Overview: The world in the second week of December 2025 between ceasefires and economic crises

Red alert for the economy: Waves of bankruptcies and the struggle over the combustion engine – A week that shows how our world is currently undergoing radical change.

In the second week of December 2025, the crises of the present coalesced into a perfect storm. While the world's attention was focused on the tough peace negotiations in Ukraine and the aggressive rhetoric emanating from Washington, Europe was grappling internally with its economic identity. From the ruins of Syria to Germany's insolvency courts, from the geopolitical power plays in the Caribbean to the infrastructure triumph in the Alps: the events of these days paint a picture of a world order losing its grip. This retrospective illuminates the decisive developments of a week in which diplomacy clashed with raw power and economic realities overtook political dreams.

When diplomacy becomes a farce and markets hold their breath

In the crucial week of December 2025, the world order revealed itself in all its ambivalence. While Nobel Prize ceremonies in Oslo and Stockholm celebrated the spirit of human achievement, battles raged once again on the borders of Southeast Asia, major powers negotiated the division of European territories, and global supply chains were torn apart under the pressure of protectionist tariff policies. The events of December 8th to 12th, 2025, not only marked the end of a turbulent year but also revealed the tectonic shifts of a world order teetering between old certainties and new uncertainties.

Syria one year later: The deceptive hope for democratic change

December 8th marked the first anniversary of the overthrow of Syrian dictator Bashar al-Assad. What was celebrated a year ago as a historic turning point has increasingly revealed itself as a complex mix of hope and disillusionment. The Islamist militia Hayat Tahrir al-Sham, which played a key role in the regime's downfall, assumed control of the war-torn country and promised a peaceful transfer of power and democratic elections within four years. But reality painted a more nuanced picture. While the capital, Damascus, remained relatively calm and the daily bombings ceased, violence continued to simmer in the surrounding areas.

The Syrian minorities, particularly Alawites, Christians, and Druze, viewed the new rulers with deep mistrust. The bloody massacres of Alawites in March 2025 had left deep wounds and raised the question of whether the new leadership would actually be capable of ensuring an inclusive state. For Germany and Europe, the situation in Syria presented a political dilemma. CDU chancellor candidate Friedrich Merz had already declared in December 2024 that the civil war was over and Syrian refugees could return. However, experts and human rights organizations issued urgent warnings against premature repatriations, as the security situation for many population groups remained precarious.

Developments in Syria revealed a fundamental dilemma of the international order: how could a democratic transition succeed after decades of brutal dictatorship when the new rulers themselves came from Islamist circles and had no democratic tradition to their name? The second transitional government under President Ahmed al-Sharaa, presented in March 2025, comprised 22 ministers but had no prime minister. This suggested a concentrated power structure that granted the president sweeping authority. At the same time, the security situation was tense, and the terrorist group Islamic State exploited the instability to intensify its activities.

From an economic perspective, Syria faced an enormous challenge. After more than a decade of civil war, its infrastructure lay in ruins, millions of people were living in exile or internally displaced, and its economic system had largely collapsed. Reconstruction would take decades and require investments in the hundreds of billions. But without political stability and international recognition, foreign investors remained hesitant. The question of Syria's future was therefore not only a humanitarian and political challenge, but also an economic one of immense proportions.

Ukraine between Trump and Putin: The struggle for territorial compromise

While Syria commemorated the first anniversary of its liberation, Ukraine faced a potentially fateful turning point. The peace negotiations, which had been ongoing for weeks between Washington, Kyiv, and indirectly Moscow, reached a critical juncture in early December. US President Donald Trump exerted massive pressure on Ukrainian President Volodymyr Zelenskyy to agree to a peace plan that entailed far-reaching territorial concessions to Russia.

The 28-point plan drafted by Trump's son-in-law Jared Kushner and special envoy Steve Witkoff stipulated that Ukraine should relinquish control of the Donbas region and forgo NATO membership. As a compromise, the US proposed the idea of ​​a so-called free economic zone in the part of the Donbas still controlled by Ukraine. For Zelenskyy and the Ukrainian leadership, these demands were hardly acceptable. They amounted to nothing less than a capitulation to Russian aggression and the legitimization of territorial conquests through military force.

