Can we talk about Germany for a moment?

Recently, almost everything in the Netherlands has been dominated by the American presidential election. Push notifications one after another, a flood of analyses by American experts, talk shows in overdrive—our focus was, understandably, fixed across the Atlantic. But at the same time, a political crisis was unfolding closer to home, in Germany, our eastern neighbor and most important trade partner: the German government has collapsed.

This comes at a crucial moment as the European economy loses relevance, the German economy weakens, and Germany, since Angela Merkel’s departure, shows less leadership within the EU. This makes Europe more vulnerable, especially now with a new, protectionist U.S. president-elect who will confront Europe without hesitation. So, let’s pay attention.

Crisis in the German government coalition

Chancellor Olaf Scholz’s attempts to keep the coalition government of the Social Democratic Party (SPD), the Greens, and the liberal party FDP together failed on Wednesday. Following the resignation of Finance Minister Christian Lindner, also the leader of coalition partner FDP, the FDP decided to withdraw all its ministers (except for Transport Minister Volker Wissing, who chose to keep his position and leave his party). Scholz declared that Lindner’s resignation was necessary due to a lack of trust. As a result, Scholz now leads a minority government made up of the SPD and the Greens. Tensions are running high: in January, Scholz wants to present a so-called confidence question to the Bundestag. The German parliament would then determine whether there is still sufficient confidence in Scholz’s government. Judging from current support, there is no such confidence. In that case, elections would take place in March.

Europe’s economic engine stalls

The political instability hits Germany and Europe at a vulnerable moment. Where Germany has long been the economic engine of Europe, that same engine now faces significant pressure, as the country grapples with one setback after another. The economy, especially the automotive industry, struggles with rising competition from China and high energy prices. Rising labor costs, the loss of Russian gas, and a rapidly aging population are shaking the once-celebrated economic miracle. Companies like Volkswagen, once symbols of German prosperity, even warn of potential factory closures and job losses.

If Germany sneezes, does the Netherlands catch a cold?

Germany is not only the largest economy in the EU but also a crucial link for many member states. For almost half of the EU countries, including the Netherlands, Germany is the main trading partner. Over 20% of our exports go to our eastern neighbor, with goods exports worth €53 billion. This close economic bond means that Germany’s economic health directly affects the Netherlands.

So far, we surprisingly notice little impact from Germany’s economic challenges. Where the Dutch economy used to suffer from fluctuations in Germany, it seems different now: despite Germany’s economic struggles, the Netherlands appears less likely to be affected in the short term. However, the question is how long this will remain the case. After all, the Netherlands benefits from a strong Germany that provides a stable market and growth for Dutch companies. If Germany continues to face difficulties, this will inevitably have a negative impact on the rest of Europe, including the Netherlands.

“America First”

The re-election of Donald Trump puts further pressure on the German economy. Trump is considering high import tariffs, which would hit the export-driven German industry particularly hard. He specifically targets the German automotive industry and wants to protect American businesses: “I want German car companies to become American car companies,” said Trump. The question is whether Germany can afford to enter this uncertain period without a stable government.

Moreover, the new geopolitical reality will put Europe’s security under pressure. This could disrupt not only our stability and safety but also our economy—a risk with hardly any price tag.

Opening the German newspaper more often

The political crisis in Germany brings both risks and opportunities. On one hand, a Germany without direction could economically weaken the entire region. On the other hand, a new government might bring more decisiveness and room for much-needed reforms—though it remains to be seen which parties will lead these efforts. In any case, Dutch politics and the business sector may want to prepare for the potential effects of a prolonged recession among our neighbors.

The Netherlands should therefore take developments in Germany as seriously as the U.S. elections. Our relationship with Germany and their economic stability are crucial for our prosperity and security. It’s time to look east more often – and maybe to open Die Bild or the Frankfurter Allgemeine Zeitung more frequently.