COMMISSION STAFF WORKING DOCUMENT 2022 Country Report - Germany Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Germany and delivering a Council opinion on the 2022 Stability Programme of Germany
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Germany, digital transformation, economic policy, economic recovery, economic reform, energy policy, investment, labour market, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2022  SWD(2022) 606 final  COMMISSION STAFF WORKING DOCUMENT 2022 Country Report - Germany Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Germany and delivering a Council opinion on the 2022 Stability Programme of Germany {COM(2022) 606 final} - {SWD(2022) 640 final}  
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

Germany’s strong economic 
performance faces challenges  

was 

economy 

losing 
Germany’s 
momentum in the run-up to the COVID-19 
crisis.  Its  growth,  which  was  above  the  EU 
average  in  the  decade  following  the  global 
financial  crisis,  halved  to  just  over  1%  in 
2018-2019. This was the result of a slowdown 
in  global  growth  and 
trade,  weakening 
productivity growth and transformations in the 
car 
industry.  Regional  GDP  and  growth 
disparities,  which  have  declined  since  2001, 
remain high and reflect a continued east-west 
divide. 

Effective  policy  support  has  cushioned 
the  economic  impact  of  the  pandemic. 
Short-time  work  schemes  helped  contain  job 
losses  and  employment  recovered  to  pre-
for  companies 
pandemic 
averted 
income  support 
shielded  household  incomes.  As  a  result,  real 
GDP declined by 4.6% in 2020, less than in the 
EU  and  the  euro  area.  Public  investment 
increased  by  6%,  cushioning  the  shortfall  in 
overall investments. 

levels.  Support 
insolvencies  and 

The  geopolitical  context  combined  with 
supply  bottlenecks  weighs  on  growth. 
While  exports  recovered  strongly  in  2021, 
continuing  supply  shortages  of  key  raw 
materials  and  components  have  delayed  the 
recovery in private equipment investment and 
halted the expansion of public investment. The 
re-emergence of pandemic-related restrictions 
in  late  2021  and  early  2022  also  held  back 
the  health 
consumer  spending.  Just  as 
situation, 
industrial  and  service  activity 
showed  tentative  signs  of  improvement  in 
early-2022,  disruptions  due 
to  Russia’s 
invasion  of  Ukraine  weakened  growth  and 
spurred 
after 
recovering  moderately,  by  2.9%  in  2021,  real 

Nevertheless, 

inflation. 

GDP  is  expected  to  continue  expanding  in 
2022  by  1.6%  due  to  significant  pent-up 
investment and consumer demand. 

The  large  and  persistent  current  account 
surplus  reflects  among  others  high 
savings  relative  to  investment.  While  the 
surplus  has  declined  from  its  2015  peak  of 
8.6%  of  GDP,  it  continues  to  remain  high  in 
2021,  at  7.4%  of  GDP,  as  a  significant  share 
of  consumption  and  investment  could  not 
materialise amid the COVID-19 pandemic. It is 
forecast  to  decline  to  6.4%  in  2022  because 
of the increase in commodity prices and trade 
disruption  and  to  rebound  slightly  by  2023, 
remaining  above 
indicated  by 
the 
fundamentals.  Massive  fiscal  support  helped 
shore  up  private  sector  balance  sheets.  In 
2021,  the  corporate  sector  increased  its  net 
lending (surplus  savings)  for  a  second  year in 
a  row.  Also  households’  net  lending  remained 
higher  than  its  pre-pandemic  level.  Germany 
has  increased  public  investment  and  plans 
further  increases  in  the  coming  decade.  The 
resources  so  far  allocated  may  nonetheless 
not cover all large investments needs and may 
have  relatively  limited  impact  on  the  current 
account surplus. (1).  

level 

while 

infrastructure 

Decarbonisation, digitalisation, education, 
transport  and 
require 
investment, 
implementation 
barriers  affect  the  business  environment 
investment. 
and  hold  back  private 
Estimates 
public 
investment  needs  related  to  decarbonisation, 
digitalisation, 
and 
infrastructure vary between 1.3% and 2.1% of 
GDP  per  year  over  the  next  decade  and 
beyond (2). Given the increasing importance of 
the  green  and  digital  transitions  at  both  EU 

accumulated 

education, 

transport 

the 

of 

(1)  See Annex 17. 

(2)  Bardt et al., 2020; Agora Energiewende, 2021; Krebs, 

2020 and KfW, 2021 

2 

 
                                                 
 
and national level, these estimates could even 
be  revised  upwards.  Investment  needs  at  all 
government 
levels  are  high  and  are 
particularly  pronounced  at  the  local  level  to 
sustain the quality  of municipal infrastructure 
after decades of negative net investment (see 
Graph  1.1).  Current  roll-out  of  electricity 
networks  and  very  high-capacity  digital 
networks  fall  short  of  what  is  needed  for 
achieving  the  planned  green  and  digital 
transformation. Upgrading these networks and 
the  public  infrastructure  is  also  crucial  for 
unlocking  private  investment  in  these  areas. 
Still,  both  public  and  private  investment  are 
held  back  by  implementation  barriers  such  as 
complex  and  lengthy  planning  and  permitting 
and 
legal, 
procedures, 
administrative constraints.  

financial 

and 

Graph 1.1: Net public investment by government 
subsector 

Source: DESTATIS 

Policy  support,  including  the  short-time 
work  arrangement  Kurzarbeit,  shielded 
employees,  but  growth  is  held  back  by 
increasing shortages of labour and skills. 
By  March  2022,  employment  reached  its  pre-
crisis  level.  Unemployment,  at  3.1%  at  the 
beginning of 2022, is among the lowest in the 
EU, while vacancies have already reached pre-
crisis  levels.  The  pandemic  has  precipitated 
labour  market  exits  by  workers  approaching 
retirement.  This,  together  with  the  recovery 
going  forward,  has  been  leading  to  growing 
in  certain 
shortages  of  skilled  workers 

sectors (3).  Wages  declined  by  0.4%  in  2020 
and increased by 3.2% in 2021. As the labour 
market  tightens  again,  wages  may  grow 
faster.  Wage  growth  may  be  particularly 
strong  for  low  wages  given  the  planned 
increase  of  the  minimum  wage  to  EUR 12 
(+25%  compared  with  end  2021),  among  the 
highest in the EU (4).  

High  energy  prices  and  tighter  labour 
markets have had a noticeable impact on 
inflation.  Consumer  price  inflation  soared  in 
the  second  half  of  2021,  lifting  the  annual 
average  rate  to  3.2%,  from  just  0.4%  a  year 
before.  Rising  energy  and  commodity  prices 
and  transportation  costs,  increased  carbon 
taxes  and  the  reversal  of  the  temporary  VAT 
reduction  were  significant  factors  behind  the 
increase in inflation. In April 2022, harmonised 
index  of  consumer  prices  inflation  soared  at 
7.8% and is expected to average 6.5% for the 
year, driven by the surge in energy prices and 
rising 
input  costs  amid  strong  demand. 
Staggered  cost  pass-through  and  a  boost  to 
service sector wages, due to an increase in the 
minimum  wage  in  late  2022,  are  expected  to 
maintain inflation above 3% in 2023. 

Reducing inequalities is key to making the 
economy  more  inclusive,  in  line  with  the 
European  Pillar  of  Social  Rights.  Wealth 
and income inequality and in-work poverty are 
higher  than  the  EU  average  (Annex  1).  The 
proportion of the population at risk of poverty 
or  social  exclusion  is  relatively  high,  notably 
among  children  (see  Annex  12).  Pandemic 
restrictions 
attendance 
disproportionately  affected  disadvantaged 
families and children, which risks exacerbating 
socio-economic  inequalities.  In  2020,  energy 
poverty  was  higher  than  the  EU  average 
(Annex 6).  

school 

on 

(3)  For example manufacturing, construction and 

information and communication. In the long-term and 
health care sectors, increases in demand cannot be fully 
met due to challenging working conditions and 
unattractive wages. See also Annex 6. 

(4)  The minimum wage is increasing in three steps in 2022 

(increasing from EUR 9.6 to EUR 9.82 per hour in 
January 2022, EUR 10.45 in July 2022, EUR 12 in 
October 2022).  

3 

-0.4-0.20.00.20.40.60.81.091939597990103050709111315171921% of GDPTotalFederalStateLocal 
 
                                                 
Russian  natural  gas  to  bridge  the  transition 
away from coal and nuclear power. 

Russia’s  invasion  of  Ukraine  is  fuelling 
inflation. Further price increases and scarcity 
of  energy  and  other  commodities  from  the 
affected  regions  are  likely  to  push  production 
costs  up,  and  further  fuel  consumer  price 
inflation,  which  in  2022  is  expected  to  reach 
6.5%. 

of 

The  response  to  Russia’s  invasion  of 
Ukraine  has  triggered  additional  public 
spending to cushion the effects of rapidly 
rising  energy  and  fuel  prices.  Support 
measures for households and companies have 
been  put  into  place,  including  the  advanced 
abolition 
energy 
surcharge (6),  the  temporary  reduction  of  the 
energy tax on fuels, a lump sum energy bonus 
as  well  as  targeted  support  for  families  and 
low-income  earners.  Moreover,  significant 
additional  public  funding has  been earmarked 
for defence spending. By 2 May, Germany has 
taken in an estimated 480 000 people fleeing 
Ukraine. 

renewable 

the 

The recovery is expected to be negatively 
affected  by  the  economic  impact  of  the 
Russian invasion. The aggravation of supply 
bottlenecks and increased costs and prices are 
slowing  down  economic  growth.  Nevertheless, 
GDP  growth  will  continue  to  be  supported  by 
large  pent-up 
investment  and  consumer 
demand. 

Attaining the ambitious green and 
digital transition targets requires 
more investments and policy 
action 

Germany  has  set  ambitious  climate 
its  own  2030 
targets. 

It  has  updated 

(6)  This surcharge was so far levied on electricity 
consumption to finance support for renewable 
electricity. It will be abolished as of 1 July 2022. 
Support for renewables will be financed from the 
Energy and Climate Fund. 

signs 

showing 

House  prices  have  surged  recently  and 
are 
of 
overvaluation. Average  house  prices  have 
almost  doubled  since  2010  and  rose  by  11% 
in  2021.  Commission  and  European  Central 
Bank models point to an overvaluation of 20-
30%  in  2021 (5).  Risks  have  increased  to  a 
level  that  requires  policy  action,  therefore 
triggering a recommendation by the European 
Systemic Risk Board (ESRB) in February 2022. 
Overall,  the  increase  of  house  prices  and  an 
accompanying 
in  rents  for  new 
tenants  have  made  housing  affordability  a 
challenge in cities and for low-income earners.  

increase 

the 

UN’s 

Germany  performs  comparatively  well  in 
Sustainable 
achieving 
Development  Goals.  The  country  performs 
above  the  EU  average  and  made  progress  on 
most  goals,  particularly  around  ‘Peace,  justice 
and  strong  institutions’,  ‘Decent  work  and 
economic growth’, and ‘Good health and well-
being’.  However,  no  progress  has  been 
is 
achieved 
among the highest in the EU. Despite progress 
made, major challenges remain with regard to 
‘Affordable  and  clean  energy’  and  ‘Climate 
action’ (see Annex 1).  

inequality,  which 

in  reducing 

The economic impact of Russia’s 
invasion of Ukraine  

intermediate  goods 
Commodities  and 
from  Russia  and  Ukraine  are  important 
for  the  German  economy.  The  countries 
involved are not significant trading partners in 
size.  They  do,  however,  represent  a  major 
source  of  key  commodities  (energy,  metals, 
minerals,  and  grain)  and  supply  intermediate 
products to key industries (automotive, metals, 
and  chemicals).  Germany  relies  heavily  on 

(5)  ECB data warehouse, indicator RESV and Commission 
Staff Working Document – In-Depth Review for 
Germany 2022(SWD (2022)629 final). For details on 
the methodology used by the ECB, see Financial 
Stability Review, ECB, June 2011 and Financial Stability 
Review, ECB, November 2015. For the methodology 
used by the Commission see Philiponnet & Turrini, 
2017. 

