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Topic - Economic Policy

Boost the economy, safeguard the future

Introduction

The Federal Ministry for Economic Affairs wants to strengthen SMEs and the industrial sector, boost new investments, shape digitisation, support innovative start-ups and make the energy transition a success. The ministry aims to foster competitive companies, strong growth, and a well-functioning Europe that regards itself as a community united by shared values. Our goal is to safeguard the prosperity of tomorrow.

Germany is on a solid growth trajectory. Our GDP grew by 2.2% (after adjustment for inflation) in 2017. This was the highest growth rate since 2011. This year, in 2018, the German economy is expected to add another 2.4% (according to the annual projection). Unemployment is at a 25-year-old low and employment and self-employment reached another all-time high last year, at 44,6 million people. This strong economic momentum is mainly driven by the domestic economy and especially by consumer spending and investment in housing construction.

Focus on new challenges

Digitisation and demographic change are bringing about a radical transformation of the world of work. Germany will only be able to cope with the challenges of the coming decade if it continues to focus on its strength, takes a bold step into the digital age, and keeps up the economic momentum.

The Federal Ministry for Economic Affairs and Energy is in the process of drafting important policy action to safeguard prosperity and employment and to create a regulatory environment that promotes modernisation. We will therefore continue to design our economic policy to promote investment and sustainable growth. This is good for growth, for our companies, and for our society.

For a list of policy actions initiated by the Federal Ministry for Economic Affairs and Energy, please click here ((in German) PDF: 188 KB).

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

© Getty Images/Thomas Trutschel

Stimulate investments

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 is dependent on modern infrastructure.

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.

Spending more on infrastructure and less on red tape

Investments in the transport infrastructure have increased by more than 20% since since the beginning of the last parliament, to reach €12.8 billion in 2017. The financial burden on municipalities has been eased to free up scope for them to make essential investments.

In the context of its investment strategy, the Federal Government is planning to take additional measures to provide a lasting boost to investment activity. Recently, two Acts to Reduce Bureaucracy were adopted, in addition to improvements to the policy environment for venture capital and start-ups in Germany and to the promotional programmes for young businesses. This has helped create a solid basis for a forward-looking investment policy.

New Age for Entrepreneurship

Strengthening SMEs, promoting innovative start-ups

In order to make sure German Mittelstand companies can 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 a number of different initiatives and programmes.

At the heart of these is a drive for innovation and a state-of-the-international-art financing system for start-ups and young companies at the growth stage. Also important are efforts to relieve companies of red tape, to facilitate company hand-overs, and to set the right framework to ensure a secure supply of skilled professionals.

Start-ups in particular are like an elixir of life for the economy. Their 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.

Better support for entrepreneurs

The Federal Ministry for Economic Affairs and Energy wants to improve the start-up environment in Germany and also at European level. This will allow young companies and start-ups to benefit not only from programmes like EXIST or INVEST, but also from a pan-European regulatory environment, good financing opportunities and lean administrative structures. The Federal Ministry for Economic Affairs and Energy wants to reduce bureaucracy to a minimum and further improve young companies’ access to venture capital.

For this reason, the ministry has expanded the volume of the EXIST and INVEST programmes and created new funding instruments, notably the coparion venture capital fund. The Act to Reduce Bureaucracy has delivered a significant reduction in the amount of red tape faced by people starting out in business. In a next step, it is now time to create greater transparency around the various funding instruments available, and to reduce the obstacles prospective entrepreneurs are having to overcome.

EU flag symbolizes European Economic Policy; Source: iStock.com/instamatics

© iStock.com/instamatics

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 actively involved in shaping globalisation. It is stimulating growth at European level, developing the European Economic and Monetary Union, strengthening EU institutions, and providing incentives for sustainable activities on the part of the Member States.

Similarly, the Federal Government is also working to step up Germany’s international economic relations and to shape them in a responsible way. A fair and transparent competitive environment is essential to the successful development of our international economic relations.

Shaping global trade

The multilateral trading system remains at the heart 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 negotiations, the results of which can then be fed into the WTO framework at a later stage. At the same time, the Federal Government is also working towards bilateral free trade agreements and investment treaties with important third countries. In view of the market size and market potential, this notably applies to the countries of the Asia-Pacific region.

Renewing the European promise

Recent developments in the EU have made it all the more necessary to renew the European promise and deliver on it. The Federal Government holds that the goal of future reforms must be to develop an Economic and Monetary Union that is able to compete internationally. Europe should succeed in delivering on the promise to promote peace, democracy, the rule of law, security, stability, prosperity and jobs, and to offer stable public finances, a modern statehood, an attractive investment environment 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.

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

© Getty Images / Rafe Swan

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 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 terms of new market opportunities, sales markets and jobs. They also offer a wide range of opportunities for individuals, with more products to choose from, new ways to communicate, and more flexible working arrangements.

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. The ninth amendment to the Act against Restraints on Competition (ARC), which was adopted by the Federal Cabinet on 28 September 2016, is an example of legislation that responds to the advance in digitisation. The Federal Government wants to ensure coherent regulation and supervision in order to promote digitisation in Germany. The regulatory framework set out by the IT Security Act is to be developed and extended to ensure higher security levels for IT systems. The General Data Protection Regulation has put in place a uniform European legal framework for the processing of personal data. The Federal Government’s reform of procurement law has established simple and user-friendly procurement rules.
Europe’s ability to compete internationally much depends on the completion of the uniform digital single market. As a general rule, we therefore want to refrain from enacting national regulations unilaterally, thus making it easier for companies to implement their digital business models all over Europe.

Shaping the course of digitisation

Programmes designed to promote the roll-out of high-performance broadband cable, provide funding for other digitisation projects, and to support our Plattform Industrie 4.0 (in German) are key to shaping the course of digitisation. A new European digital regulatory policy will have to focus on two goals: first of all, we ought to create a level playing field for investment and innovation, which will generate inclusive growth. Secondly, we must protect people’s personal rights and their right to data sovereignty.

The Digital Summit (in German) 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.

For a summary of the last Federal Government’s digital policy action, see the Report on the Digital Agenda 2014-2017 (in German). It shows that, in many areas, Germany is well-prepared for the digital future.

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. As a next step in the energy transition, a consistent overall framework is needed to bring together the various fields of action, including energy efficiency, renewables, the electricity market, the grids, and digitisation.

The energy transition eis 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. At the core of the energy transition are energy efficiency and a further increase in renewables capacity. Just like our economy as a whole, the energy transition must be underpinned by the principles of the social market economy. This means that we need to bring together economic success and a highly level of social security. The share of renewables in our electricity supply is to increase to 65% by 2030, which is a major leap. We must ensure that our energy supply remains stable, at a cost that does not harm our businesses’ ability to compete or our consumers’ ability to buy.

Some smart reforms are needed to further integrate renewables in the electricity market and to make the electricity market 2.0 fit for a growing share of renewables. The Federal Ministry for Economic Affairs and Energy is putting the conditions in place for a digital infrastructure which will link up more than 1.5 million electricity generators and large consumers.

How to be more energy-efficient – ‘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 must be 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.

Further information

  • 31/01/2018 - Press release - Economic Situation and Cyclical Development

    Press release: “A strengthened economy ready to embrace the future”: Federal Government adopts 2018 Annual Economic Report

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