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Topic - Economic Policy

Make Germany fit for the future - harness the opportunities of digital transformation

Introduction

Basing its policies firmly on the principles of the Social Market Economy, the Federal Ministry for Economic Affairs and Energy has taken a lot of important actions to foster inclusive growth. We aim at secure, good jobs and equal opportunities. We aim to foster digitisation, fair world trade and a successful energy transition. We aim to foster competitive companies and a functioning Europe which is a community of values. We aim to foster the prosperity of tomorrow.

Germany is enjoying solid growth: in 2016, the German economy grew by 1.9 percent. Unemployment is at its lowest level for 25 years – with more than 43.5 million people in work, Germany is experiencing a record level of employment. Real net wages and salaries have increased by more than 1.4% a year during this legislative term; part of this is due to the increased level of employment, and part of it to collective wage agreements and the minimum wage. The ongoing economic dynamism is mainly being driven by the domestic economy, and particularly by consumer spending and investment in housing construction.

Focus on new challenges

The influx of refugees, the global economic environment and demographic change are creating great challenges for government, commerce and society. The Federal Government is orienting its economic and fiscal policy towards putting the growth dynamism on a permanent footing and boosting the potential gross domestic product. It is therefore continuing its economic policy aimed at investment and sustainable growth. A key role here is played by digitisation, which is increasingly impacting on the economy and society.

In the course of this legislative term, the Economic Affairs Ministry has launched important measures to safeguard growth and prosperity and to put a good policy environment in place for modernising Germany’s economy. You can find the Economic Affairs Ministry’s mid-term review of the 18th legislative term here ((in German) PDF: 188 KB).

Inclusive growth: a strong basis for successful integration

Inclusive growth means opening up opportunities for all sections of the population and making possible fair participation in the prosperity that is earned.

Inclusive growth creates the basis for a stable society and a successful economic system. In view of new challenges due to globalisation, digitisation and demographic change, there is a need to shift policies towards inclusive growth which gives all citizens the change to make their own contribution towards economic prosperity and to benefit from it.

Fair societies are better positioned to ensure cohesion, an open attitude to the future, a willingness to achieve, and an ability to innovate: all of this is needed in a time of radical advances in technology. This forms the basis for the key economic policy tasks for the next ten years.

Important milestones in the 18th legislative term

1

05/06/2014

Greater transparency on exports of military equipment

2

01/08/2014

Thorough reform of the Renewable Energy Sources Act

3

20/08/2014

Digital Agenda 2014-2017 adopted

4

28/08/2014

Commission of experts set up to boost investment

5

11/12/2014

Reducing bureaucracy: the Act to Reduce Bureaucracy

6

12/12/2014

New Alliance for Initial and Further Training in place

7

03/03/2015

Alliance for the "Future of Industry" set up

8

18/03/2015

Stricter regulation of small arms exports

9

14/04/2015

Launch of Plattform Industrie 4.0

10

23/07/2015

Launch of "Future of SMEs" Action Programme

11

17/12/2015

Launch of “refugee guides” for refugees

12

14/03/2016

Presentation of Digital Strategy

13

18/04/2016

Biggest reform of public procurement for more than 10 years

14

02/07/2016

Federal Government creates package of measures for more electric mobility

15

08/07/2016

Biggest reform of the electricity market since the deregulation of the 1990s

16

20/07/2016

Start-up financing boosted by a billion euros

17

27/07/2016

Greater legal certainty for wifi operators

18

28/09/2016

Competition law adapted to digitisation

19

12/10/2016

Minister Gabriel proposes initiative to equip vocational schools

20

19/10/2016

Reorganisation of responsibility for nuclear waste management

21

26/10/2016

Federal Government presents report on “Quality of Life in Germany”

22

30/10/2016

EU and Canada have signed the CETA free trade agreement

23

01/12/2016

Economic Affairs Ministry launches G20 digital process

24

08/12/2016

Ministerial permission for the Edeka/Kaiser’s Tengelmann merger safeguards more than 15,000 jobs

For the first time, parliament is being informed about final decisions on the granting/refusal of licences to export military equipment. In addition to the annual Military Equipment Export Report, there is an interim report which informs about the export licences for the first half of each calendar year.