4 

 
                                                 
                                                 
greenhouse  gas  emissions  reduction  target  to 
65% relative to 1990 and brought forward the 
goal  of  climate  neutrality  to  2045.  This  will 
require accelerating the transformation of the 
economy  (see  Annex  5).  Renewable  energy  is 
expected  to  contribute  significantly  to  the 
reduction  of  greenhouse  gas  emissions.  It  is 
also  key  to  reducing  Germany’s  and  the  EU’s 
high  dependence  on  imported  fossil  fuels (7). 
The  coalition  agreement (8)  sets  a  target  of 
80%  of  renewable  electricity  by  2030 (9). 
Reaching this target will require further efforts 
on  the  expansion  of  the  electricity  grid,  the 
deployment  of  decentralised  energy  and  the 
reduction  of  investment  bottlenecks.  Ensuring 
a fair transition is key in light of job losses in 
fossil  fuel  (coal/lignite)  and  related  industries, 
such  as  mining  or  internal  combustion  engine 
car manufacturing (see Annex 6). 

Digitalisation  remains  relatively  weak. 
Germany  is  addressing  some  key  challenges, 
but  progress  on  digital  networks  and  digital 
public  services  has  been  slow.  Germany 
continues  to  lag  behind  other  countries  in the 
coverage  of  fibre  and  very  high-capacity 
networks in rural areas (see Annex 8). Creating 
for  digital 
better 
infrastructure  roll-out  continues  to  be  a 
challenge. 
digital 
technologies  by  companies  is  only  slightly 
above the EU average. There is also significant 
potential for improving the digital skills of the 
population, 
for 
improving the availability of ICT specialists. 

teachers,  and 

framework 

integration 

conditions 

including 

The 

of 

Sound public finances face 
challenges and demographic 
pressure 

Public  finances  were  in  good  shape  to 
absorb  the  shock  of  the  pandemic  but 

(7)  Leopoldina, 2022. 

(8)  Koalitionsvertrag zwischen SPD, Bündnis 90/Die Grünen 
und FDP, Koalitionsvertrag 2021 (bundesregierung.de). 

(9)  Even more ambitious targets (100% by 2035) are 

discussed in the context of reducing dependence on 
fossil fuels.  

face  further  challenges  related  to  the 
impact  of  Russia’s  invasion  of  Ukraine. 
The country’s public finances had seen several 
years of budget surplus before the outbreak of 
the  pandemic.  The  debt-to-GDP  ratio  had 
declined  continuously  from  its  peak  of  over 
82%  of  GDP  in  2010  during  the  global 
financial  crisis  to  just  below  60%  of  GDP  in 
2019.  With  this  comfortable  fiscal  position, 
Germany was well positioned to adopt sizeable 
measures  to  stabilise  the  economy  and 
facilitate  recovery.  The  general  government 
deficit reached 4.3% of GDP in 2020 and 3.7% 
of  GDP  in  2021.  Deficits,  combined  with  the 
fall  in  GDP  led  to  an  increase  in  the  debt-to-
GDP ratio to around 69% in 2021.  

for 

The  labour  tax  wedge  is  one  of  the 
highest  in  the  EU.  This  reduces  take-home 
pay  and  creates  disincentives  to  increase 
hours  worked 
certain  groups  and 
aggravates  the  skills  shortage.  At  the  same 
time,  other  tax  bases,  less  detrimental  to 
In 
inclusive  growth, 
particular, revenues from environmental taxes 
are  comparatively  low  (see  Annex  18) (10).  In 
addition,  environmentally  harmful  subsidies, 
tax  reductions  and  tax  exemptions  undermine 
environmental 
targets  and 
sustainability 
counteract  decarbonisation,  energy  efficiency 
and renewable energy deployment.  

remain  underused. 

Population ageing will constrain economic 
activity  and  put  pressure  on  public 
finances.  With  the  retirement  of  the  baby-
boomers  generation,  demographic  change  will 
pick  up  in  the  coming  years  and  accelerate 
even  further  from  the  2030s  onwards.  This 
will  increase  financial  pressures  on  the  social 
security  system.  Under  current  rules,  this  will 
lead  to  an  increase  in  the  tax-funded  federal 
contribution to the pension system 

(10)  Kopernikus-Projekt Ariadne, 2021. Germany has 

introduced a CO2 pricing system (national emission 
trading system) in the transport and heating sectors, 
that are currently not covered by emissions trading at 
EU level. 

5 

 
                                                 
                                                 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

resilience  Facility 

The  German  recovery  and  resilience  plan 
(RRP)  includes  significant  measures  to 
support  the  twin  transition.  The  recovery 
and 
(RRF)  contributes 
EUR 25.6 billion  (or  0.74%  of  GDP)  to  finance 
investments  and  reforms  included  in  the  RRP. 
The plan contributes to all six pillars of the RRF 
Regulation  (see  Annex  2).  In  the  area  of 
climate  action  and  energy  transition,  the  plan 
aims  to  develop  a  hydrogen  economy,  and 
promote climate-friendly mobility and energy-
efficient  building  renovation.  The  RRF  further 
supports investment in advanced technologies, 
in the digital transformation of the automotive 
industry,  and  in  digitalisation  of  healthcare 
services, 
public 
administration. The implementation of the RRP 
is underway in all its major dimensions. 

education 

and 

the 

the 

plan 

entered 

Hydrogen  and  green  transport  measures 
their 
under 
implementation  phase.  The  plan  includes 
actions to decarbonise the economy, especially 
industry, with a focus on renewable hydrogen. 
It  provides  for  Germany’s  participation  in  an 
EU-wide 
(important  project  of 
common European interest – IPCEI) to help the 
economy  make  the  leap  towards  renewable 

initiative 

the 

three 

production 

hydrogen at all stages of the value chain. The 
preparation  of  the  IPCEI  is  ongoing  (a  call  for 
interest  was  launched  in  2021)  and  the  first 
hydrogen projects under this EU-wide initiative 
are expected to have started by 2023. By that 
time, also a legal framework to help industries 
become  greener  is  expected  to  have  entered 
into  force.  Following  a  call  for  ideas  for 
flagship  research  and 
innovation  projects 
large-scale 
focusing  on  hydrogen, 
projects  with  more  than  240  partners  started 
in April 2021, exploring the serial production of 
water-electrolysers, 
of 
hydrogen  directly  at  sea  based  on  offshore 
electricity  and  the  development  of  transport 
technologies  for  hydrogen.  The 
transport 
sector  is  also  expected  to  become  greener 
thanks to support for electric cars, clean buses 
and 
.  Funding 
programmes  for  the  acquisition  of  electric 
vehicles,  for  the  construction  of  charging 
stations,  and  for  the  acquisition  of  green 
buses  already  started,  allowing  projects 
participants 
funding.  The 
registration tax exemption for electric vehicles 
has  been  also  prolonged  to  ten  years  to 
incentivise  further  the  uptake  of  electric 
vehicles.  In  addition,  applications  for  support 
started  to  flow  in  under  the  programme  for 

improved  rail  connections. 

to  apply 

for 

Box 2.1:  Key deliverables under the recovery and resilience plan in 2022-23  

 

Supporting the purchase of 320 000 electric vehicles. 

  One million students receiving learning support. 

 

Start of the pilot programme on carbon contracts for difference.  

  Adoption  of  the  second  report  to  the  Conference  of  Minister-Presidents which  also 

covers tackling investment bottlenecks. 

 

Launch  of  three  IPCEIs  on  ‘hydrogen’,  ‘microelectronics  and  communication 
technologies’ and ‘next generation cloud infrastructure and services’. 

  At least 100 of the most important digital administrative services of the Länder and 
115  federal  government  services  being  implemented  nationwide  as  one-for-all 
services. 

6 

 
 
 
 
the  support  of  energy-efficient  renovation  of 
residential buildings. 

A  large  number  of  digitalisation  projects 
are  expected  to  advance  significantly  by 
the  end  of  2022,  including  an  IPCEI  on 
communication 
microelectronics 
and 
technologies.  A  second 
IPCEI  aiming  to 
deliver  the  next  generation  of  cloud  services 
and  infrastructure  will  foster  the  industrial 
deployment of smart cloud and edge solutions. 
For  both  IPCEIs,  projects  are  expected  to  be 
launched  by  the  end  of  2022.  By  then, 
Germany  is  also  expected  to  have  advanced 
the implementation of its Online Access Act by 
digitalising public services. 

The  RRP  also  addresses 
learning 
disadvantages,  extends  the  provision  of 
childcare  and  digitalises  and  improves 
the  healthcare  system,  thereby  helping 
implement  the  European  Pillar  of  Social 
Rights.  The  plan  provides  for  additional 
courses,  mentoring  and  other  measures  for 
pupils with a learning backlog, with a focus on 
core subjects and core skills to tackle learning 
disparities  caused  by  the  COVID-19  crisis. 
the 
the  country  already 
Moreover, 
necessary 
legislative  decisions  to  provide 
additional childcare places, thereby facilitating 
full-time  employment  of  women  with  caring 

took 

responsibilities.  Furthermore,  by  the  end  of 
2022,  it  is  expected  that  funding  will  have 
been  awarded  to  at  least  70 000  apprentice 
support  applications.  The  plan  also  includes 
measures to digitalise and improve the health 
system,  including  public  health  capacities.  By 
summer 2022, a large part of the EUR 3 billion 
earmarked for the digitalisation of hospitals is 
expected to have been allocated. 

for 

approval 

requesting 

procedures, 

Measures  under 
the  RRR  are  also 
underway  to  facilitate  investment  and 
simplify  administrative  processes  for 
public  authorities  and  businesses,  thus 
promoting  productivity.  These 
include 
reforms  to  shorten  administrative  planning 
standardise 
and 
requirements 
financing 
subsidies, accelerate housing construction and 
increase the number of successful transfers of 
business  ownership  to  the  next  generation.  In 
addition,  a  public  consulting  agency  has  been 
enabled  to  provide  technical  assistance  to 
their 
in 
public  authorities 
implementing 
in  digitalisation  of 
investments, 
including 
schools.  Certain  pieces  of 
to 
legislation 
accelerate  planning  and  approval  procedures 
in  the  transport  sector  have  already  been 
adopted  and  now  need  to  be  efficiently 
implemented. 

Box 2.2:  Measures  in  focus:  a  working  group  at  federal  and  Länder  level  to  tackle 

investment bottlenecks 

As  part  of  Germany’s  RRP,  a  working  group,  at  federal  and  Länder  level,  aims  to  reduce 
investment barriers and improve administration efficiency.  

 

 

 

 

 

 

 

 

accelerating  the  outflow  of  grants,  including  by  making  grants  for  the  Länder  and 
municipalities as uniform as possible;  

improving the financial support of municipalities; 

improving transfer of business ownership through a dedicated task force; 

revising the Musterbauordnung (model building code); 

strengthening planning and approval authorities; 

improving recruitment of skilled staff;  

accelerating planning, in particular in rail, local public and private transport; and 

streamlining  the  public  participation  procedures  and  simplifying  participation 
through digitalisation. 

7 

 
 
FURTHER PRIORITIES AHEAD 
FURTHER PRIORITIES AHEAD 

required 

Beyond  those  addressed  by  the  RRP,  as 
outlined above, Germany faces additional 
challenges.  Some  reforms  were  put  in  place 
recently (see Annex 4 on progress on country-
specific recommendations), but further efforts 
to  make  progress  on 
will  be 
numerous priority challenges. These include in 
particular, improving framework conditions for 
investing  in  the  green  and  digital  transitions 
boosting  education  and  skills,  improving  the 
tax mix,  addressing inequalities and preparing 
the  pension  system  for  an  ageing  society. 
Addressing  these  challenges  will  also  help 
make  further  progress  in  achieving  the  SDGs, 
notably  those  related  to 
inequalities  and 
environmental sustainability.  

