<h1>Economic stagnation restrains growth as export competition and policy uncertainty depress domestic demand and investment.</h1> Germany's economy contracted for a second consecutive year due to weak consumer spending, stronger international competition-especially from China-in key export sectors, higher energy costs, and high interest rates that deter investment. Structural issues such as excessive bureaucracy and skilled-labour shortages exacerbate stagnation. The downturn has political consequences, including government instability and election-driven debate over policy responses, while trade-policy risks and geopolitical uncertainty pose further downside risks despite a resilient labour market.