Brussels, July 19, 2025 — Europe’s once-dominant industrial sector is grappling with a deepening economic crisis, as high energy costs, global competition, and structural inefficiencies threaten the continent’s manufacturing backbone.

Recent data from Eurostat reveals that EU industrial output fell by 5.8% year-on-year, marking the third consecutive monthly decline. Trade unions and industry leaders have sounded the alarm, warning of a looming wave of deindustrialization that could permanently erode Europe’s economic base.

Germany, long considered the engine of European industry, is at the epicenter of the crisis. Major firms like Volkswagen and Thyssenkrupp have announced factory closures, layoffs, and profit slumps, with industrial production now 20% below its 2017 peak. Analysts attribute the downturn to the collapse of Germany’s export-driven model, which relied heavily on cheap Russian energy and robust demand from China.

The broader European industrial landscape is similarly strained. 

Energy-intensive sectors such as chemicals, steel, and automotive have curtailed production or relocated operations to regions with lower energy costs, including Asia and the United States. The EU’s ambitious climate goals and regulatory burdens have further complicated recovery efforts, prompting calls for a bold, unified industrial strategy.

In response, policymakers are exploring reforms to revitalize manufacturing, including investments in green technologies, digital transformation, and supply chain diversification. However, experts warn that without swift and coordinated action, Europe risks losing its competitive edge in the global clean-tech race.

“The crisis is not just cyclical—it’s structural,” said Tobias Gehrke of the European Council on Foreign Relations. “Without intervention, Europe’s deindustrialization will only accelerate”.

As the EU prepares for upcoming elections and economic stimulus debates, the fate of its industrial sector remains a defining challenge for the continent’s future.