Trump grew increasingly frustrated with the slow progress. In an interview, he declared himself extremely frustrated with Ukraine's delaying tactics and called on Zelensky to hold new elections. His argument was cynical: Ukraine could not be considered a democracy if it hadn't held elections for years. Trump deliberately ignored the fact that martial law made holding elections legally impossible and that Ukraine was fighting for its survival on a daily basis. Zelensky responded pragmatically, stating his willingness in principle to hold elections, provided the US and Europe guaranteed Ukraine's security.

The European partners, above all Germany under Chancellor Friedrich Merz, France under President Emmanuel Macron, and Great Britain under Prime Minister Keir Starmer, desperately tried to play a role in the negotiations. On December 8, the European leaders met with Zelenskyy in London to discuss a revised peace plan. But the reality was sobering: Europe had hardly any influence on the course of the negotiations. Trump made it clear that the US had taken the lead and that European concerns carried only limited weight.

In a keynote address in Berlin, NATO Secretary General Mark Rutte issued a stark warning about the consequences of a fragile peace. Russia is dangerous not only for Ukraine, but for all of Europe, Rutte declared. "We are Russia's next target, and we are already in danger," the Dutchman stated. Rutte called on NATO member states to massively increase their defense spending and continue to provide military support to Ukraine. He predicted that within five years, Russia could be prepared to use military force against NATO.

From an economic perspective, the war in Ukraine placed an immense burden on all involved. Ukraine required billions of euros in external aid every month to maintain its state apparatus and military. Europe and the US had already provided over €200 billion, but the willingness to continue this support indefinitely was steadily waning. At the same time, the European economy suffered from the indirect consequences of the war: high energy prices, disrupted supply chains, and uncertainty hampered investment and growth. A peace agreement that included territorial concessions might bring short-term economic relief, but it would undermine the fundamental principle of the inviolability of borders and, in the long run, jeopardize the stability of the entire region.

Thailand and Cambodia: The forgotten border war in Southeast Asia

While the world's attention was focused on Ukraine, another conflict escalated in early December, one that had the potential to destabilize an entire region. Following a supposed ceasefire in October, fighting between Thailand and Cambodia flared up again. Thailand launched its first airstrikes against Cambodian positions since the start of the conflict, justifying these actions with alleged troop movements and rearmament on the Cambodian side.

The border conflict, which began with initial exchanges of fire in May 2025, escalated dramatically in July. At least 43 people died, and over 300,000 were forced to flee. The historical dispute over the border, some of which dates back to colonial times, became intertwined with current nationalist movements in both countries. The governments in Bangkok and Phnom Penh used the conflict to distract from internal problems and to stoke nationalist sentiment.

US President Trump announced his intention to mediate. However, his credibility was damaged after he had already announced impulsive and ill-conceived interventions in other conflicts. China, which maintained close economic ties with both Thailand and Cambodia, also attempted to play a mediating role. The Southeast Asian group ASEAN sent observers in August, but their mandate was limited and the ceasefire agreements were repeatedly violated.

Economically, the conflict was devastating for both countries. Thailand closed all border crossings with Cambodia, bringing bilateral trade to a standstill. Cambodia imposed an import ban on Thai products, including fossil fuels and foodstuffs. Hundreds of thousands of Cambodian migrant workers employed in Thailand returned home for fear of reprisals. This significantly exacerbated Cambodia's already strained economic situation. The conflict highlighted how quickly regional tensions could escalate when nationalist rhetoric clashed with unresolved historical disputes.

Europe's industry caught between the end of combustion engines and Chinese competition

While war and diplomacy raged on the fringes of Europe, the continent at its core grappled with its economic future. On December 11th, EU Commission President Ursula von der Leyen and the Chairman of the European People's Party, Manfred Weber, agreed to a relaxation of the planned 2035 phase-out of combustion engines. Instead of a 100 percent reduction in CO2 emissions, only a 90 percent reduction would now be mandatory.

