Lower energy costs, less taxes, more incentives for investment, greater flexibility in labor law, reduction of social contributions and, above all, less bureaucracy – the next German government should succeed in the economy.

“The economy shrinks. Unemployment rates are increasing. And Germany is no longer such an attractive location for investors, ”summarizes German employers’ president Rainer Dulger. There is also an increasingly lack of trained workforce. The legislative framework and bureaucracy have increased in recent years, as has been the case with labor costs and other business expenses. “The more expensive an investment location, the more advantages it should have. But this is no longer the case in Germany. ” Compared to the rest of the planet the country is no longer competitive.

The role of industry

The industry is due to more than a quarter of the country’s economic power. After two years with recession, the German Industry (BDI) estimates that production is now significantly lower than five years ago. Similarly, the elements for other branches are also negative. Throughout the country, production, construction, sales and consumption are reduced.

The federal government’s latest annual financial report expects a slight growth of 0.3%for 2025, with economists advising the government to observe an persistent recession in all areas. And most importantly: exports are constantly decreasing.

Problems for German exports

For decades, Germany was based on the following business model: a cheap market for raw materials and accessories from abroad and subsequently production and export “Made in Germany” products with German know -how and cheap energy.

The Russian invasion of Ukraine, the energy crisis, the inflation and the forced transition to a climate neutral economy resulted in increased energy costs – a serious blow to sectors that consume large amounts of energy. Important sectors of the economy, such as engineering and electrical equipment, have fallen particularly, while the chemical industry stabilized at low levels after the dramatic decline recorded in 2023.

Many businesses ‘migrate’

The economy needs a significant reduction in the cost of electricity in order to become competitive again. Equally important, however, is the reduction in the cost of bureaucracy. The Munich IFO Institute estimates that businesses should only accumulate € 65 billion only to fulfill their bureaucratic obligations.

The business disposition is extremely negative and the uncertainty about the economic prospects. Instead of investing in their country, many businesses are already turning to more attractive locations abroad.

Solutions in mortgage and labor market are sought

In a letter to the leaders of the Bundestag parties, Rainer Dulger and the leaders of four more large associations call on political leadership to focus more on rural areas post -election, among others, improving transfers and energy infrastructure, investing more in digitization, In housing and health infrastructure, as well as in educational, social and cultural institutions.

Polls show that the economy and migration are the most important issues for citizens, with most respondents choosing the CDU/CSU Union as the best chance of solving problems – CDU candidate for Chancellor Friedrich Merz It is he who is also ahead of electoral polls.

However, the next government seems almost certain to be a coalition government. The CDU will probably ally with the SPD or the greenery. In the negotiations on the formation of a government, they are expected to play an important role in external issues, such as the management of changes globally – especially after Donald Trump’s return to the White House.

How will Germany-US relations differentiate?

The developments on the opposite bank of the Atlantic are also a reason for concern for German companies. In 2024 the US was again, for the first time in ten years, Germany’s most important trading partner, as 10% of German exports absorbed.

Many German companies expect that international competition will be negatively affected by Trump’s moves, which seeks to control trade and is imposing duties on imports – an unpleasant development primarily for the pharmaceutical industry, but also for the engineering and automotive industry, which the US market is crucial. Germany sells more goods in the US than it buys from there. And that is exactly what disturbs Trump, who aims to reduce the German trade surplus and attract more German companies to carry part of their production to the US.

Where will the money be found?

The above further increases the pressure for the next German government, which will be called upon to make Germany again attractive. The CDU/CSU Union promises to reduce business taxation to 25% by maximum and energy costs. The SPD and the Greens suggest subsidies for industry: Anyone who invests in Germany should be rewarded. In addition, it is imperative to improve and modernize infrastructure across the country.

All this will of course need money – and this is where the problem is. The debt is explicitly provided in the German Constitution and therefore the state can spend as much money as it receives. Therefore, the next government should find a solution on this issue as well, as the abolition of the debt is not under discussion. The most likely scenario seems like a reform that will allow investment funding in Germany through lending.

Curated by: George Passas