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Michael Hüther IW-Policy Paper No. 1 8. January 2025 An agenda for the new legislative period: Competitiveness and transformation

The German business model, based on industry, services, exports, and regional balance, faces significant pressure.

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Competitiveness and transformation
Michael Hüther IW-Policy Paper No. 1 8. January 2025

An agenda for the new legislative period: Competitiveness and transformation

German Economic Institute (IW) German Economic Institute (IW)

The German business model, based on industry, services, exports, and regional balance, faces significant pressure.

Since 2018, industrial production has declined, while gross value added remains stable but stagnates. The reasons are a decreasing international division of labor, shorter value chains, and national factors. Additionally, export dynamics are weakening, and Germany can no longer benefit from the global economy as it once did. This is linked to declining price competitiveness, reduced innovation, and increasing geopolitical risks. Insufficient levels of investment, particularly government investments, lag international standards and lead to outdated infrastructure and a lack of modernization. The competitiveness of the German economy is threatened, with stagnant productivity and weak growth projections. The commitment to a climate-driven transformation by 2045 adds further pressure. The new government has to response by focusing on supply-side policies, promoting investment and innovation. Measures like deregulation, tax cuts, and reforms in energy pricing and social contributions are essential. A cohesive strategy between fiscal, monetary, and wage policies is critical for sustainable growth.

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Competitiveness and transformation
Michael Hüther IW-Policy Paper No. 1 8. January 2025

An agenda for the new legislative period: Competitiveness and transformation

German Economic Institute (IW) German Economic Institute (IW)

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Markus Demary / Tobias Hentze / Jasmina Kirchhoff / Michael Voigtländer IW-Policy Paper No. 2 22. January 2025

An agenda for more private investment

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

IW

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Philipp Deschermeier IW-Trends No. 3 14. September 2024

IW Population Forecast 2024

The demographic transition poses major challenges for policymakers, business and society as a whole. Policymakers seeking solutions to these challenges mainly base their decisions on the quantitative data of population forecasts.

IW

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