Is Germany on the decline – and what does that mean for Sweden?

New Republic Insight #10

After The New Republic's fall conference in Berlin, there were many impressions. Meetings with journalists, the Swedish embassy, and industry colleagues in public affairs highlighted several German concerns.

The country faces parallel challenges. The new coalition government, led by Chancellor Friedrich Merz, is characterized by internal friction. And it is clear that Germany is struggling with the redefinition of long-term, historical fundamentals – such as its close ties to the US (which are becoming less and less self-evident) and the breakdown in relations with Russia. German leadership is under pressure in a fragmented Europe and from increasing geopolitical tensions.

There was consensus on what is needed to turn the ship around: Germany's economic future will ultimately be determined by innovation in tech, energy, and security. Key sectors are digital technology, green energy, and the defense industry. Substantial structural reforms are also needed.

Major federal investments will be made in infrastructure, and the need for labor immigration amounts to approximately 400,000 people per year.

Almost three-quarters of Sweden's exports go to Europe, with Germany being the largest market, ahead of Norway. It is therefore very much in Sweden's interest, also from a trade perspective, that Germany navigates this tricky path forward.

Our two countries have both strong economic ties and shared values that provide a stable foundation for continued constructive cooperation in areas such as trade, security, and sustainable investment—in both directions.

Mattias Keresztesi

Partner & Director, New Republic