From Investment Readiness to Insolvency Risk: The Chain of Errors in the Mittelstand

At first glance, the economic situation of Germany’s Mittelstand appears contradictory: many companies are ready to innovate, possess ideas, capital, and order books—yet are increasingly coming under pressure. Rising insolvency figures, postponed investments, and growing uncertainty define the picture. This development is neither surprising nor the result of isolated missteps. It is the consequence of a chain of political failures, short-term crisis measures, and neglected structural reforms that has grown over many years. The following chronological error analysis shows how the Mittelstand gradually arrived at its current situation—and why the present wave of bankruptcies is less a sign of economic failure than a delayed reality check.

1. Years Before the Crises: Structural Warning Signs Were Ignored

Long before the pandemic and the energy crisis, key weaknesses were already apparent:

increasing bureaucratization,
rising tax and contribution burdens, and
an emerging shortage of skilled labor due to demographics and gaps in education.

Instead of counteracting these trends, regulations were expanded further, approval procedures were prolonged, and reforms postponed. The Mittelstand continued to function nonetheless—thanks to strong personal responsibility, solid foundations, and financial reserves. The problems were known but were considered manageable.

Error: Structural risks were politically managed rather than resolved.

2. Pandemic Phase: Stabilization Without Cleansing

With the outbreak of the COVID-19 pandemic, the state intervened massively:

support programs,
short-time work schemes, and
temporary suspension of the obligation to file for insolvency.

These measures prevented an economic collapse and were justified in the short term. At the same time, however, a necessary market cleansing failed to occur. Companies with pre-existing structural deficits continued to survive—without having to adapt their business models.

Error: Stabilization was not linked to reform pressure or modernization.

3. Energy Crisis: Cost Explosion Meets Old Failures

The energy crisis intensified existing problems:

sharply rising energy prices,
increasing government intervention, and
additional reporting requirements and regulations.

Energy-intensive and labor-intensive mid-sized companies in particular came under pressure. Investments in efficiency, digitalization, or new products would have been necessary—but were blocked by uncertainty and rising costs.

Error: High burdens were introduced without simultaneously providing planning certainty and relief.

4. After the Crises: Investment Will Meets Inability to Act

After the acute crises, a paradoxical picture emerges:

Order books are stable in many places.
Capital and investment ideas are available.
The willingness to transform exists.

Yet three bottlenecks prevent action:

bureaucracy that ties up time and resources,
tax and contribution burdens that make investments economically unattractive, and
shortages of skilled labor that make growth practically impossible.

Investments are postponed or scaled back—not due to a lack of courage, but due to a lack of reliable framework conditions.

Error: The state calls for transformation but blocks it operationally.

5. The Wave of Bankruptcies: The Delayed Reality Check

Rising insolvency numbers are not a sudden collapse, but the delayed consequence of earlier decisions:

expiring support measures,
rising interest rates, and
permanently higher costs.

Companies that were kept afloat for years by special measures are now failing. Economic reality is catching up with what was politically postponed.

Error: Problems were deferred—and are now returning all at once.

6. The Present: Political Stagnation as an Amplifier

To this day, key reforms remain incomplete:

no consistent reduction of bureaucracy,
no clear skilled labor strategy, and
no reliable tax and energy policy.

Instead of clear priorities, companies experience announcements, contradictory signals, and short-term corrections. Trust is eroding. Investment decisions are replaced by efforts to secure liquidity.

Error: A lack of reliability prevents future-oriented investment.

Conclusion: Not a Lack of Entrepreneurial Spirit, but of Framework Conditions

The Mittelstand has not failed. It has been blocked—by a sequence of:

neglected reforms,
crisis-related postponements, and
persistent political stagnation.

The current situation is therefore no coincidence, but the result of a long-standing chain of errors. Without structural corrections, the real threat is not a lack of ideas—but the loss of the economic substance that has sustained Germany to date.