"Global confidence is waning": Foreign investment projects in Germany fall to their lowest point since 2009, declining for eight consecutive years

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Germany is facing a crisis of confidence among foreign investors. Foreign capital continues to withdraw, and the attractiveness for investment has fallen to its lowest level in more than a decade.

According to reports, consulting firm EY's latest data shows that the number of new projects by foreign investors in Germany in 2025 will decline for the eighth consecutive year, hitting its lowest point since 2009, highlighting the continued deterioration in competitiveness of Europe's largest economy under the heavy burden of high taxes and high energy costs.

Specifically, foreign investors announced a total of 548 new projects in Germany in 2025, down about 10% from the previous year. Henrik Ahlers, EY Germany's head, characterized this as a "warning signal for Germany as a business location," and pointed out that Germany is falling behind while other European countries are clearly performing better.

Alice Weidel, co-chair of the Alternative for Germany (AfD), cited these figures on social media platform X, stating: "The world is losing confidence: foreign companies are investing less and less in Germany." At present, the withdrawal of foreign capital is eroding the attractiveness of Germany's capital market from multiple angles.

Lagging reforms, Germany’s appeal to foreign capital continues to drain

In comparison across Europe, Germany’s performance is particularly lacking. EY data shows that Europe as a whole attracted 5,026 new foreign investment projects in 2025, a year-on-year decrease of 7%. France ranked first with 852 projects, followed closely by the UK with 730, while Germany came in third. Germany’s 10% decline is significantly higher than Europe’s overall 7% drop, showing its relative competitiveness is falling faster.

EY Germany’s Henrik Ahlers pointed out that Germany has talked about reforms for years, but taken very little action. He commented, "Germany’s image as a country averse to reform is widely known worldwide. Its reputation as a strong, high-quality business location and cornerstone of economic stability has almost disappeared."

EY’s analysis attributes the root cause of foreign capital withdrawal directly to Germany’s longstanding unresolved structural issues. Henrik Ahlers clearly listed four major obstacles: high taxation, high labor costs, expensive energy prices, and cumbersome administrative burdens that make business difficult.

These problems are not new, but against the backdrop of accelerating global capital flow and countries racing to optimize their business environments, Germany’s relative disadvantages are becoming more pronounced. Other European countries have made notable progress in areas such as tax reform and digitalizing administration, while Germany’s pace of reform remains sluggish, causing its attractiveness to foreign investment to continue to erode.

A double spiral of economic deterioration and capital withdrawal

The loss of foreign capital is not an isolated phenomenon; it is part of a mutually reinforcing negative cycle with Germany’s worsening domestic economy.

According to the Halle Institute for Economic Research, the number of bankruptcies among German partnerships and corporations reached 4,573 in the first quarter of 2025, not only exceeding levels seen during the 2009 financial crisis, but also setting a new record since the third quarter of 2005. In March, the number of bankruptcies surged by 71% compared to the average for the same period from 2016 to 2019.

The industrial sector is also under pressure. According to a previous Reuters report, since the outbreak of COVID-19 in 2019, Germany has lost around 245,500 industrial jobs. Volkswagen is a typical example of this dilemma: the company plans to cut about 50,000 jobs in Germany by 2030. In 2025, Volkswagen's net profit fell 44% year-on-year to €6.9 billion, its lowest since the "Dieselgate" scandal; revenue remained flat at around €322 billion, and global deliveries slightly declined to nearly 9 million vehicles.

Overall, Germany is trapped in a predicament where collapsing confidence in foreign capital and weakening endogenous growth are mutually reinforcing. If structural reforms fail to materialize, its status as Europe’s economic engine faces further risks of being shaken.

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