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In the 2014 Renewable Energy Sources Act, the Economic Affairs Ministry laid the foundations for an affordable and reliable energy transition that can be planned. The reframing of the Renewable Energy Sources Act was an important first step in re-booting Germany’s energy transition.

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Digitisation offers major opportunities for long-term prosperity and a good quality of life for the people in Germany. The German Government seeks to actively promote and shape the transition into the digital era. The guiding principles are set out in the 2014-2017 Digital Agenda.

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The commission of high-level experts from theory and practice, which was convened by former Economic Affairs Minister Sigmar Gabriel, is examining economic policy measures to improve the level of investment dynamism in Germany. The recommendations by the "Fratzscher Commission" form the basis for the investment strategy during this legislative term.

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The German government adopts a comprehensive package of measures to relieve the business sector of unnecessary red tape. The Act to Reduce Bureaucracy II, which was adopted on 3 August 2016, also considerably reduces the amount of administration that companies need to deal with.

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In the Alliance for Initial and Further Training, businesses, trade unions, the Federal Government and the Länder aim to strengthen the dual vocational training system and agree on specific measures to reach even more young people.

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An alliance of numerous partners from industrial associations and trade unions is developing an agenda for a medium-term and long-term outlook for industry in Germany, as well as very specific measures to boost Germany’s industrial competitiveness.

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Guided by the principle of a restrained, responsible policy on the export of military equipment, the German government has tightened the controls on exports of small arms. The export of components and technology to third countries is strictly regulated, and principles are established for the labelling of small arms.

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As the economy becomes increasingly digitised and networked, the number of links in development, production and sales, both nationally and globally, is increasing. A coordinated shaping of digital structural change is the main aim of Plattform Industrie 4.0.

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The Economic Affairs Ministry, the Federation of German Industries (BDI), the Association of German Chambers of Commerce and Industry (DIHK) and the German Confederation of Skilled Crafts (ZDH) have agreed on common goals for a modern SME policy.

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In order to give refugees long-term prospects, the Economic Affairs Ministry and the German Confederation of Skilled Crafts launch the “refugee guides” initiative. Along with the network “Companies integrate refugees” of the Economic Affairs Ministry and the Association of German Chambers of Commerce and Industry, the refugee guides support companies wishing to train or recruit refugees.

The Digital Strategy 2025 builds on the Digital Agenda and flags up what urgent next steps need to be taken as Germany undergoes the digital transformation – e.g. on infrastructure expansion, the promotion of investment and innovation, and smart networking.

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In its procurement law reform, the Economic Affairs Ministry is boosting competition and putting the conditions in place for procurement procedures to be undertaken more quickly and more efficiently. To achieve this, we are bringing the award of public contracts into the digital age – in the interest of social, ecological and innovative procurement.

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In order to develop the market for electric mobility, the Federal Government is investing a billion euros: an "environmental bonus" grant is awarded to those purchasing new electric vehicles. At the same time, the Federal Government is providing €300 million towards improving the charging infrastructure.

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We have embarked on a new chapter of the energy transition in the form of three pieces of legislation: the Act on the Further Development of the Electricity Market, the 2017 Renewable Energy Sources Act, and the Act to Digitise the Energy Transition. This has put a coherent framework in place for the integration of renewables.

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More support for start-ups, strong incentives for growth and innovation: the two venture capital instruments, the ERP/EIF Fund of Funds and the European Angels Fund, are topped up by a billion euros to €2.7 billion. Together with the funding for the ERP/EIF Growth Facility, which has also been increased, the total volume of these three venture capital instruments will be €3.2 billion.