The decision was the result of massive pressure from the automotive industry and several member states. German Chancellor Friedrich Merz had demanded in a letter to the EU Commission that highly efficient combustion engines be permitted even after 2035. He received support from Italian Prime Minister Giorgia Meloni and Polish Prime Minister Donald Tusk. The automotive industry argued that the original targets were unrealistic and jeopardized jobs. Environmental groups and the Green Party sharply criticized the weakening of the regulations, calling it a dark day for climate protection.

The debate surrounding the phase-out of combustion engines revealed the deep uncertainty within European industry in the face of Chinese competition. Chinese manufacturers had gained a significant lead in electric vehicles and battery technology and were aggressively pushing into the European market. German automakers saw their market share in China shrink dramatically. German exports to China were projected to decline by over ten percent in 2025. At the same time, imports from China increased, driven by electric vehicles, textiles, and electronic devices.

Germany's trade deficit with China reached a new record high of approximately €87 billion in 2025. This was a dramatic increase compared to the roughly €20 billion in 2020. China had once again overtaken the US as Germany's most important trading partner, albeit under completely different circumstances. While Germany had previously generated export surpluses, it now imported significantly more than it exported. This represented a structural problem that fundamentally challenged the German economy.

The weakening of the supply chain law on December 9th fit seamlessly into this picture. The EU agreed that the regulations for the protection of human rights in supply chains should henceforth only apply to large companies with more than 5,000 employees and an annual turnover of at least €1.5 billion. Originally, significantly lower thresholds had been planned. Furthermore, civil liability at the EU level was to be eliminated, thus depriving victims of human rights violations of the right to legal recourse. The weakening was justified by the argument of not overburdening the European economy. Critics saw it as a sellout of ethical principles in favor of short-term competitive advantages.

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Germany in a recession trap: Bankruptcies and structural problems

Germany's economic situation at the end of 2025 was alarming. The country was in its third consecutive year of recession. The number of corporate insolvencies reached an estimated 24,000, the highest level in over ten years. Small and medium-sized enterprises (SMEs) were particularly hard hit. Companies with 51 to 250 employees experienced an above-average increase in insolvencies of over 16 percent. Larger companies with revenues of five million euros or more were also affected. Their number of insolvencies was more than double the pre-pandemic level.

Estimated losses from corporate insolvencies amounted to approximately €33.4 billion in the first half of 2025. This corresponded to an average loss of about €2.8 million per insolvency case. The manufacturing, construction, hospitality, and transportation and logistics sectors were particularly affected. The causes were manifold: high energy prices, rising wages, excessive bureaucracy, structural burdens, and weak domestic demand hampered the economy.

Private households also suffered increasingly from the economic downturn. The number of consumer insolvencies rose to around 37,700 in the first half of 2025. Over 5.6 million people were considered over-indebted. The labor market, which had long acted as a stabilizer of the German economy, showed clear signs of weakness. The number of employed people had been shrinking since mid-2024. In the summer of 2025, unemployment exceeded three million for the first time, a level last seen in 2010.

The inflation rate in November 2025 was 2.3 percent, marking the fourth consecutive month above the European Central Bank's target of two percent. Services were primarily responsible for the price increase, rising by 3.5 percent. Food prices increased moderately by 1.2 percent, while energy prices fell slightly. Core inflation, which excludes energy and food, was 2.7 percent.

The structural problems of the German economy were deeply rooted. For decades, Germany had benefited from cheap energy from Russia, a strong industrial sector, and export surpluses. But this model no longer worked. Energy prices remained persistently high after the end of Russian gas supplies, industry suffered from international competition, and export markets shrank. At the same time, successive governments neglected necessary investments in infrastructure, digitalization, and education. The consequence was a gradual deindustrialization that cost jobs, value creation, and entrepreneurial potential.

Property tax reform: Fairness or bureaucratic monster?

On December 10th, the Federal Fiscal Court handed down a ruling of considerable importance to millions of property owners in Germany. In three test cases, the court upheld the constitutionality of the property tax reform based on the federal model, which has been in effect since the beginning of 2025. The plaintiffs had argued that the standardized valuation method led to injustices because it did not adequately consider the individual characteristics of the properties.

