Olaf Scholz outlines vision to revive Germany's economy

Chancellor Olaf Scholz addresses economic challenges in Volkswagen's historic home.

Olaf Scholz, Germany's chancellor, attends a Social Democrats (SPD) party campaign event in Wolfsburg, Germany, on January 17, 2025. Photo by Krisztian Bocsi/Bloomberg/Getty Images

By Alana Salsabila and Clarisa Sendy

Chancellor Olaf Scholz on Friday unveiled his plan to tackle Germany's economic challenges during a campaign event in Wolfsburg, the historic headquarters of Volkswagen. Speaking to enthusiastic supporters, Scholz addressed the energy crisis, high inflation, and manufacturing decline that have plagued Europe's largest economy.

Scholz, leader of the center-left Social Democratic Party (SPD), defended his government's economic policies while acknowledging the need for renewed efforts to bolster growth. "We face significant challenges, but we must remember that our interconnectedness with the global economy is also a strength," Scholz said. "We must defend that strength by investing here in Germany."

Germany's economy, once a symbol of European resilience, shrank for the second consecutive year in 2024, sparking intense debate ahead of the February 23 snap election. Scholz’s visit to Wolfsburg, home to Volkswagen, highlighted the city’s struggles as emblematic of the broader national crisis.

Volkswagen, grappling with high costs, weak demand in China, and a challenging transition to electric vehicles, recently announced plans to cut 35,000 jobs by 2030. While the company avoided factory closures in Germany, the mood in Wolfsburg remains grim.

Scholz acknowledged these difficulties but stressed the importance of fostering economic growth. "We need new opportunities that create jobs across the country," he said, emphasizing the potential of green industries, renewable energy, and reduced bureaucratic barriers to stimulate economic recovery.

During his speech, Scholz called for reforming Germany’s debt brake, a fiscal rule that limits government borrowing. Critics argue the policy has hindered necessary investments in infrastructure, education, and technological innovation.

"We cannot allow outdated financial restrictions to hold back our future," Scholz said, urging voters to support policies that prioritize sustainable growth.

Scholz also criticized the opposition, particularly Friedrich Merz’s conservative Christian Democratic Union (CDU), for proposing tax cuts for the wealthy. "This is not the path to a stronger Germany," he argued, contrasting his vision of inclusive growth with what he called the CDU’s "short-sighted policies."

Scholz faces an uphill battle as his SPD lags in opinion polls, with just 16% of voter support. The CDU, led by Merz, leads with around 30%, while the far-right Alternative for Germany (AfD) has surged to second place at 20%.

The chancellor's three-party coalition collapsed in November due to budget disputes, setting the stage for next month’s election. Critics have often pointed to Scholz’s reserved demeanor as a disadvantage in connecting with voters.

Despite these challenges, Scholz remains optimistic about his economic vision. "Germany has always risen to the occasion during times of difficulty," he said. "Together, we can create a brighter future."

Wolfsburg's struggles as a microcosm

Wolfsburg, a city of 128,000 in Lower Saxony, has long been synonymous with Volkswagen’s success. However, the company’s recent challenges underscore the broader economic difficulties facing Germany.

Volkswagen’s struggles to adapt to the electric vehicle market, coupled with high domestic costs, have taken a toll. The company’s decision to scale back operations highlights the urgency of addressing systemic issues in Germany’s manufacturing sector.

Scholz’s emphasis on green industries and renewable energy aligns with efforts to modernize Germany’s industrial base. By focusing on sustainable technologies, the chancellor hopes to position the country as a leader in the global energy transition.

As Scholz campaigns to retain his position, his message is clear: Germany’s economic future depends on bold investments, structural reforms, and inclusive growth. Whether his vision resonates with voters remains to be seen, but the stakes are high for a country grappling with economic uncertainty.

The February election will serve as a referendum on Scholz’s leadership and his ability to navigate Germany through this pivotal moment. For Wolfsburg and cities like it, the outcome could shape their economic prospects for years to come.