Germany has a massive lack of investment, which dampens productivity, thereby reducing economic growth and increasingly endangering prosperity.

An agenda for more private investment
German Economic Institute (IW)
Germany has a massive lack of investment, which dampens productivity, thereby reducing economic growth and increasingly endangering prosperity.
But it's not just the government that has invested too little in the past. Companies also invested significantly less than in previous decades. The new federal government should tackle this urgent task immediately and pave the way for a necessary increase in public and private investment.
The modernization of the infrastructure in Germany is absolutely necessary. The new federal government should pay particular attention to covering the necessary investment requirements when preparing the budget. A prerequisite for successful implementation is sufficient financing. Without changes to the debt brake or the establishment of an infrastructure fund, financial transactions offer a viable solution for some areas.
Tax incentives are necessary to promote the general investment activities of companies in the country. Germany is one of the countries with the highest corporate tax rates and, in particular, does not provide enough support for investments in innovation. In view of the weak economic growth, the right tax incentives must urgently be provided after years of standstill in tax policy. It would be conceivable to initially strengthen private investment activities with immediate depreciation or an investment bonus in order to, in a next step, improve the quality of the economy through a gradual and reliable reduction in corporate tax rates. Loan financing would be justified from an economic point of view, as greater economic dynamism would lead to returns to the state treasury over time.
In addition, structural reforms are necessary to streamline bureaucratic processes and speed up planning and approval procedures. The example of the construction industry shows how bureaucratic hurdles can limit productivity. Instead of being able to take advantage of economies of scale, construction activity remains small-scale and not very innovative. This also jeopardizes the necessary expansion of construction activity given the shortage of skilled workers. Overall, the task of the new federal government is to identify those that can be consolidated, standardized or deleted in the current complex network of regulations, consisting of a large number of individual measures and different levels of responsible authorities.
Start-ups in Germany often lack sufficient access to capital. The lagging behind of the German venture capital market compared to global competitors such as the US market becomes clear, especially in late-stage financing rounds. Innovative start-ups are important enabler of structural change and strengthen the innovative strength and economic growth of the economy. The first good initiatives from the BMWK and the federal government in the last legislative period as well as the need formulated in various federal election programs to focus on innovative start-ups and strengthen their access to financing point the way in the right direction.

An agenda for more private investment
German Economic Institute (IW)
More on the topic

Civil service at federal, states and municipalities
In recent years, the federal, state and local governments have significantly increased their staffing levels. Nevertheless, many places are complaining about a shortage of staff, partly because increasing regulation is putting a strain on public sector staff. ...
IW
The EU and money: Who pays, who gets?
The German net position fell slightly in 2023 compared to the previous year, from 19.7 billion euros to 17.4 billion euros. However, it is still significantly higher than in the pre-Brexit period.
IW