The Federal Fiscal Court rejected this argument, emphasizing that the legislature is permitted to enact generalized and standardized regulations within the framework of a mass procedure. The property tax reform became necessary after the Federal Constitutional Court declared the old valuation system unconstitutional in 2018. The standard values ​​on which the old property tax was based dated back to 1964 in West Germany and even to 1935 in East Germany. They had long since ceased to reflect actual property values.

The new property tax was based on the assessed value, which was determined according to detailed criteria such as standard land value, living space, plot size, and building age. This assessed value was multiplied by the property tax rate and the municipal multiplier to calculate the actual tax burden. The Federal Constitutional Court had mandated that the legislature create a new regulation by the end of 2024. The new property tax came into effect in January 2025.

The reform was highly complex and, in many cases, led to significantly higher tax burdens. Property owners were required to submit a property tax return by the beginning of 2023, providing detailed information about their property. Many felt overwhelmed by the bureaucracy and resented the increased taxes. The Federation of Taxpayers and the homeowners' association Haus & Grund announced their intention to file a constitutional complaint. They argued that the legislature had chosen a basis for assessment that could not be accurately determined in a mass process.

From an economic perspective, property tax was an important instrument for financing municipal services. In 2024, municipalities collected over €16 billion in property tax. This revenue financed schools, kindergartens, roads, and other public infrastructure. The reform was intended to ensure a fairer distribution of the tax burden and to be based on current property values. However, implementation was anything but smooth. Many municipalities had not yet finalized their tax rates, leading to uncertainty. Some federal states subsequently adjusted their calculation models due to unexpected shifts in the tax burden.

The Koralm Railway: Austria's infrastructure triumph as a counterpoint

While Germany struggled with recession and structural problems, neighboring Austria celebrated the opening of a monumental project on December 12th. The Koralm Railway, a 126-kilometer high-speed rail line between Graz and Klagenfurt, began operation after 27 years of construction. Its centerpiece was the 33-kilometer Koralm Tunnel, the longest railway tunnel in Austria and the sixth longest in the world.

The new line reduced travel time between the two cities from around three hours to just 41 minutes. Equipped with a top speed of 250 kilometers per hour and state-of-the-art railway technology, the Koralm Railway represented a milestone for public transport in Austria. The project cost approximately 5.9 billion euros, of which the European Union contributed over 600 million euros. Its full impact would be realized once other major projects, such as the Semmering Base Tunnel, were completed, which was scheduled to accelerate travel between Vienna and Graz from 2030 onwards.

The Koralm Railway was more than just a railway line. It symbolized Austria's ability to successfully implement long-term infrastructure projects despite all obstacles. While construction projects in Germany regularly failed due to bureaucracy, cost overruns, and delays, Austria proved that ambitious projects were achievable when political will, clear planning, and sufficient funding came together. The line was part of the Baltic-Adriatic Corridor, which was intended to facilitate freight transport between Northern Europe and the Mediterranean. This had not only national but also European significance.

The oil maneuver in the Caribbean: Trump's flexing of muscles against Venezuela

While Europe grappled with its own problems, US President Donald Trump escalated a conflict on the other side of the world. On December 10, the US seized an oil tanker off the coast of Venezuela. The tanker was carrying approximately 1.1 million barrels of crude oil, which, according to the US government, was part of an illegal network for transporting sanctioned goods. Trump announced that the oil would be kept and threatened further operations. "It will soon begin on land," he said cryptically, without providing details.

Venezuela's authoritarian president, Nicolás Maduro, accused the US of trying to force regime change in order to gain access to the country's vast oil reserves. Venezuela possesses the world's largest oil reserves, but production has declined dramatically in recent years due to sanctions, mismanagement, and a lack of investment. Trump denied having any interest in Venezuelan oil, but his actions cast doubt on this claim.

The escalation off the coast of Venezuela fit into a pattern of impulsive and often contradictory foreign policy actions by the Trump administration. For months, Washington had been exerting massive pressure on Caracas, officially citing the fight against drug trafficking. US forces had amassed a powerful force of warships, fighter jets, and soldiers in the Caribbean. Several speedboats, allegedly transporting drugs, had been sunk, some with fatal consequences.

