We've all heard about the lavish French pensions pushing France toward a debt crisis, but France is not alone. Look at Italy, Austria, or Greece, they have similar levels of pension spending as a percentage of GDP. Demographics make it worse. In the not-too-distant future, just a few years from now, a large cohort of boomers will reach retirement age, pushing pension and healthcare spending much higher. No politicians dare state the obvious and tell their voters that pensions are unsustainable. It's pure math, current pension levels will overstretch budgets and the ability to issue more debt at reasonable rates in several European countries. The ECB will of course step in and monetize sovereign debt, devaluing the euro and making everyone in the Eurozone poorer. Pensions are just one of many Europe’s problems. If you own euro-denominated assets, hedge them. The euro will follow the Japanese yen's path and lose value.

Remember when Germany was known for its cars? Not anymore, German vehicle production has fallen by 31% since 2015, the steepest drop among major producers, while China’s has risen by more than 40%. The same pattern appears elsewhere. Machinery and plant engineering remain well below earlier peaks as Chinese rivals close the technology gap and undercut on price. Chemicals, the classic early-warning sector, have seen multi-year output declines, with capacity utilization stuck around 70–75% amid rising pressure from Chinese overcapacity. Energy-intensive industry overall remains roughly 15% below 2018–2022 levels. The old German model of high-quality engineering and reliable exports is under structural strain. High energy and labor costs, stagnant productivity, dense regulation, and years of complacency have eroded competitiveness, while adaptation to electrification and software has lagged. What has expanded is the public sector. Employment in government, education, and health has grown even as manufacturing and private jobs have shrunk. Aggregate growth since 2020 has come almost entirely from higher public consumption and investment, financed by rising debt, private-sector contributions have been negative. This is not sustainable. Without lower energy and regulatory costs and genuine pressure to innovate, the relative decline of Germany’s industrial core will continue. Higher debt masks the decline for now, but Germany without its industry won’t stay prosperous forever.