Removing investment bottlenecks 
and boosting investments in the 
green and digital transitions 

for 

the 

twin 

bottlenecks 
investment 
Persisting 
hamper the full rollout of the investment 
needed 
transition. 
Implementation  barriers  continue  to  thwart 
public and private investment (see also Section 
1).  A  landmark  initiative  for  the  reduction  of 
investment barriers is included in the RRP (see 
Box  2.1).  However,  additional  actions  are 
needed 
local 
administrative  capacity  (both  in  terms  of 
technical  expertise and human resources) and 
cooperation  across  public  authorities,  improve 
training  and  job  conditions  to  attract  skilled 
personnel 
administrative 
procedures.  

strengthen 

simplify 

further 

and 

to 

The  existing  electricity  networks  cannot 
cope with the needs related to the green 
transition.  Germany  made  efforts 
to 
stimulate flexibility solutions for the electricity 
system.  However,  investment  to  expand  and 
reinforce  the  power  grid  and  to  promote 

8 

in 

also 

the  network  was 

thereby  also  affecting 

responses  by  energy  consumers  to  varying 
light  of 
remain  essential 
prices  will 
increased  electricity  needs,  and  variable  and 
decentralised  electricity  generation.  Planned 
investments  have  suffered  significant  delays, 
and  Germany  lags  significantly  behind  its 
targets  on  the  expansion  of  transmission  and 
distribution  networks (11).  Delays  in  expanding 
the  electricity  networks  made  it  occasionally 
necessary  to  curtail  renewables  in  certain 
regularly 
areas  where 
overloaded, 
the 
deployment  of  additional  renewable  capacity. 
of 
Delays 
neighbouring  Member  States,  since  network 
capacity  within  Germany  is  not  sufficient  to 
transport  the  volumes  of  electricity  traded 
within  the  German-Luxembourgish  price  zone. 
Reasons  for  delays  include  numerous  and 
lengthy appeals against grid projects and lack 
of  administrative  capacity  to  authorise  such 
infrastructure  projects.  The  2021  coalition 
agreement  sets  out  the  intention  to  speed  up 
planning  and  permitting  procedures  for  grid 
expansion.  It  also  tasks  transmission  system 
operators  and  the  Federal  Network  Agency  to 
develop  a  plan  for  a  climate  neutrality  grid. 
However,  implementation  on  the  ground  will 
be decisive in accelerating deployment.  

networks 

affect 

the 

thwart 

procedures 

Lengthy  and  complex  planning  and 
permitting 
the 
renewable  electricity, 
deployment  of 
which  is  key  to  reducing  dependency  on 
fossil  fuels.  To  achieve  its  climate  targets 
and reduce dependency on fossil fuel imports, 
Germany  intends  to  increase  the  share  of 

(11)  According to the 2022 state of play report issued by the 
Ministry for Economic Affairs and Climate Protection 
(Eröffnungsbilanz Klimaschutz) as of 2021, out of a 
total of 12 241 km power lines according to the law on 
grid expansion only 1 848 km are in operation and a 
further 675 km are under construction, while 9 718 km 
are pending or in the approval process. 
Bundesministerium für Wirtschaft und Klimaschutz, 
2022.  

 
 
                                                 
 
implementation  barriers 

renewables in electricity generation from 42% 
currently  to  80%  by  2030  and  to  almost 
100%  by  2035.  This  requires  ambitious 
measures  to  step  up  the  deployment  of 
renewable electricity as well as to expand and 
reinforce  electricity  networks  and  further 
integration.  The 
promote  energy  system 
removal  of 
to 
renewable  electricity  deployment  –  such  as 
complex  and  lengthy  permit  procedures  –  will 
also  be  crucial.  In  this  respect,  the  main 
challenges  relate  to  conflicts  over  land  use, 
the  use  of  spatial  planning  to  identify  zones 
for 
renewable  energy  deployment,  and 
minimum distance rules, for instance for wind 
turbines.  Streamlined  consultation  processes, 
improved  public  participation  and  revenue 
sharing 
local 
acceptance.  Digitalising  approval  procedures 
and  strengthening  administrative  capacity 
across  different  levels  of  government  would 
further  accelerate  permitting.  Simplified 
procedures  for  the  permitting  of  repowering 
could  be  explored.  In  addition,  accelerating 
renewables  and  electricity 
investment 
networks  will  require  a  skilled  workforce  at 
different  levels  of  the  value  chain,  including 
developers, installers, and experts for planning 
and authorisation.  

in  projects  could 

increase 

in 

in 

Removing 

bottlenecks 

investments 

consumption  and  diversifying  energy  supplies 
including  through  accelerated 
and  routes, 
renewables  deployment  and 
the  use  of 
liquefied  natural  gas  could  be  considered. 
Decarbonisation  of  sectors,  including  in  the 
industry,  should  be  accelerated,  in  particular 
for  those  relying  substantially  on  gas.  In  that 
context, it is important to promote co-benefits 
of  addressing  security  supply  and  climate 
mitigation. 
and 
accelerating 
renewable 
electricity  and  electricity  networks  are  crucial 
to  both  overcome  dependence  on  fossil  fuels 
imports  from  Russia  and  to  meet  climate 
targets. This is important also in view of rising 
energy  prices  as  the  increased  deployment  of 
in  energy 
renewables  and 
efficiency are expected to lower energy prices 
and  help  mitigate 
currently  very 
pronounced  price  volatility  of  fossil  fuels. 
Energy  poverty  in  Germany  stands  at  9%, 
above the EU average (8.2%), and affects low-
income groups in particular (see Annex 6). The 
development  of 
renewable  hydrogen 
market  and  the  shift  to  renewable  hydrogen 
could  be  accelerated.  Investments  should  be 
future-proof  where  possible  and  avoid  lock-in 
effects  in  view  of  Germany’s  objective  of 
climate neutrality by 2045.  

increase 

the 

the 

the 

Reaching  climate  and  energy  targets 
requires  more  ambitious  action.  The 
climate policy  measures  in  the  RRP  and  other 
government  measures,  such  as  introducing  a 
CO2 price in the transport and heating sectors, 
are  not  sufficient  for  Germany  to  reach  the 
ambitious climate and energy targets. Several 
sectors, including transport and heating, which 
failed 
sector-specific 
emission targets for 2021, will have to step up 
efforts  to  contribute  adequately  to  meeting 
Germany’s  2030  target  under  the  Effort 
Sharing  Regulation (13).  Beyond  the  measures 
introduced  in  the  RRP,  boosting  a  modal  shift 
in  transport,  in  particular  towards  rail,  and 
increasing the use of public transport, notably 
by improving the quality of the service, would 

to  meet  national 

Second progress report on energy security from 1 May 
2022, the share of Russian gas imports has declined to 
35%, from about 55% on average in previous years.  

(13)  DIW, 2021; see also Annex 5. 

Stepping  up  climate  measures  would 
reduce  Germany’s  dependency  on  fossil 
fuels  imports.  Oil  and  gas  are  the  largest 
sources  of  energy  in  Germany  with  a  strong 
import dependency (89.1% for natural gas and 
96.4%  for  oil  and  petroleum  products  in 
2020). With a share of 35% of the energy mix 
(gross  inland  consumption)  oil  is  the  largest 
source of energy in Germany, with 34% of its 
imports  coming  from  Russia  (compared  to  an 
average  of  26%  for  the  EU  in  2020).  Natural 
gas 
largest  source.  The 
dependency  on  gas  imports  from  Russia  is 
particularly strong with a share of 65% of gas 
imports compared with an EU average of 44% 
in 2020 (12). In the short term, reducing energy 

the  second 

is 

(12)  : Eurostat (2020), share of Russian imports over total 
imports of natural gas, crude oil and hard coal. For the 
EU27 average, the total imports are based on extra-
EU27 imports. For Germany, total imports include intra-
EU trade. Crude oil does not include refined oil products. 
According to recent data published by the German 
Ministry of Economic Affaires and Climate Action in their 

9 

 
                                                 
 
                                                                        
Strengthening productivity through 
digitalisation, research and 
innovation, education and skills  

is  a 

There  is  considerable  scope  to  boost 
productivity.  While  the  long-term  slowdown 
in  productivity  is  a  global  phenomenon,  there 
are  also  country-specific  structural 
issues 
explaining  the  long-term  decline  in  labour 
productivity  growth.  There 
large 
investment  gap  in  intangible  assets,  including 
research  and 
software  and 
innovation, 
databases  (see  Graph  3.1)  compared  to  other 
EU Member States as well as in skills, which is 
affecting in particular small and medium-sized 
businesses  (SMEs).  The  business  environment 
technology  diffusion, 
suffers 
low 
weaknesses 
competition in business services, leading to an 
overall decline in business dynamism (16).  

from  slow 
in 

eGovernment,  and 

Graph 3.1: Use of software and databases 
2000-2020 

of 

and 

emissions 

help reduce fuel consumption and dependency 
on  fossil  fuels  as  well  as  emissions.  The 
introduction  of  a  speed  limit  would  cut  fuel 
consumption 
both 
greenhouse  gases  and  local  air  pollutants (14). 
Germany  would  also  benefit  from  further 
incentivising investment in energy efficiency of 
buildings, 
in  particular  deeper  renovation 
levels, and accelerating the phase-out of fossil 
fuel  use  in  buildings.  Promoting  the  circular 
solutions (15) 
economy  and  nature-based 
would  further  help  reach  the  climate  targets. 
The  circular  use  of  material  is  a  major  driver 
for  future  competitiveness  and  can  help 
reduce  dependency  on  raw  material  sources. 
Germany’s  circular  material  use  rate  has 
improved,  but  remains  far  behind  that  of  EU 
leaders. 

Better  framework  conditions  are  key  for 
the  digital  transition.  Despite  significant 
improvements in the overall coverage of very-
high-capacity  networks,  the  country  is  still 
lagging in deploying them in rural areas. At the 
same  time,  only  15.4%  of  households  have 
access to a fibre connection, placing Germany 
among  the  Member  States  with  the  lowest 
fibre  coverage  (the  top  five  EU  performers 
have  a  fibre  coverage  of  at  least  85%).  The 
coalition  agreement  includes  targets  for  the 
nationwide  availability  of  fibre  and  the  latest 
mobile  communications  standards,  but  does 
not  set  a  deadline  to  reach  them.  Increasing 
building  and  management  capacity  in  the 
private 
and 
and 
implementation  capacity  in  the  public  sector 
will  be  crucial.  Meeting  the  targets  will  also 
require improvements in procedures for permit 
the 
application 
and 
time-
standardisation  of  alternative, 
consuming, installation techniques. 

and 
less 

planning 

granting 

sector 

(14)  Based on data by the German Environmental Agency, 
NGOs such as Deutsche Umwelthilfe expect that the 
introduction of a speed limit could lead to savings of up 
to 3.7 billion liters of fuel and 9.2 million tones of CO2 
per year.  

(15)  Nature-based solutions are solutions that are inspired 
and supported by nature. They are cost-effective 
climate mitigation measures and help build resilience.  

Net balance sheet value of software and databases as % 
of GDP 
Source: Eurostat 

investment 

Private 
in  research  and 
development (R&D) remains concentrated 
in  large  firms.  Germany  is  classed  as  a 
Strong  Innovator,  ranking  sixth  in  the  2021 
European  Innovation  Scoreboard,  but  the  lead 

(16)  OECD, 2020 

10 

 
                                                 
 
                                                 
over  the  EU  average  has  been  shrinking  over 
the years. SMEs’ R&D expenditure, which as a 
share  of  GDP  is  one  of  the  lowest  in  the  EU, 
fell  behind  the  dynamics  of  large  enterprises 
over the past decade (see Annex 9). Following 
a decreasing trend over the previous 15 years, 
the start-up rate increased slightly in 2019 but 
then fell again in 2020.  