The opposition in Venezuela, led by Nobel Peace Prize laureate María Corina Machado, was in a difficult position. Machado was awarded the Nobel Peace Prize in Oslo on December 10, but it remained unclear until the last minute whether she would be able to attend in person. She had been living underground in a secret location for eleven months. The opposition accused Maduro of manipulating the July 2024 election and demanded his resignation. However, without international support, they lacked the power to bring about regime change.

Economic outlook: Europe between stagnation and hesitant recovery

The global economy presented a mixed picture at the end of 2025. Despite Trump's chaotic trade policies, the US recorded robust growth of a projected 2.3 percent. Fears that high tariffs would lead to a recession had not materialized. US companies had stocked up in advance and rerouted supply chains to minimize the impact. US inflation remained moderate, and the Federal Reserve signaled further interest rate cuts.

Europe, on the other hand, struggled with stagnation. Germany, traditionally the engine of the European economy, was in its third consecutive year of recession. Gross domestic product was projected to grow by only 0.2 percent in 2025, or even shrink. For 2026, economists predicted a slight recovery to growth of 0.8 to 1.4 percent, but uncertainties remained high. The structural problems—high energy prices, demographic change, insufficient investment in digitalization and infrastructure, and a weakening industrial sector—would continue to burden Germany for years to come.

The eurozone as a whole experienced only moderate growth in 2025. The European Central Bank lowered interest rates to stimulate the economy, but the effect remained limited. Uncertainty surrounding US trade policy, geopolitical tensions in Europe, and the structural problems of many member states dampened investment activity. China, long the engine of global economic growth, struggled with its own problems: a weakening real estate sector, high debt levels, and declining consumption weighed on its economy.

Germany's foreign trade performed disappointingly in 2025. Exports declined, particularly to the key markets of China and the USA. The trade deficit with China reached a record high, while surpluses with European partners only partially offset the losses. Germany's current account balance, for decades a symbol of economic strength, shrank significantly. Economists expected a further deterioration to 2.8 percent of gross domestic product by 2026.

The world is reorganizing: What the end of old certainties means for you now

The events of December 8th to 12th, 2025, revealed a world in upheaval. The old certainties of the liberal, rules-based order were eroding rapidly. Territorial integrity became negotiable, international institutions lost their significance, and economic interdependence was increasingly perceived as a risk rather than an opportunity. At the same time, viable alternatives were lacking. The new multipolarity was chaotic and conflict-ridden, characterized by power politics and short-term national interests.

Europe was in an existential crisis. Economically stagnant, politically divided, and security-wise dependent on an unpredictable American partner, the continent struggled to maintain its role in the world. Its industrial base was eroding, competitiveness was declining, and necessary investments in future technologies were failing to materialize. At the same time, the political will to implement painful reforms was lacking.

Germany, once the economic powerhouse of Europe, exemplified this decline. Three years of recession, record numbers of bankruptcies, shrinking exports, and an aging industrial sector painted a picture of a country that was falling behind. The property tax reform, the debate surrounding the phasing out of combustion engines, and the weakening of the supply chain law were symptoms of a profound uncertainty about the right path forward.

Yet amidst this bleak diagnosis, there were also glimmers of hope. The Koralm Railway demonstrated that ambitious infrastructure projects were feasible. The awarding of the Nobel Peace Prize to María Corina Machado served as a reminder that civic courage and the fight for democracy continued despite all adversity. And the persistent negotiations for peace in Ukraine, however frustrating and compromise-ridden they were, demonstrated that diplomacy had not yet completely succumbed to pure force.

The week of December 8th to 12th, 2025, did not mark an abrupt turning point, but rather was part of a gradual transformation process. The world was realigning itself, and Europe had to find its place in this new order. Whether it succeeded would determine whether the continent remained a shaping force in the 21st century or became a pawn of more powerful actors. Time was of the essence, and the challenges were immense. But all was not yet lost, as long as the will to renew had not completely died out.

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