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The entry into force of the Second Act Amending the Telemedia Act gives individual and small and large commercial providers greater legal certainty when they offer their wifi to be used by others: the liability exemption now applies to service providers of all sizes and unreservedly covers all forms of liability for illegal behaviour by third parties.

The ninth amendment to the Act against Restraints on Competition (ARC), extends competition law to cover internet-based and data-based business models. The aim is effective merger control and protection against misuse of market power.

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In order to anchor digitisation in the dual vocational training system and to upgrade the technology in the vocational schools, Minister Gabriel proposes an initiative to equip vocational schools and calls for the possibility for more cooperation between the Federation and the Länder on education issues.

The responsibility for nuclear waste management has been redistributed. The planned act secures the long-term financing of the decommissioning and dismantling of the nuclear power plants and for the disposal of the waste, without an excessive transfer of the costs to society.

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The government’s “Quality of Life in Germany” report provides a compass for an economic and social policy of social participation and “prosperity for all”. The report is based on a citizens’ dialogue involving more than 15,000 people, and looks beyond the usual economic policy indicators.

CETA is opening up new opportunities for business and setting standards: with an impressive Sustainability Chapter and modern investment protection in line with German proposals, the free trade agreement between the EU and Canada points to the direction for the future.

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The Economic Affairs Ministry hosted the first G20 Digital Ministers Meeting in Düsseldorf on 6-7 April 2017 as part of its G20 Presidency. In this process, the G20 ministers for the digital economy discuss a joint international framework for action on digitisation.

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In order to safeguard jobs and uphold workers’ rights, Minister Gabriel issues ministerial permission for the merger of the supermarket chains of Kaiser’s Tengelmann and Edeka. The reasons override the restraints of competition identified by the Federal Cartel Office.

Investment first

Investing in the future

The Federal Government is taking a comprehensive approach to strengthening both public and private-sector investment. A modern industrial and services society needs modern infrastructure. The proportion of spending on investment in the federal budget has risen by more than a third in the current legislative term, and stands at €36.1 billion in the 2017 budget.

In order to continue to safeguard the viability of Germany’s economy, the government is strengthening private-sector and public-sector investment in Germany and Europe. Investment and innovations are key to higher competitiveness, lasting prosperity and a better quality of life. A modern, efficient infrastructure and investment in education, science and research form the basis for future growth.

More money for infrastructure – relieving the burden on municipalities

The investment in transport infrastructure has risen by more than 20 percent since the beginning of the legislative term, to €12.8 billion in 2017. The fact that the financial burden on the municipalities is being reduced by €22 billion (2013-2018) creates scope for them to invest. Of this amount, €3.5 billion is being passed via the Municipal Investment Promotion Fund to fiscally weak municipalities with the greatest need. Further to this, the Federal Government is helping the Länder and the municipalities to cope with the refugee situation by providing relief of almost €8.5 billion in 2016 and €6 billion in 2017. The funding being provided to the Länder for housing construction has also been topped up by a total of €5 billion up to 2020, and a total of €2.1 billion has been allocated to the broadband roll-out.

In the context of its investment strategy, the Federal Government has also taken further measures to lastingly boost investment activity during this legislative term: It has adopted two Acts to Reduce Bureaucracy, with measures to improve the policy environment for venture capital and start-ups in Germany and to expand the promotional programmes for young businesses.

In the context of its investment strategy, the Federal Government has also taken further measures to lastingly boost investment activity during this legislative term: it has adopted two Acts to, with measures to improve the policy environment for venture capital and start-ups in Germany and to expand the promotional programmes for young businesses.

Construction of track rails symbolizes Investment Strategy; Source: Getty Images/Thomas Trutschel

© Getty Images/Thomas Trutschel

Strengthening social cohesion

Inclusive growth safeguards our future

Fair participation is a strong basis for a stable society. The Economic Affairs Ministry shapes the economic conditions in line with the principles of the social market economy: for prosperity, social cohesion, social security and fair participation for all.

