizing companies that fail to meet environmental, human rights, and labor standards.

Additionally, colder weather conditions and the Dunkelflaute—periods when renewable energy generation is minimal—have driven up gas demand for power generation. Anne-Sophie Corbeau, a global energy researcher at Columbia University, reported that industrial gas demand in nine northwest European countries rebounded by 6% year-on-year from January to November 2023.

The rate of gas depletion varies across member states. The Netherlands has seen a 33% drop in stored gas levels since winter began, while France has experienced a 28% decline.

Looking ahead, Russian gas supplies via Ukraine—currently accounting for around 5% of EU imports—are expected to cease at the end of 2024 when the transit agreement expires. While Andreas Guth, secretary-general of Eurogas, suggests there is no immediate concern about this supply interruption, he acknowledges that every marginal volume of gas will impact storage replenishment efforts.