The  lack  of  qualified  personnel  is  the 
most  significant  factor  hampering  SME 
innovation  and  digitalisation.  High-growth 
businesses  consider  the  scarcity  of  staff  with 
to 
the 
right  skills  as  a  major  barrier 
investment (17).  While  the  number  of 
ICT 
specialists  in  the  workforce  is  above  the  EU 
average, in certain ICT fields Germany faces a 
significant 
shortage. 
Currently,  the  mismatch  is  particularly  high 
regarding experts in informatics, and software 
development  and  implementation.  Investment 
in skills is key in order to achieve the 2030 EU 
headline target on adult learning. 

labour  and 

skills 

Graph 3.2: Inheritability of education 

Source: DESTATIS 

has 

pandemic 

The 
aggravated 
inequalities  in  educational  attainments. 
Educational  outcomes  are  strongly  influenced 
by 
status  and  migrant 
background (see Annex 13). These correlations 

socio-economic 

(17)  Amaral-Garcia et al., 2022 

11 

likely 

improve  both 

were  strengthened  by  the  pandemic  (NETS, 
2021).  Children  of  parents  with  higher 
secondary  education  are  more 
to 
succeed  in  school  (see  Graph  3.2).  18  to  24-
year-olds  who  were  born  abroad  are  three 
times  more  likely  to  leave  school  without  a 
diploma  than  children  of  native-born  parents. 
Improving  access  to,  and  quality  of,  early 
childhood  education  and  care  (especially  for 
under-3-year-olds)  and  providing  all-day 
schooling  would  help 
the 
educational  outcomes  of  pupils  and  the  full-
time  participation  of  women  in  the  labour 
market,  in  line  with  the  European  Pillar  of 
Social  Rights.  More  and  better-qualified 
improve  pupils’ 
teachers  and  staff  can 
in  schools  with 
achievements,  particularly 
many 
disadvantaged 
from 
children 
backgrounds.  However,  shortages  of  staff  are 
widespread  as  the  supply  of  teachers  cannot 
meet  education  needs.  Improving  teachers’ 
digital  and  pedagogical  skills  is  a  priority. 
Furthermore, measures to support pupils most 
affected by the pandemic could be stepped up 
and  continued  in  the  coming  years,  as  lost 
learning  opportunities  have  not  been  entirely 
remedied. 

A tax mix fostering job-rich, 
inclusive and sustainable growth 

The  tax  mix  holds  back  hours  worked. 
Taxes  and  social  security  contributions  are 
weighing on the cost of labour, while tax bases 
that  are  more  supportive  of  inclusive  growth 
remain  underused  (see  Annex  18).  Better  use 
of  the  labour  potential,  however,  is  becoming 
more  urgent  as  population  ageing 
is 
constraining  labour  supply  in  an  already  tight 
market.  Currently, 
interplay  between 
the 
taxation,  social  contributions  and 
income 
benefits  creates  disincentives  to  increase  the 
hours worked for certain groups, such as low- 
and  middle-income  earners,  and  second 
earners. This long-standing challenge has been 
partially  addressed  through  various  reforms 
such  as  abolition  of  the  solidarity  surcharge 
for  most  taxpayers,  but  the  problem  persists. 
The tax wedge on labour is among the highest 
in the EU and the tax-benefit system currently 

619193224212922560102030405060Distribution among the secondary schools of children whose parents have...…lower secondary education...higher secondary education*ISCED levels atgraduationpercent 
  
                                                 
still 

includes 

CO2 price in transport and heating (see Annex 
18).  Unlike  other  EU  countries,  Germany  has 
no tax on pollution and resources use. Vehicle 
taxation  can  be  reformed  to  encourage  more 
environmentally friendly mobility, including an 
increased use of public transport. The effective 
tax  mix  also 
significant 
environmentally  harmful  subsidies,  including 
the 
the  so-called 
company  car  privilege (21).  The  coalition 
agreement acknowledges the need to address 
such  subsidies,  but  the  timeline  and  practical 
Well-designed 
unclear. 
follow-up 
redistributive  measures  can  help  counteract 
the regressive effects of environmental taxes, 
as 
low-income  earners  spend  a  higher 
proportion  of  their  income  on  environmental 
taxes compared with high-income earners (22). 

‘Diesel  privilege’,  and 

is 

Preparing the pension system for 
population ageing 

Demographic  change  puts  pressure  on 
public pensions.  The working age population 
is  expected  to  diminish  by  3.7  million  in  the 
2020s.  The  old-age  dependency  ratio  will 
increase  by  more  than  12  percentage  points 
(pps)  to  46.4%  in  2030,  and  is  expected  to 
accelerate further to 54.3% by 2060 (23).  This 
will  considerably increase the  financing  needs 
of 
the  first  pillar  Rentenversicherung,  a 
mandatory  pay-as-you-go  system,  which  is 
not  deemed  sustainable  by  various  experts 

(21)  Bundesrechnungshof 2022. According to the German 

Federal Environmental Agency, these subsidies amount 
to EUR 65 bn. The German Finance Ministry publishes its 
subsidy report annually. Across these two sources, there 
are discrepancies as a number of subsidies, including 
the company car tax benefit (Dienstwagenprivileg) or 
the distance flat rate (Entfernungspauschale) listed by 
the Environmental Agency, are not covered in the 
annual subsidy report of the Ministry of Finance, due to 
a narrower definition of subsidies. 

(22)  DIW, 2019 

(23)  The 2021 Ageing Report: Economic and Budgetary 

Projections for the EU Member States (2019-2070). 
The old-age dependency ratio shows the ratio between 
the number of people aged 65 and over and the 
number of people aged between 20 and 64.  

does  not  provide  sufficient 
increase the hours worked.  

incentives  to 

full 

employees’ 

The  coalition  agreement  commits  to 
alleviating  the  tax  burden  on  very  low 
incomes  and 
earners  and 
second 
harmonising  the  tax  system  with  social 
benefits.  From  October  2022,  the  earnings 
thresholds  for  mini-jobs  and  midi-jobs (18), 
above  which 
social 
contributions  apply,  will  be  increased.  While 
this may increase take-home pay for very low-
income  earners,  it  may  keep  people  working 
very  low  hours  and  limit  progression  to  other 
types  of  jobs (19).  At  the  same  time,  the  tax 
wedge  for  low-  and  middle-income  earners, 
and for second earners, remains high. Women 
are particularly affected by the high tax wedge 
for 
(see 
low-wage  and  second  earners 
Annexes  18  and  12).  The  timeline  and  exact 
procedures  of  the  coalition’s  commitment  to 
harmonise  social  assistance,  housing  benefit 
and other social benefits are not yet specified. 
No  major  reform  of  the  joint  income  taxation 
is  envisaged,  but  coalition  partners  have 
agreed  to  attribute  the  tax  advantage  of 
married couples more equally to both spouses 
and  no  longer  uniquely  to  the  one  with  the 
highest earnings. As the application process is 
burdensome,  the  already  existing  option  to 
allocate  the  tax  advantage  more  equally 
(Faktorverfahren)  has  been  used  by  less  than 
1% of married couples. Without a far-reaching 
joint 
reform  of 
taxation  major 
income 
to  work  persist (20).  Further 
disincentives 
reforms  of  the  tax  system  could  flatten  the 
tax  progression  curve  for  middle-income 
earners  (Mittelstandsbauch)  and  shift  the  tax 
burden  towards  other  tax  bases  that  are  less 
detrimental to inclusive growth. 

The  tax  system 
is  not  sufficiently 
promoting  sustainability.  On  the  revenue 
side,  environmental  taxes  as  a  share  of  GDP 
are expected to remain considerably below the 
EU average even after the introduction of the 

(18)  These are labour contracts where employees’ social 

security contributions are reduced compared to regular 
contracts. 

(19)  See also Bruckmeier et al, 2022 

(20)  Bach et al. 2022 

12 

 
                                                 
                                                 
under  the  current  rules (24).  The  situation  is 
aggravated  by  the  expansion  of  pension 
benefits over the past years (25). 

limited 

Complementary pension pillars make only 
a 
to  old-age 
contribution 
income (26). In the occupational system (or the 
second pillar) the state provides tax incentives 
for  companies  to  provide  a  supplementary 
pension  for  their  employees.  However,  due  to 
more  volatile  employment  careers,  it  will  be 
difficult  to  scale  it  up.  Third  pillar  private 
pension  schemes  (Riester  Rente)  have  proven 
to  be  ineffective,  since  the  products  require 
investment in low-yielding safe debt and many 
them  suffer  from  high  fees.  As  a 
of 
to 
consequence, 
adequately 
retirement 
savings, especially for low-income earners. 

the  system  has  failed 

incentivise  private 

increases 

onwards  contributes  to  fiscal  sustainability.  In 
addition, the coalition agreement also includes 
plans  to  introduce  a  capital-based  buffer, 
which  could  cushion  future 
in 
disbursements.  The  state-subsidised  private 
pensions  could  be  optimised,  including  by 
lowering  administrative  costs  and  allowing 
more  freedom  in  the  portfolio  allocation,  also 
including higher-yield assets. In the long term, 
sustainability  could  be  improved  by  linking 
retirement age to increases in life expectancy, 
after  it  has  reached  67  years  in  2031.  To 
accompany  this,  further  support  could  be 
beneficial  to  improve  employability  of  older 
workers, in particular low-skilled ones. Reforms 
should  also  take  into  account  distributional 
effects  as  the  replacement  rate  for  low-
income earners is already comparatively low. 

Federal  transfers  to  the  pay-as-you-go 
system  are  expected  to  increase.  Already 
today,  about  a  quarter  of  the  pay-as-you-go 
insurance  benefits  are  borne  by  the  federal 
budget  and  not  by  social  contributions.  The 
political  commitment  to  the  so-called  double 
stop  line  (doppelte Halteline),  to  neither  lower 
the 
the 
contribution rate beyond certain ceilings could 
result in higher budget contributions.  

replacement 

level,  nor 

increase 

combination  of  measures 

could 
A 
alleviate  the  fiscal  burden  and  make 
retirement  savings  more  effective.  The 
reactivation 
factor 
the 
(Nachholfaktor)  to  prevent  pensions  from 
outpacing  wage  developments  from  2022 

catch-up 

of 

(24)  See statements by the German Council of Economic 

Experts (Sachverständigenrat), the independent fiscal 
institution (Gemeinschaftsdiagnose), the Bundesbank, 
the Board of Economic Advisors of the Ministry for 
Economic Affairs and Climate Action. 

(25)  Notably in the statutory pay-as-you-go system 
Rentenversicherung for certain groups, entitling 
particularly long-term insured to retire early (Altersrente 
für besonders langjährig Versicherte), mothers to get 
additional pension entitlements for childrearing years 
(“Mütterrente”). Additional expenditures also stem from 
the newly introduced Grundrente, a top-up for low 
pensions based on long contribution periods. 

(26)  The German pension system is based on a compulsory 
pay-as-you-go first pillar, an optional occupational 
second pillar and an optional capital-based third pillar. 

13 

 
                                                 
 
KEY FINDINGS 
KEY FINDINGS 

Germany’s  recovery  and  resilience  plan 
includes important measures to address a 
series of its structural challenges: 

  investments  in  building  renovations,  clean 
mobility,  industry  decarbonisation  and  the 
hydrogen value chain; 

  investments  in  key  advanced  technologies 
the 
and 
automotive  industry,  healthcare,  education, 
and public administration; and 

transformation  of 

in  digital 

  actions  to  tackle  the  learning  disparities 
exacerbated  by  the  COVID-19  crisis,  and 
the provision of additional childcare places. 