Participation in society for all, a better education system, a fair tax system – these are key factors for a successful future in Germany. The fact that economic growth is not sufficient as the sole indicator of prosperity is shown by the Federal Government’s report on the quality of life in Germany, which draws on a broadbased citizens’ dialogue and has been evaluated by academics. The report identifies further important aspects of the quality of life, such as health, educational opportunities, access to culture, freedom, social cohesion, political codetermination and environmental compatibility.

Last year, an average of 43.5 million people were in gainful employment, more than ever before. Real net wages and salaries have increased by more than 1.4% a year in real terms during this legislative term. The introduction of the nation-wide statutory minimum wage on 1 January 2015 has improved the income situation of many workers in the low-wage sector. But despite these positive developments, market incomes in Germany are increasingly unequally distributed compared with the 1990s and with other OECD countries.

So creating inclusive growth is a central task. It means opening up opportunities for all sections of the population and also making possible fair participation in the prosperity that is earned. In addition to decent work and fair wages that reflect performance for the broad base of workers, keeping pace with productivity gains and the rise in prosperity, there is a need for first-class education and training at schools, in higher education, and in vocational training.

Actively supporting a changing society

Digitisation and demographic change are bringing about a radical transformation of the world of work. Germany can only cope with the challenges of a good development in the coming decade if it continues to rely on the strengths of the German economy, boldly shapes the transition to the digital age, and reverses the trends to split society into winners and losers. If a country is to have lasting economic dynamism, successful companies and economic success, it needs a social balance and strong social cohesion. Find out more (in German).

Participation in society for all, a better education system, a fair tax system – these are key factors for a successful future in Germany. The fact that economic growth is not sufficient as the sole indicator of prosperity is shown by the Federal Government’s report on the quality of life in Germany. In a ten-point plan, the Economic Affairs Ministry presented proposals on 16 March 2017 on how we can combine further economic growth with inclusive growth.

Construction workerssymbolizes Social Market Economy; Quelle: Getty Images/Helen King

© Getty Images/Helen King

Digitisation

Creating a regulatory framework for the digital transition

Digitisation brings with it major opportunities for society and opens up enormous potential for additional value creation. The Federal Government is embracing the digital transformation and is working with businesses, trade unions, the scientific community and civil society to put the conditions in place for successful digitisation.

The changes to everyday life, commerce and work caused by digitisation are similar in scale to those resulting from the industrial revolution. They offer great economic opportunities in the form of new market opportunities, sales markets and jobs. They also offer a wide range of opportunities for individuals, with a greater diversity of products, new ways to communicate, or the possibility to be flexible about when and where to work.

However, the digital transition requires an “ordo-liberal” framework which ensures intact competition, takes greater account of the special features of digital markets, and clearly assigns responsibilities. For example, the ninth amendment to the Act against Restraints on Competition (ARC), which was adopted by the federal cabinet on 28 September 2016, responds to the advance in digitisation. The IT Security Act has significantly improved the security of IT systems. The General Data Protection Regulation is putting a uniform European legal framework in place for the processing of personal data. The Federal Government’s reform of procurement law has established simple and user-friendly procurement rules.

Comprehensive strategy for the digital transformation

The Federal Government’s Digital Agenda 2014 - 2017 summarises the key issues and fields for action relating to digitisation. The Digital Strategy 2025, which was presented by the Economic Affairs Ministry in March 2016, looks ahead to the action needed up to 2025.

In the context of the Digital Strategy 2025, the Economic Affairs Ministry presented the “Digital Platforms” Green Paper at the end of May 2016, setting out the way forward to a regulatory framework for the digital world. The digital platform economy opens up numerous new possibilities, but also places a lot of demands on companies, employees and consumers. It is therefore important to strike the right regulatory note. The Green Paper served as the basis for a discussion and consultation process involving the whole of society. Representatives of business, science, society and politics had the opportunity to submit comments. As a result of this consultation process, the Economic Affairs Ministry published the White Paper on Digital Platforms in March 2017.

