Germany at a Crossroads: BDI's Vision for a Return to Growth

The Current State of the German Economy

The German economy is under immense pressure. Structural reforms have been neglected for too long, leading to a rapid erosion of Germany’s competitiveness. This decline began as early as 2017, with the growth engine sputtering. The COVID-19 pandemic and Russia’s war of aggression against Ukraine have further derailed the German economy, accelerated its decline and diminished its share in global exports. Germany's attractiveness to investors has waned, and the country faces the risk of creeping deindustrialization.

Immediate action is necessary. The new government must implement bold reforms that extend beyond a single legislative period to restore Germany’s status as a competitive, innovative, and sustainable economy.

Three-Pronged Approach for a National Change of Course

The BDI proposes several measures to reignite Germany’s growth:

Trust and Confidence in Businesses: Bureaucratic burdens remain a significant obstacle, with companies reporting administrative costs amounting to around 6% of their revenues. The BDI calls for a cultural shift toward trust-based regulation, urging collaboration across federal, state, and EU levels to streamline procedures. The complexity of rules, particularly from Brussels, must be reduced to enable businesses across Europe to thrive.

Budget Prioritization: With limited fiscal space, public spending must focus on growth-driving investments in infrastructure, transformation, and resilience. Key recommendations include:

• Competitiveness in Energy Costs: Reducing electricity taxes for industries to the EU minimum and capping grid charges to ensure a stable energy supply.
• Tax Reform: Capping corporate tax burdens at 25%, abolishing the solidarity surcharge (Solidaritätszuschlag), and offering long-term investment incentives.
• Infrastructure Investments: Mobilizing €315 billion for transport, education, and digital transformation projects to unlock growth potential.
• Fostering Research and Innovation: Strengthening the research ecosystem with targeted funding, professional transfer structures, and focusing on achieving the 3.5% GDP target for R&D.

Balancing Ecology and Economy: Germany must create a business climate conducive to success in green and digital technologies. By 2030, a global market worth over €15 trillion annually could emerge. Without embracing this shift, Germany risks deindustrialization, jeopardizing its position as a global leader in innovative sectors.

A Global Perspective: Resilience, Trade, and Leadership

The BDI stresses the importance of international partnerships, resilient supply chains, and securing access to raw materials. To build economically advantageous alliances, the EU must urgently finalize new trade agreements by adopting more compact and flexible negotiation approaches. Sustainability goals must align with the requirements of Europe's partners. Additionally, separating investment protection from free trade agreements could expedite their conclusion.

Tariffs should be minimized, with the EU promoting balanced compromises confidently. Despite prevailing challenges, WTO rules and governance must be upheld. Strengthening partnerships with developing countries is essential, and the German government should strongly support the European Global Gateway initiative.

The BDI also highlights the need for higher defense spending and a comprehensive raw materials strategy to secure economic sovereignty in an increasingly volatile global landscape. The Bundeswehr must be well-equipped, requiring increased military spending, long-term commitments, and faster procurement processes. Collaboration with startups can expedite innovation in military technology.

China remains one of the most significant markets for German industry. However, a clear and unified European strategy is essential to balance openness with protective measures against competitive distortions and dependencies. The concept of "de-risking" is central to ensuring Europe can withstand systemic competition with China.

A Call to Action

Germany’s next government has the opportunity and the responsibility – to reset the nation’s economic trajectory. The BDI’s vision presents a roadmap for aligning national and international priorities to build a thriving, resilient economy at the heart of Europe.

The BDI position papier for the general election 2025 can be accessed via the following link (only available in German).