Beyond  the  reforms  and  investments  in 
the RRP, Germany would benefit from: 

  boosting 

and 

investments 

improving 
framework  conditions  by  accelerating  and 
facilitating 
permitting 
procedures  for  electricity  networks  and 
renewable energy generation; 

planning 

and 

  reducing  reliance  on  fossil  fuels  and  their 
imports, by diversifying energy supplies and 
efficiency, 
routes, 
incentivising 
and 
accelerating  decarbonisation  in  transport 
and heating; 

improving 

savings, 

energy 

energy 

  better 

framework  conditions 

the 
deployment  of  very  high-capacity  digital 
networks, in rural areas in particular; 

for 

  boosting  productivity  by  upskilling  the 
labour 
in 
innovation,  in  particular  among  SMEs,  and 
promoting business dynamism; 

force,  boosting 

investment 

  addressing 

inequalities 

in  educational 
improving  educational 

attainment  and 
outcomes of disadvantaged groups; 

  improving 

the 

tax  mix 

to  promote 
incentives  to  increase  hours  worked,  for 
low-  and  middle-income  earners  and 
second  earners 
to 
promote environmental sustainability, while 
of 
cushioning 
environmental taxation; and 

in  particular,  and 

regressive 

effects 

  ensuring  sustainability  of 

the  pension 

system in light of demographic change.  

14 

 
 
 
 
ANNEXES 

 
 
 
LIST OF ANNEXES 

Cross-cutting progress indicators 

Annex 1: Sustainable Development Goals 

Annex 2: Recovery and Resilience Plan implementation 

Annex 3: Other EU instruments for recovery and growth 

Annex 4: Progress in the implementation of country-specific recommendations 

Environmental sustainability 

Annex 5: Green Deal 

Annex 6: Employment and social impact of the green transition 

Productivity 

Annex 7: Resource efficiency and productivity 

Annex 8: Digital transition 

Annex 9: Innovation 

Annex 10: Industry and single market 

Annex 11: Public administration 

Fairness 

Annex 12: Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

Annex 13: Education and skills 

Annex 14: Health and health systems 

Annex 15: Economic and social performance at regional level 

Macroeconomic stability 

Annex 16: Key financial sector developments 

Annex 17: Macroeconomic Imbalance Procedure assessment matrix 

Annex 18: Taxation 

Annex 19: Key economic and financial indicators 

Annex 20: Debt sustainability analysis 

References 

LIST OF TABLES 

Table A2.1: 
Table A4.1: 
Table A5.1: 
Table A7.1: 

Key elements of the German RRP 
Progress on CSRs and RRP coverage 
Key economic and financial indicators 
Selected resource efficiency indicators 

17 

19 

19 

21 

22 

24 

27 

27 

30 

32 

32 

34 

36 

38 

40 

42 

42 

44 

46 

48 

50 

50 

52 

54 

56 

57 

59 

21 
25 
29 
32 

 
 
 
Table A8.1: 
Table A9.1: 
Table A10.1: 
Table A11.1: 
Table A12.1: 
Table A13.1: 
Table A14.1: 
Table A15.1: 
Table A16.1: 
Table A17.1: 
Table A18.1: 
Table A19.1: 
Table A20.1: 
Table A20.2: 

Key Digital Economy and Society Index indicators 
Key research, development and innovation indicators 
Key Single Market and Industry Indicators 
Public Administration indicators 
Social Scoreboard 
EU-level targets and other contextual indicators under the European Education Area strategic framework 
Key health indicators 
Regional data on economic and social performance 
Key financial soundness indicators 
Assessment of Macroeconomic Imbalances matrix 
Taxation indicators 
Key economic and financial indicators 
Debt sustainability analysis for Germany 
Heat map of fiscal sustainability risks for Germany 

LIST OF GRAPHS 

Graph A1.1: 

Progress towards the SDGs in Germany in the last five years 

Graph A2.1: 

Share of RRF funds contributing to each policy pillar 

Graph A3.1: 

2014-2020 European Structural and Investment Funds in Germany – total budget by fund 

Graph A3.2: 

Cohesion policy contribution to the SDGs (EUR billion) 

Graph A4.1: 

Germany’s progress on the 2019-2020 CSRs (2022 European Semester cycle) 

Graph A5.1: 

Fiscal aspects of the green transition Taxation and government expenditure on environmental protection 

Graph A5.2: 

Share in energy mix (solids, oil, gas, nuclear, renewables) 

Graph A5.3: 

Terrestrial protected areas and organic farming 

Graph A5.4: 

Share of zero emission vehicles (% of new registrations) 

Graph A6.1: 

Fair green transition challenges 

Graph A6.2: 

Energy poverty by income decile 

Graph A7.1: 

Economic importance and expansion of the circular economy – employment and value added in the circular economy 

sectors 

Graph A11.1: 

E-government benchmark scores and and e-government users 

Graph A11.1: 

Public procurement performance 

Graph A13.1: 

Low achievement in reading by migrant background, PISA 2018 

Graph A14.1: 

Projected increase in public expenditure on health care over 2019-2070 (reference scenario) 

Graph A14.2: 

Life expectancy at birth in years 

Graph A15.1: 

Gross value added per worker 

Graph A15.2: 

Territories most affected by climate transition in Germany 

Graph A16.1: 

Credit growth 

Graph A18.1: 

Tax wedge indicators 

35 
37 
39 
41 
42 
45 
47 
49 
51 
53 
55 
56 
57 
58 

20 

21 

22 

23 

24 

27 

27 

28 

28 

30 

31 

32 

40 

40 

44 

46 

46 

48 

49 

50 

54 

18 

 
 
 
 
CROSS-CUTTING PROGRESS INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

with  a  learning  backlog  to  tackle  the  learning 
disparities  created  by  the  COVID-19  crisis.  The 
plan is also devoting EUR 725 million to supporting 
apprentices hit by the crisis. 

Germany  performs above  the  EU  average on 
SDG  indicators  related  to  productivity  (SDG 
8, 9) and improved its performance. Germany 
performs  above  the  EU  average  on  ‘Decent  work 
and  economic  growth’  (SDG  8)  and  ‘Industry, 
infrastructure’  (SDG  9).  With 
innovation,  and 
3.14% of GDP allocated to R&D in 2020, Germany 
has  one  of  the  highest  R&D  spending  in  the  EU. 
The  share  of  R&D  personnel 
in  the  active 
population  rose  from  1.58%  in  2015  to  1.78%  in 
2020  (EU:  1.44%  in  2020).  The  RRP  targets 
bottlenecks  related  to  the  digitalisation  of  the 
administration  and  the  economy,  for  instance  by 
interconnecting  business  registers  to  reduce  the 
administrative burden for businesses and citizens.  

Germany  performs  very  well  on  SDG 
indicators related to macroeconomic stability 
(SDG  8,  16).  Germany  performs  well  on  SDG  16 
‘Peace,  justice  and  strong  institutions’,  showing  a 
stable  and  secure  environment  for  pursuing 
economic  activities  and  on  SDG  8  ‘Decent  work 
and  economic  growth’.  Germany  halved  its  long-
term  unemployment  rate  from  2.0%  in  2015  to 
1.1%  in  2020  (EU:  2.4%  in  2020).  The  RRP 
includes a package of reforms to speed up public 
investment  and  tackle  investment  bottlenecks  to 
unlock private investment and reduce the savings-
investment imbalance. 

This  annex  assesses  Germany’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  four  dimensions  of  competitive 
sustainability.  The  17  SDGs  and  their  related 
indicators  provide  a  policy  framework  under  the 
UN’s  2030  Agenda  for  Sustainable  Development. 
The  aim  is  to  end  all  forms  of  poverty,  fight 
inequalities  and  tackle  climate  change,  while 
ensuring that no one is left behind. The EU and its 
Member  States  are  committed  to  this  historic 
global  framework  agreement  and  to  playing  an 
active  role  in  maximising  progress  on  the  SDGs. 
Graph  A1.1  is  based  on  the  EU  SDG  indicator  set 
developed  to  monitor  progress  on  SDGs  in  an  EU 
context.  

is 

SDGs 

regard 

related 

improving  with 

Germany  performs above  the  EU  average on 
some 
to 
indicators 
environmental  sustainability  (such  as  SDG 
11)  and  is  improving  on  others  (SDG  12,  13, 
7).  Germany 
to 
affordable  and  clean  energy  but  the  share  of 
energy 
renewable 
consumption  is  below  the  EU  average  (at  19.3% 
against  22.1%  for  the  EU  in  2020).  Various 
measures in the recovery and resilience plan (RRP) 
supporting  the  use  of  renewable  hydrogen  in 
industry and the transport sector will contribute to 
greenhouse gas emission reduction and increasing 
the share of renewable energy. 

in  gross 

energy 

final 

Germany  performs  well  on  SDG  indicators 
assessing  the  fairness  of  society  and 
economy  (SDG  2,  3,  5,  8)  but  needs  to  take 
measures  to  reduce  inequality  (SDG  10), 
improve the quality of education (SDG 4), and 
(SDG  1) (27).  Germany 
address  poverty 
generally  performs  better  than  the  EU  average  in 
domains  linked to  decent jobs  and  growth,  health 
and  hunger.  However,  wealth  inequality  is  among 
the  highest  in  the  EU  and  there  has  been  no 
progress in reducing income inequality. The income 
share of the bottom 40% was considerably below 
the  EU  average  in  2020.  The  German  RRP  will 
contribute  to  addressing  these  social  challenges 
with  additional  courses  and  mentoring  to  pupils 

(27)  See ‘Annex 12 – Employment, skills and social policy 

challenges in light of the European Pillar of Social Rights’ for 
further information. Due to a change in the methodology, 
there is a break in the time series for various social and 
inequality-related indicators between 2019 and 2020. 

19 

 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
Graph A1.1: Progress towards the SDGs in Germany in the last five years 

For detailed datasets on the various SDGs see the annual ESTAT report ‘Sustainable development in the European Union’, 
https://ec.europa.eu/eurostat/web/products-statistical-books/-/KS-03-21-096; Extensive country specific data on the short-term 
progress of Member States can be found here: Key findings - Sustainable development indicators - Eurostat (europa.eu) 
Source: Eurostat, latest update of 28 April 2022. Data mainly refer to 2015-2020 and 2016-2021. 

20 

 
 
 
ANNEX 2: RECOVERY AND RESILIENCE PLAN IMPLEMENTATION 
ANNEX 2: RECOVERY AND RESILIENCE PLAN IMPLEMENTATION 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the  centrepiece  of  the  EU’s  efforts  to 
support  its  recovery  from  the  COVID-19 
pandemic, to fast forward the twin transition 
and  to  strengthen  resilience  against  future 
shocks.  Germany  submitted  its  recovery  and 
(RRP)  on  28 April 2021.  The 
resilience  plan 
Commission’s 
on 
positive 
22 June 2021  and  the  Council’s  approval  on 
13 July 2021 paved the way for disbursing grants 
of  EUR 25.6 billion  under  the  RRF  over  the  period 
2021-2026.  The  financing  agreement  was  signed 
on  20 August 2021.  The  key  elements  of  the 
German  RRP  are  set  out  in  Table  A2.1.  The  graph 
below 
funds 
contributing to each of the RRF’s six policy pillars. 

(A2.1)  outlines 

the  share  of 

assessment 

The progress made by Germany implementing 
its  plan  is  published  in  the  Recovery  and 
Resilience  Scoreboard.  The  scoreboard  also 
gives  a  clear  overview  of  the  progress  made  in 
implementing the RRF as a whole.  