The goals and measures contained in it reflect the perspectives of all the stakeholders in terms of a digital ordo-liberal policy. There are two aspects that are of key importance here: First of all, we ought to make sure to generate inclusive growth. This can be achieved by creating a level playing field for investment and innovation. Secondly, we must protect people's personal rights and data sovereignty. The White Paper also sets out ideas for policies to be implemented at European level as digitalisation does not stop at national borders.

In order to flesh out the measures contained in the Digital Strategy 2025, the Economic Affairs Ministry presented the “Digitisation Action Programme” on 22 September 2016. It reaches beyond the issue of digital platforms to propose further key measures for a successful digitisation policy. The aim is to improve the conditions for the economy in order to promote innovation and investments in digitisation and to usher in a new age for entrepreneurship.

The Digital Summit (previously the National IT Summit) is the central platform for cooperation between the worlds of politics, business, academia and society as we shape the digital transformation. The most recent Summit meeting was held in the Rhine-Neckar Metropolitan Region from 12 to 13 June 2017.

Computer chip and gas fiber, symbolic of digitisation; Source: Getty Images / Rafe Swan

© Getty Images / Rafe Swan

New Age for Entrepreneurship

Strengthening SMEs, promoting innovative start-ups

To help the German Mittelstand companies to remain vigorous, strong and innovative in the face of a wide range of challenges in the age of globalisation, demographic change and the energy transition, the Federal Ministry for Economic Affairs and Energy – the ministry responsible for SMEs – has launched the “Future of SMEs” Action Programme”.

Key issues include strengthening the innovative capacities, internationally competitive financing for start-ups and growth, successful company hand-overs to the next generation, securing skilled workers, and pruning red tape.

Start-ups in particular are like an elixir of life for the economy: creative ideas, innovative business models and new jobs modernise the economic structure, boost competitiveness and bring diversity into the social market economy. It is therefore necessary to boost the rate at which new businesses are being set up in Germany. There is a lot of potential for a greater desire to start out afresh and go into business – for a new age for entrepreneurship. The Economic Affairs Ministry aims to strengthen the spirit of entrepreneurship and to boost the number of start-ups in Germany, by making it more attractive for people to start up their own business.

More support for entrepreneurs: the New Age for Entrepreneurship initiative

The Economic Affairs Ministry has launched various measures in the context of the New Age for Entrepreneurship initiative since 1 December 2015. In order to support young companies, it has expanded the established programmes like EXIST and INVEST and set up new funding instruments like the coparion venture capital fund.

The policy environment has also been improved: the Act to Reduce Bureaucracy has significantly reduced the amount of red tape faced by people starting out in business. In order to improve the financing conditions for young, innovative, fast-growing companies, Deutsche Börse also announced the launch of a stock exchange segment for SMEs and young, fast growing companies in particular on 21 November 2016.

Pressing ahead efficiently with energy transition

Expanding renewables and boosting energy efficiency

The energy transition is one of the Federal Government’s key projects for a secure, environmentally compatible and economically successful future. Energy efficiency, renewable energy, the electricity market, energy efficiency, the grids and digitisation used to be treated as separate elements, but have now been turned into a consistent overall framework for the energy transition, so that the next phase of the energy transition can begin.

The energy transition is not only making it possible to phase out nuclear power by the end of 2022, but is also helping Germany to attain its climate targets. An efficient and sparing use of energy and an ongoing expansion of renewable energy are the two core strategies for the continuation of the energy transition. The energy-policy triangle consisting of affordability, energy security and environmental compatibility continues to be the guiding principle of energy policy.

The 2017 Renewable Energy Sources Act, the Act on the Further Development of the electricity market and the Act to Digitise the Energy Transition will integrate renewables more deeply into the electricity market and make the Electricity Market 2.0 fit for growing shares of renewables. The reforms put the conditions in place for a digital infrastructure which links up more than 1.5 million electricity generators and large consumers. This is the biggest reform of the electricity market since the deregulation of the 1990s and heralds a new chapter in the energy transition.

