The latest report on corporate distress across Europe, by the global law firm Weil, shows Germany once again ranked as the country with the highest level of corporate distress across Europe.

Germany hit a corporate distress value of 6.3 in November, well above the European average of 3.6. There is little reason for optimism that Germany might manage to close this gap in 2024.

In its first-ever forecast of corporate distress, Weil projects Germany will continue its unfortunate residency at the top of the pile this year, far ahead of the second-ranked U.K.

Germany continues to reel from Russia’s invasion of Ukraine, which caused energy prices to strike in a manufacturing-heavy economy that was dependent on Russian oil and gas. As an export-intensive economy, the country has also been rocked by falling demand in major markets like China. 

Uncertainty is also weighing on companies and causing investment to stutter. An election in February is expected to bring huge support for the far-right AfD party, while the election of Donald Trump brings fresh uncertainty over tariffs that could be slapped on the U.S.’s imports from Germany.

The country’s manufacturing sector has been contracting for two-and-a-half years, based on Purchasing Managers’ Index (PMI) data. Meanwhile, on Wednesday, Germany’s statistics agency confirmed the country’s economy had contracted for the second year in a row as it continued to battle severe economic headwinds. 

Andrew Wilkinson, partner and co-head of Weil’s London restructuring practice, says corporate default has been rising in Germany as well as across Europe. 

The decision by several automotive companies and suppliers to reduce production, engage in layoffs, reduce working hours, and cut investment has also had outsized effects in Germany, particularly among producers in the supply chain.

Wilkinson says it’s difficult to compare current levels of distress with previous spikes, such as during the COVID-19 pandemic and the global financial crisis because the response isn’t the same.

“What’s striking about the peaks of corporate distress at the time of the financial crisis and then the pandemic is they fall away incredibly quickly,” Wilkinson told Fortune.

The reason, Wilkinson says, is rapid financial support from the government to prop up the economy. 

“This is a bit different,” Wilkinson said of Germany and Europe’s economic struggles. 

“This is about the effects of a whole series of issues, including some very intractable geopolitical issues, where there is not across the G7 a consensus at all about how you address them.”

There is a caveat, Wilkinson says, to Germany’s potential grim milestone of COVID levels of corporate distress. The service sector experience the highest level of distress during the pandemic as lockdowns effectively shut down the industry. Because Germany’s representation in services is relatively small, it was less impacted than the U.K., for example. 

Regardless, it highlights the level of precarity many German firms face in 2025 after living through nearly three years of a historically challenging economic landscape.

Wilkinson said there are scenarios that could play out in Germany’s favor, however unlikely they seem right now.

One would be a durable settlement in Ukraine, one that would be agreeable enough to see sanctions removed. But with myriad geopolitical risks, Germany’s export-focused, industrial heavy economy should brace for more pain this year.