Table A2.1: Key elements of the German RRP 

(1) See Pfeiffer P., Varga J. and in ’t Veld J. (2021), 
“Quantifying Spillovers of NGEU investment”, European 
Economy Discussion Papers, No. 144 and Afman et al. (2021), 
“An overview of the economics of the Recovery and Resilience 
Facility”, Quarterly Report on the Euro Area (QREA), Vol. 20, 
No. 3 pp. 7-16.  
Source: European Commission 2022 

Graph A2.1: Share of RRF funds contributing to each policy pillar 

(1) Each measure contributes towards two policy areas of the six pillars, therefore the total contribution to all pillars displayed on 
this chart amounts to 200% of the estimated cost of the German RRP. The bottom part represents the amount of the primary 
pillar, the top part the amount of the secondary pillar. 
Source: RRF Scoreboard https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/country_overview.html 

21 

Total allocation EUR 25.6 billion in grants (0.7% of 2019 GDP)Investments and Reforms 25 investments and 15 reforms Total number of Milestones and Targets129Estimated macroeconomic impact (1) Raise GDP by 0.7% by 2026 (0.4% in spillover effects)Pre-financing disbursed EUR 2.2 billion (August 2021) First instalment Germany did not yet submit a first payment request0%10%20%30%40%50%60%Green transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic,social andinstitutionalresiliencePolicies for thenext generation 
 
 
 
 
 
  
 
 
 
 
 
  
ANNEX 3: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 
ANNEX 3: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The EU’s budget of more than EUR 1.2 trillion 
for  2021-2027  is  the  investment  lever  to 
help  implement  EU  priorities.  Underpinned  by 
an  additional  amount  of  about  EUR  800  billion 
largest 
through  NextGenerationEU  and 
instrument, the Recovery and Resilience Facility, it 
represents  significant  firepower  to  support  the 
recovery and sustainable growth.  

its 

support 

Germany’s 

In  2021-2027,  EU  cohesion  policy  funds (28) 
will 
long-term 
development  objectives  by  investing  EUR 
20.94  billion (29)  including  EUR  2.8  billion 
from  the  Just  Transition  Fund  to  alleviate 
the  socio-economic  impacts  of  the  green 
transition  in  the  most  vulnerable  regions. 
Partnership  agreements  and  programmes  under 
the  2021-2027  cohesion  policy  funds  take  into 
account 
country-specific 
2019-2020 
the 
investment  guidance 
recommendations  and 
provided  as  part  of  the  European  Semester, 
ensuring  synergies  and  complementarities  with 
other  EU  funds.  In  addition,  Germany  will  benefit 
from  EUR  30.6  billion  support  for  the  2023-27 
period from the Common Agricultural Policy, which 
supports  social,  environmental,  and  economic 
sustainability  and  innovation  in  agriculture  and 
rural  areas,  contributing  to  the  European  Green 
Deal, and ensuring long-term food security. 

For  the  programming  period  2014-2020 (30), 
Investment 
the  European  Structural  and 
Funds  (ESIF)  for  Germany  are  set  to  invest 
EUR  33.50  billion (31)  national  financing 
amounts  to  EUR  52.01  billion  (Graph  3.1), 
representing around 0.23% of GDP for 2014-
2020  and  8.38%  of  public  investment (32)(in 
total  EUR  29.7  billion).  By  end  2020,  Cohesion 

(28)  European Regional Development Fund (ERDF), European 

Social Fund+ (ESF+), Cohesion Fund (CF), Just Transition Fund 
(JTF), Interreg. 

(29)  Current prices, source: Cohesion Open Data  

(30)  The data for the EAFRD refers to the period 2014-2022 

(31)  ESIF includes cohesion policy funds (ERDF, ESF+, CF, Interreg), 

the European Agricultural Fund for Rural Development 
(EAFRD) and the European Maritime and Fisheries Fund 
(EMFF). According to the ‘N+3 rule’, the funds committed for 
the for 2014-2020 must be spent by 2023 at the latest (by 
2025 for EAFRD). Data source: Cohesion Open data, cut-off 
date 31.12.2021 for ERDF, ESF+, CF, Interreg; cut-off date 
31.12.2020 for EAFRD and EMFF.  

(32)  Including REACT-EU. ESIF data on 

https://cohesiondata.ec.europa.eu/countries/DE 

22 

policy  investments  supported  44 960  businesses, 
the creation of more than 13 000 direct jobs, the 
development  of  new  to  the  markets  products  by 
more  than  1 600  businesses,  the  gain  of  new 
qualifications  by  1.18  million  people,  and  the 
reduction  of  GHG  emissions  by  almost  262 
thousand  tons  of  CO2  equivalents  per  year. 
European 
investments 
supported  more  than  2.7  million  participants  in 
than 
funded  projects, 
587 000  gained  a  qualification  in  educational  or 
vocational  training  and  more  than  106 000  were 
in employment after a social inclusion project. 

through  which  more 

Social 

policy 

Fund 

Cohesion  policy  funds  already  substantially 
contribute  to  the  Sustainable  Development 
Goal  objectives.  In  Germany,  cohesion  policy 
funds support 10 of the 17 SDGs with up to 97% 
of  expenditure  contributing  to  the  attainment  of 
the goals. 

Graph A3.1: 2014-2020 European Structural and 
Investment Funds in Germany – total budget by 
fund 

EUR billion in current prices, % of total  
Source: European Commission, Cohesion Open Data 

REACT-EU 

instrument 

cohesion  policy  allocations 

The 
(Recovery 
Assistance  for  Cohesion  and  the  Territories 
of Europe) under NextGenerationEU provided 
EUR 2.1 billion of additional funding to 2014-
for 
2020 
Germany.  This  will  contribute  to  objectives  such 
as 
recovery,  boost 
convergence  and  provide  vital  support  to  regions 
following  the  coronavirus  outbreak.  REACT-EU 
provided  support  in  Germany  to  organise  the 
vaccination  campaign,  improve  research  facilities 
the  health  sector,  strengthen  education, 
in 

to  ensure  a  balanced 

EAFRD19.3 bn37%EMFF0.3 bn1%ERDF19.2 bn37%ESF13.3 bn25%Grand Total: 52.0 bn 
 
                                                 
  
 
Graph A3.2: Cohesion policy contribution to the SDGs (EUR billion) 

Ministry  of  Health  in  the  implementation  of  the 
national  genome  initiative  (genomDE)  and  the 
Federal  Financial  Supervisory  Authority  (BaFin)  in 
the  digitalisation  of  supervisory  procedures.  The 
Commission  also  supported  Bavaria  and  North 
Rhine-Westphalia  with 
their  digital  upskilling 
strategies  and  Brandenburg  in  strengthening  their 
education system. In 2022, new projects will start 
to  improve,  for  example,  overall  RRP  monitoring 
frameworks  and  bring  gender  mainstreaming into 
public policy and budget processes. 

Germany  also  benefits  from  other  EU 
programmes,  such  as  the  Connecting  Europe 
Facility  and  Horizon  2020.  The  Connecting 
Europe  Facility  allocated  EU  funding  of  EUR  2.4 
billion  to  specific  projects  on  strategic  transport 
networks.  Horizon  2020  allocated  EU  funding  of 
EUR 9.97 billion. 

Source: European Commission 

including  IT  equipment, provide  additional  support 
to  SMEs,  training  and  skills  development,  active 
inclusion and to promote energy efficiency. 

It 

to 

The  Coronavirus  Response 
Investment 
Initiative (33) provided the first EU emergency 
support to Germany in relation to the COVID-
introduced  extraordinary 
19  pandemic. 
re-allocate 
flexibility  enabling  Germany 
resources 
businesses 
support 
for 
(EUR 70 million). For instance, Germany  supported 
purchase  of  protective  equipment,  healthcare 
supplies  and  IT  equipment  for  the  health  care 
sector,  and  supported 
in  SMEs. 
Germany also benefited from the temporary 100% 
EU  financing  of  incurred  measures  in  cohesion 
policy,  with  approximately  EUR 261 million 
in 
2021 through 100% co-financing. 

innovation 

to 

via 

the 

provides 

Technical 

Commission 

tailor-made 
The 
expertise 
Support 
Instrument  (TSI)  and  the  Horizon  Policy 
Support  Facility  (PSF)  to  support  Germany 
design and implement growth-enhancing and 
R&I-specific  reforms  respectively,  including 
implementing  its  RRP.  Germany  has  received 
assistance,  since  2018,  through  nine  technical 
support  projects  under  the  TSI  and,  since  2016, 
seven under the PSF–Mutual Learning Exercises in 
R&I policy learning. TSI projects delivered in 2021 
aimed,  for  example,  to  support  the  Federal 

(33)  Re-allocating ESIF resources according to Regulation (EU) 

2020/460 of the European Parliament and of the Council of 
30 March 2020, and Regulation (EU) 2020/558 of the 
European Parliament and of the Council of 23 April 2020. 

23 

0.060.140.280.751.092.224.364.695.5510.1304812SDG 3 Good health and well beingSDG 12 Responsible consumption and productionSDG 11 Sustainable cities and communitiesSDG 15 Life on landSDG 13 Climate actionSDG 7 Affordable and clean energySDG 4 Quality educationSDG 1 No povertySDG 9 Industry, innovation, infrastructureSDG 8 Decent work and economic growth 
                                                 
  
ANNEX 4: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
ANNEX 4: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 
RECOMMENDATIONS 

Graph A4.1: Germany’s progress on the 2019-2020 
CSRs (2022 European Semester cycle) 

The  Commission  assessed  the  2019-2021 
country-specific  recommendations  (CSRs) (34) 
addressed  to  Germany  in  the  context  of  the 
European  Semester.  The  assessment  takes  into 
account  the  policy  action  taken  by  Germany  to 
date (35),  as  well  as  the  commitments  in  the 
recovery and resilience plan (RRP) (36). At this early 
stage  of  the  RRP  implementation,  overall  59%  of 
the CSRs focusing on structural issues in 2019 and 
2020  have  recorded  at  least  “some  progress”, 
while  41%  recorded  “limited”  (see  Graph  4.1). 
Considerable  additional  progress  in  addressing 
structural  CSRs  is  expected  in  the  years  to  come 
with the further implementation of the RRP. 

Source: European Commission 

(34)  2021 CSRs: https://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=CELEX%3A32021H0729%2805%29&qi
d=1627675454457  

2020 CSRs: https://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=CELEX%3A32020H0826%2805%29&qi
d=1526385017799  

2019 CSRs: https://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=CELEX%3A32019H0905%2805%29&qi
d=1526385017799  

(35)  Incl. policy action reported in the National Reform 

Programme, as well as in the RRF reporting (bi-annual 
reporting on the progress with implementation of milestones 
and targets and resulting from the payment request 
assessment). 

(36)  Member States were asked to effectively address all or a 

significant subset of the relevant country-specific 
recommendations issued by the Council in 2019 and 2020 in 
their RRPs. The CSR assessment presented here takes into 
account the degree of implementation of the measures 
included in the RRP and of those done outside of the RRP at 
the time of assessment. Measures foreseen in the annex of 
the adopted Council Implementing Decision on the approval 
of the assessment of the RRP which are not yet adopted nor 
implemented but considered as credibly announced, in line 
with the CSR assessment methodology, warrant “limited 
progress”. Once implemented, these measures can lead to 
“some/substantial progress” or “full implementation”, 
depending on their relevance. 