Using energy carefully: Germany makes it efficient

For the energy transition to be a success, it is necessary to significantly improve energy efficiency. The expansion of renewable energy on its own will not be enough for us to meet the climate targets set out in the decisions from the Paris conference and in the Energy Concept. The goal is to consume as little energy as possible and to use renewables to cover the remaining needs. The key instrument steering energy efficiency policy in Germany is the National Action Plan on Energy Efficiency (NAPE), which defines the strategic direction of efficiency policy and brings together key measures, programmes and instruments.

In future, the “efficiency first” principle must become even more firmly anchored in our energy policy. For this reason, the Federal Government has made available more than €17 billion of funding to help private households, companies and municipalities to invest in energy efficiency measures. The broadbased information and activation campaign "Germany makes it efficient" offers comprehensive and easy-to-understand information about the advisory services and promotional programmes of the Federal Government and the Länder.

Developing Europe

Building a strong Europe – strengthening international trade

Prosperity, growth and employment in Germany are inseparably linked to the political and economic development in Europe and the world. The Federal Government is utilising the opportunity to lay down fair and sound rules for ever deepening globalisation and to play an active role in it. It is stimulating growth at European level, developing the European Economic and Monetary Union, strengthening the joint institutions, and providing incentives for sustainable activities on the part of the Member States.

The Federal Government is also working outside Europe’s borders to intensify and responsibly shape international economic relations. If international economic relations are to develop successfully, we need fair and transparent conditions for competition. In shaping these, the Economic Affairs Ministry aims to ensure that high standards of protection, particularly in the field of protection for the environment, workers, consumers and data, as well as IT security and public services, can be maintained or put in place, and that the precautionary principle is retained. For example, CETA, the European-Canadian free trade agreement, is an ambitious agreement which is not only about free, but also about fair trade, and which sets a benchmark for future agreements.

Giving global trade a fair regulatory framework

At the same time, the multilateral trading system remains the focus of European and German trade policy. It brings industrialised, emerging and developing economies together in a transparent and reliable regulatory framework for global trade. Strengthening the World Trade Organization is therefore an important policy of the Federal Government.

In view of the bogged-down negotiations in the current world trade round, the Federal Government is interested in more flexible, plurilateral negotiation formats which subsequently feed their results into the WTO framework. At the same time, the Federal Government is also working towards bilateral free trade agreements and investment agreements with important third countries. In view of the market size and market potential, these include the countries of the Asia-Pacific region.

Making the European promise more visible again

After the decision by the British people to leave the EU, we must make the key promises of European unity more visible and fill them with new life. In the view of the Federal Government, the goal of future reforms must be to develop an internationally competitive Economic and Monetary Union: a Europe which fulfils the promise to promote peace, democracy, the rule of law, security, stability, prosperity and jobs, with stable public finances, a modern statehood, attractive investment conditions and an open internal market. Furthermore, it is important to develop a long-term vision of the institutional future of the Economic and Monetary Union.

Further information

  • 23/02/2017 - Press release - European Economic Policy

    Press release: Minister Zypries visiting Paris to hold economic policy talks

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  • 17/01/2017 - Press release - Investment Strategy

    Press release: Symposium on Modernising Germany – Innovation Agenda #de2025: Federal Minister for Economic Affairs and Energy Sigmar Gabriel advocates making investment a priority

    Bilderstrecke

    Open detail view
  • 27/01/2016 - Press release - Economic Situation and Cyclical Development

    Press release: 2016 Annual Economic Report: "Making Germany fit for the future - taking the opportunities of digital transformation"2016 Annual Economic Report: "Making Germany fit for the future - taking the opportunities of digital transformation"

    Open detail view
Employee in a company symbolizes economy policy; Source: Getty Images/Monty Rakusen