24 

Limited Progress41%Some Progress55%Substantial Progress4% 
 
                                                 
  
 
 
 
 
 
 
Table A4.1: Progress on CSRs and RRP coverage 

(Continued on the next page) 

25 

GermanyAssessment in May 2022*RRP coverage of CSRs until 20262019 CSR1Some ProgressWhile respecting the medium-term budgetary objective, use fiscal and structural policies to achieve a sustained upward trend in private and public investment, in particular at regional and municipal level. Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022, 2023 Focus investment-related economic policy on education;Limited ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.research and innovation;Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022 and 2023.digitalisation and very-high capacity broadband;Some ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.sustainable transport Some ProgressRelevant RRP measures planned as of 2020 and 2021.as well as energy networks Limited ProgressRelevant RRP measures planned as of 2020, 2021 and 2023.and affordable housing, taking into account regional disparities. Limited ProgressRelevant RRP measures planned as of 2021.Shifttaxesawayfromlabourtosourceslessdetrimentaltoinclusiveand sustainable growth.Some ProgressRelevant RRP measures planned as of 2021.Strengthencompetitioninbusinessservicesandregulatedprofessions.Limited Progress2019 CSR 2Some ProgressReduce disincentives to work more hours,Some ProgressRelevant RRP measures planned as of 2021including the high tax wedge,  in particular for low-wageSome ProgressRelevant RRP measures planned as of 2020, 2021and second earners.Limited ProgressRelevant RRP measures planned as of 2020, 2021Take measures to safeguard the long-term sustainability of the pension system, while preserving adequacy.Limited ProgressRelevant RRP measures planned as of 2021Strengthen the conditions that support higher wage growth, while respecting the role of the social partners. Substantial ProgressRelevant RRP measures planned as of 2021Improve educational outcomes and skills levels of disadvantaged groups.Limited ProgressRelevant RRP measures planned as of 2020, 2021, 2022  2020 CSR1Some ProgressTakeallnecessarymeasures,inlinewiththegeneralescapeclauseof the Stability and Growth Pact, to effectively address the COVID-19 pandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability, while enhancing investment. Not relevant anymoreNot applicableMobiliseadequateresourcesandstrengthentheresilienceofthehealth system, including by deploying e-health services.Some ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.2020 CSR2Some ProgressFront-load mature public investment projects Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022 and promote private investment to foster the economic recovery. Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022  Focus investment on the green and digital transition, in particular on sustainable transport, Some ProgressRelevant RRP measures planned as of 2020 and 2021.clean, efficient and integrated energy systems, Limited ProgressRelevant RRP measures planned as of 2020, 2021 and 2023.digital infrastructure and skills, Some ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.housing, Limited ProgressRelevant RRP measures planned as of 2021.education Limited ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.and research and innovation. Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022 and 2023.Improve digital public services across all levels Limited ProgressRelevant RRP measures planned as of 2021 and 2022.and foster the digitalisation in SMEs. Some ProgressRelevant RRP measures planned as of 2020 and 2021.Reduce the regulatory and administrative burden for businesses.Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022.2021 CSR1Substantial ProgressIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationally financed investment.Full ImplementationNot applicable 
 
 
  
 
Table (continued) 

* See footnote 36 
Source: European Commission 

26 

Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term. Substantial ProgressNot applicableAtthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticular investment supporting the green and digital transition. Some ProgressNot applicableGiveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Limited ProgressNot applicable 
 
  
 
ENVIRONMENTAL SUSTAINABILITY 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 5: GREEN DEAL 
ANNEX 5: GREEN DEAL 

intends 

The  European  Green  Deal 
to 
transform the  EU  into a  fair and prosperous 
society with a modern, resource-efficient and 
competitive economy where there are no net 
emissions  of  greenhouse  gases  in  2050  and 
where  economic  growth  is  decoupled  from 
resource use. This annex offers a snapshot of the 
most  significant  and  economically 
relevant 
developments 
in  the  respective 
building  blocks  of  the  European  Green  Deal.  It  is 
complemented by Annex 6 on the employment and 
social impact of the green transition and Annex 7 
for circular economy aspects of the Green Deal.  

in  Germany 

Graph A5.1: Fiscal aspects of the green transition 
Taxation and government expenditure on 
environmental protection 

Source: Eurostat 

law, 

Achieving  Germany’s  domestic  and  European 
climate  ambitions  will  require  sustained 
efforts.  In  July  2021,  Germany  amended  its 
climate 
to  climate 
thereby  committing 
neutrality  by  2045  and  to  greenhouse  gas 
emission  reductions  of  -65%  compared  to  1990 
total 
levels  by  2030. 
greenhouse 
the 
gas 
LULUCF (37)  sector  showed  a  decrease  of  -40% 
since  1990.  In  the  sectors  not  covered  by  the  EU 
Emission Trading System, emissions were only cut 
by  -12%  relative  to  2005  levels  and  remained 
higher than those resulting from Germany's 2020 
target  of  -14%  reductions.  Transport  emissions 
increased slightly in 2020 relative to 2019, despite 
the  COVID-19  crisis.  With  existing  measures, 

In  2020,  Germany’s 
excluding 
emissions 

Germany  would  underachieve  its  current  2030 
effort  sharing  target  of  -38%  relative  to  2005 
emission levels by 9 p.p. The proposed new effort-
sharing  target  for  Germany  in  the  ‘Fit  for  55’ 
framework  is  -50%.  In  its  recovery  and  resilience 
plan (RRP), Germany allocates 42% of the plan to 
climate objectives and outlines crucial reforms and 
investments  to  further  the  transition  to  a  more 
sustainable, 
low-carbon  and  climate-resilient 
economy (38). 

Graph A5.2: Share in energy mix (solids, oil, gas, 
nuclear, renewables) 

(1) The energy mix is based on gross inland consumption, and 
excludes heat and electricity. The share of renewables 
includes biofuels and non-renewable waste. 
Source: Eurostat 

The ratio of environmental taxation revenues 
to  total  taxes  as  well  as  in  terms  of  GDP  is 
below  the  EU  average  and  continues  to 
decrease.  The  share  of  environmental  taxes  is 
particularly  low  in  the  domain  of  pollution  and 
resources (39).  The  share  of  expenditure  on 
environmental  protection 
in  total  government 
expenditure  is  increasing,  while  remaining  below 
the  EU  average.  With  insurance  cover  penetration 
at  a medium  level,  public budgetary  risks  are  low 
to medium in Germany, even if the summer floods 
showed  that  at  regional  level  risk  can  still  be 
significant. 

(38)  The share of financial allocation contributing to climate 

objectives has been calculated using Annex VI of the RRF 
Regulation. 

(37)  Land use, land-use change and forestry. 

(39)  For more information on taxation see Annex 18. 

27 

0.01.02.03.04.05.06.0Environmentaltaxes(% of GDP)Environmentaltaxes(% of totaltaxation)Spending onenvironmentalprotection(% of totalexpenditure)DE (2020)EU27(2020)0102030405060708090100200520102015201820192020RenewablesNuclearGasOilSolid fossil fuels, peat and oil shale 
 
 
  
                                                 
  
                                                 
 
 
In  2020,  Germany’s  energy  mix  was  still 
dominated  by  fossil  fuels.  The  energy  carriers 
constituting  the  highest  percentages  are  oil  and 
petroleum  products  (excluding  biofuel  portion), 
with  35%  and  natural  gas  with  26%  (slight 
increase  over  the  past  decade  for  both).  These 
were  followed  by  renewables  and  biofuels,  and 
solid fuels (dominantly coal and lignite) with 18% 
and  16%  of  the  energy  mix,  respectively.  The 
share  of  nuclear  energy  was  almost  halved  over 
the last decade, leading the way to the full phase-
out  of  nuclear  energy  planned  for  later  this  year. 
Streamlining  planning  and  permitting  procedures 
for  electricity  networks  and  renewable  energy 
generation  would  support  wider  and  faster 
deployment  of  wind  and  solar  renewable  energy 
sources.  

Graph A5.3: Terrestrial protected areas and 
organic farming 

in 

Emissions  of  several  air  pollutants  have 
decreased  significantly  in  Germany,  but  air 
quality 
larger  agglomerations  gives 
continued  cause  for  serious  concern.  The 
current  submission  of  air  pollutant  emission 
projections does not demonstrate compliance with 
the emission reduction commitments for NOX and 
for the emission reduction commitment for PM2.5 
from  2030  onwards.  According  to  the  last  report 
on  the  implementation  of  the  Nitrates  Directive 
groundwater  quality  has  not  improved  and  water 
pollution  by  nitrates  remains  a  serious  concern, 
especially in pollution hotspots.  

Graph A5.4: Share of zero emission vehicles (% of 
new registrations) 

(1) Zero emission vehicles (passenger cars) include battery 
and fuel cell electric vehicles (BEV, FCEV). 
Source: European Alternative Fuels Observatory. Zero 
emission vehicles include battery and fuel cell electric vehicles 
(BEV, FCEV) 

More  efforts  are  needed 
to  promote 
sustainable  mobility  and  decarbonise  the 
transport  sector.  Germany’s  car  market  has  a 
fast-progressing  share  of  electric  passenger  cars, 
compared  to  the  EU  average.  However,  more 
efforts  are  needed  to 
increase  the  use  of 
sustainable public transport and promote a modal 
shift, in particular towards rail, for both passenger 
and  freight  transport.  More  than  half  of  the 
railway  network 
is  electrified. 
However, this is below the EU average. An increase 
in  the  use  of  public  transport  can  be  achieved  by 
improving  the  quality  of  the  service.  This  will 
improve  road  congestion,  where  Germany  scores 
worse  than  the  EU  average,  and  will  reduce 
dependence on fossil fuels. 

in  Germany 

(1) For terrestrial protected areas data for 2018, and data for 
the EU average (2016, 2017) is lacking. 
Source: EEA (terrestrial protected areas) and Eurostat 
(organic farming). 

Despite  local  successes,  and  a  variety  of 
funding  programmes,  adopted  actions  were 
not sufficient to halt the loss of biodiversity. 
Some  30%  of  habitats  covered  by  the  Habitats 
Directive  have  a  good  conservation  status,  with 
32%  having  poor  and  37%  having  bad 
conservation status. Only around 10% of habitats 
that  have  an  unfavourable  conservation  status 
show  improving  trends.  The  main  pressures  on 
biodiversity  come  from  agriculture  in  the  form  of 
changes 
and 
agricultural 
intensification,  land-take,  and  regulation  of  rivers 
for navigation and flood defence (40). 

practices 

of 

(40)  European Environment Agency, 2020 

28 

0102030402016201720192020Terrestrial protected areas (% total area)Area under organic farming (% total utilised agricultural area)EU27 (terrestrial)EU27 (organic)0.05.010.015.0201620172018201920202021% of new registrationsDEEU27 
  
                                                 
  
Table A5.1: Key economic and financial indicators 

Source: (1) The 2030 non-ETS GHG target is based on the Effort Sharing Regulation. The FF55 targets are based on the COM 
proposal to increase EU's climate ambition by 2030. Renewables and Energy Efficiency targets and national contributions under 
the Governance Regulation (Regulation (EU) 2018/1999). (2) Distance to target is the gap between Member States’ 2030 target 
under the Effort Sharing Regulation and projected emissions, with existing measures (WEM) and with additional measures (WAM) 
respectively, as a percentage of 2005 base year emissions. (3) Percentage of total revenues from taxes and social contributions 
(excluding imputed social contributions). Revenues from the ETS are included in environmental tax revenues (in 2017 they 
amounted to 1.5% of total environmental tax revenues at the EU level). (4) Covers expenditure on gross fixed capital formation to 
be used for the production of environmental protection services (i.e. abatement and prevention of pollution) covering all sectors, 
i.e. government, industry and specialised providers. (5) The climate protection gap indicator is part of the European adaptation 
strategy (February 2021), and is defined as the share of non-insured economic losses caused by climate-related disasters. 
(6) Sulphur oxides (SO2 equivalent), Ammonia, Particulates < 10µm, Nitrogen oxides in total economy (divided by GDP). 
(7) Transportation and storage (NACE Section H). (8) Zero emission vehicles include battery electric vehicles (BEV) and fuel cell 
electric vehicles (FCEV). (9) European Commission Report (2019) 'Benchmarking smart metering deployment in the EU-28'. 
(10) European Commission (2021). Each year the DESI is re-calculated for all countries for previous years to reflect any possible 
change in the choice of indicators and corrections to the underlying data. Country scores and rankings may thus differ compared 
with previous publications. 
Source: Eurostat, JRC, European Commission, EEA, EAFO. 

29 

TargetTarget2005201920202030WEMWAM2030WEMWAMNon-ETS GHG emission reduction target (1)MTCO2 eq; %; pp (2)484.7-7%-12%-38%-9-9-50%-21-21200520162017201820192020Share of energy from renewable sources in gross final consumption of energy (1)%7%15%15%17%17%19%30%Energy efficiency: primary energy consumption (1)Mtoe321.6297.6298.1292.0285.2262.3216.0Energy efficiency: final energy consumption (1)Mtoe219.7216.9218.6215.2214.7201.7185.0201520162017201820192020201820192020Environmental taxes (% of GDP)% of GDP1.91.91.81.81.81.72.42.42.2Environmental taxes (% of total taxation)% of taxation (3)5.04.84.64.54.44.36.05.95.6Government expenditure on environmental protection% of total exp.1.261.251.241.301.341.341.661.701.61Investment in environmental protection% of GDP (4) 0.370.370.370.39--0.420.380.41Fossil fuel subsidiesEUR2020bn12.9013.4013.3012.8412.10-56.8755.70-Climate protection gap (5)score 1-4Net GHG emissions1990 = 100727373706760797669GHG emissions intensity of the economykg/EUR'100.350.340.330.310.290.280.320.310.30Energy intensity of the economykgoe/EUR'100.110.110.110.110.100.100.120.110.11Final energy consumption (FEC)2015=100100.0101.9102.8101.1100.994.8103.5102.994.6FEC in residential building sector2015=100100.0103.6103.3101.6105.1105.5101.9101.3101.3FEC in services building sector2015=100100.098.798.689.585.382.9102.4100.194.4Smog-precursor emission intensity (to GDP) (4)tonne/EUR'10 (6)0.830.760.760.770.71-0.990.93-Years of life lost caused due to air pollution by PM2.5per 100.000 inh.786720777859676-863762-Years of life lost due to air pollution by NO2per 100.000 inh.16514413212575-12099-Nitrate in ground watermg NO3/litre26.927.927.327.126.3-21.720.7-Terrestrial protected areas% of total-30.637.7-37.637.6-25.725.7Marine protected areas% of total-45.9--45.9--10.7-Organic farming% of total utilised agricultural area6.36.86.87.37.89.68.08.59.100-0606-1212-18Net land takeper 10,000 km213.011.05.0201520162017201820192020201820192020GHG emissions intensity of transport (to GVA) (7)kg/EUR'100.910.880.920.910.860.740.890.870.83Share of zero emission vehicles (8)% in new registrations0.40.30.71.01.76.61.01.95.495567148812Share of electrified railways%52.452.852.952.953.1-55.656.0-29.629.529.929.329.4-28.928.8-YearDEEUShare of smart meters in total metering points (9) - electricity% of total20180.035.8Share of smart meters in total metering points (9) - gas% of total20180.013.1ICT used for environmental sustainability (10)%202156.965.9MobilityNumber of plug-in electric vehicles per charging pointCongestion (average number of hours spent in road congestion per year by a representative commuting driver)DigitalPollutionBiodiversity2000-20062006-20122012-201812.99.47.3Energy'Fit for 55'DistanceDistanceProgress to policy targetsNational contribution to 2030 EU targetGERMANYEUFiscal and financialindicators1.6 out of 4 (slight increase from historical level of 1.5). This is a low/medium risk category (4 being a high risk).Climate 
 
  
 
ANNEX 6: EMPLOYMENT AND SOCIAL IMPACT OF THE GREEN TRANSITION 
ANNEX 6: EMPLOYMENT AND SOCIAL IMPACT OF THE GREEN TRANSITION 

The  green  transition  not  only  encompasses 
environmental 
to 
improvements 
sustainability, but also includes a significant 
social dimension.  While measures in this regard 
include the opportunity for sustainable growth and 
job creation, it must also be ensured that no one is 
left  behind  and  all groups  in  society  benefit  from 
the  transition.  Germany’s  green  transition 
is 
progressing  but  facing  diverse  challenges  across 
regions.  The  energy-intensive  sectors  are  still 
sizeable and some social challenges persist.  

Graph A6.1: Fair green transition challenges 

Source: Eurostat, World Inequality Database 

Germany’s recovery and resilience plan (RRP) 
outlines  important  reforms  and  investments 
for  a  fair  green  transition.  The  RRP  focuses 
support  on  sustainable  mobility  and  emission 
reductions via  a  support  scheme  as  well  as  a  tax 
exemption  for  e-vehicles.  A  measure  to  renovate 
the  building  stock  aims  at  increasing  energy 
efficiency.  Measures  for  skills  development  are 
meant  to  prevent  job  losses  and  facilitate  job-to-
job 
In 
transitions  alongside  decarbonisation. 
synergy with the European Social Fund (ESF+), the 
Just Transition Fund (EUR 2.25 billion; 2018 prices) 
will  help  mitigate  the  social-economic  impact  of 
the  green  transition  and  dedicate  resources  to 
green skills. Germany’s integrated national energy 
and climate plan (NECP) of 11 June 2020 partially 
addresses 
the 
Commission  to  integrate  fairness  aspects  in  the 
energy 
the  social, 
employment  and  skills  impacts  of  the  planned 
measures.  It  projects  the  creation  of  185 000 
additional jobs by 2030. 

transition  and  describe 

recommendation 

the 

by 

key 

industry, 

energy-intensive 

Although 
sectors 
remain  sizeable,  the  green  economy  has  the 
potential  to  grow  and  contribute  to  job 
creation.  The  greenhouse  gas  (GHG)  emissions 
intensity  of  the  German  economy  decreased 
significantly  between  2015  and  2020  and  is  at 
86%  of  the  EU  average  (0.23  kilotonnes  per 
million  EUR  of  gross  value  added),  with  the 
average carbon footprint per worker at 13.60 tons 
of  GHG  emissions,  broadly  in  line  with  the  EU 
average of 13.61 (see Graph A6.1). The coal/lignite 
and  fossil  fuel  based  energy  production  sectors 
are in decline (41), with risks of job losses in fossil 
fuel  and  related  industries  such  as  mining  or 
combustion  engine  car  manufacturing.  Germany’s 
energy-intensive 
including  metals, 
chemicals  and  paper (42),  provides  jobs  for  4%  of 
the  workforce,  for  which  up-  and  reskilling  could 
be  particularly  important  (see  Annex  13).  At  the 
same time, the environmental  goods and services 
sector provides jobs to a relatively limited share of 
the  employed  population  (1.4%  vs  2.1%  in  the 
EU) (43).  Overall,  Germany  has  average  potential 
for  solar-based 
(417 
MWh/km2 compared to 420 MWh/km2 for the EU 
average),  while  northern  Germany  has  above 
average  potential  for  onshore  wind  power  (678 
MWh/km2  compared  to  125  MWh/km2  for  the 
whole  country  and  357  MWh/km2  as  the  EU 
average).  These  sectors,  as  well  as  energy 
efficiency 
further 
opportunities  for  green  jobs (44).  At  the  moment, 
particular labour shortages linked to the transition 
to  a  climate-neutral  economy  are  reported  in  the 
construction 
of 
construction companies reported labour shortages. 
According 
related 
renovation  and  modernisation  of  buildings  will 

renewables  production 

In  2020,  62% 

improvements, 

the  energy 

forecasts, 

industry. 

offer 

to 

(41)  SWD(2021) 275 final. 

(42)  2020 European Semester: Overview of Investment Guidance 
on the Just Transition Fund 2021-2027 per Member State 
(Annex D). 

(43)  There is currently no common EU-wide definition of green 
jobs. The environmental goods and services sector (EGSS) 
accounts only report on an economic sector that generates 
environmental products, i.e. goods and services produced for 
environmental protection or resource management. 

(44)  On the identification and measurement of green jobs see: 

https://publications.jrc.ec.europa.eu/repository/handle/JRC126
681. See also: 
https://publications.jrc.ec.europa.eu/repository/handle/JRC126
047. 

30 

0.000.300.600.901.20GHG tonnesper Euro ofgross addedvalue (MS/EU)GHG tonnesper worker(MS/EU)Employmentshare inenergy-intensiveindustries…Share ofpopulation inrural areas atrisk of poverty(MS/EU)Energy poverty(MS/EU)Carboninequality(MS/EU)GermanyEU 2020Germany 2015 
 
  
                                                 
 
 
42.1% in 2015-2019 to 41.6% in 2020 (compared 
to  31.6%  in  the  EU,  see  Annex  18).  Redistributive 
measures  accompanying  environmental  taxation 
have the  potential  to  foster  progressivity  and  can 
have  a  positive  impact  on  the  disposable  income 
of  households  in  the  bottom  of  the  income 
distribution (49). 

lead  to  the  creation  of  80,000  additional  jobs  by 
2025 (45).  

The  social  dimension  of  the  green  transition 
may  become  an  important  challenge.  This 
involves ensuring access to essential transport and 
energy  services.  In  2020,  the  share  of  rural 
population  at  risk  of  poverty  was  slightly  lower 
than  the  EU  average  (16.2%  vs  18.7%) (46).  The 
share of the population being unable to keep their 
homes  adequately  warm  declined  from  2015  to 
2019 and stood at 9% in 2020 (47), which is above 
the  EU  average  (8.2%)  (see  Graph  A6.2).  While 
low-income  earners  are  most  affected  by  the 
green  transition,  their  carbon  footprint  is  lower 
than  that  of  higher-income  earners.  The  average 
carbon  footprint  of  the  top  10%  of  emitters  is 
almost  6  times  higher  than  that  of  the  bottom 
50% of the population (5.3 times in the EU), which 
is almost unchanged since 2015. 

Graph A6.2: Energy poverty by income decile 

Source: Eurostat EU-SILC survey (2020) 

Tax  systems  are  key  to  ensuring  a  fair 
transition  towards  climate  neutrality (48). 
Germany’s  revenues  from  total  environmental 
taxes  decreased  from  1.92%  of  GDP  in  2015  to 
1.76%  in  2019,  and  1.71%  in  2020  (against 
2.24%  in  the  EU).  The  labour  tax  wedge  for  low-
income  earners decreased  only  slightly  from 

(45)  Bundesministerium für Arbeit und Soziales (2021); DIHK 

(2020) 

(46)  As a proxy for potential transport challenges in the context of 

the green transition (see COM(2021) 568 final). 

(47)  The comparison of 2020 values with previous years is 

affected by a methodological change in the collection of 
SILC data. 

(48)  COM(2021) 801 final. 

(49)  SWD(2021) 641 final PART 3/3. 

31 

0%5%10%15%20%25%12345678910Unable to keep home adequately warm (per income decile)Income decileGermanyEuropean Union 
  
 
                                                 
                                                 
PRODUCTIVITY 
PRODUCTIVITY 
ANNEX 7: RESOURCE EFFICIENCY AND PRODUCTIVITY 
ANNEX 7: RESOURCE EFFICIENCY AND PRODUCTIVITY 

negative  impacts  on  the  environment  and  reduce 
dependency on volatile raw material markets.   

Graph A7.1: Economic importance and expansion of 
the circular economy – employment and value 
added in the circular economy sectors 

while 

minimising 

The  efficient  use  of  resources  is  key  to 
ensuring  competitiveness  and open strategic 
autonomy, 
the 
environmental  impact.  The  green  transition 
presents  a  major  opportunity  for  European 
clean 
creating  markets 
industry 
technologies  and  products.  It  will  have  an  impact 
across  the  entire  value  chain  in  sectors  such  as 
energy and transport, construction and renovation, 
food  and  electronics,  helping  create  sustainable 
well-paid local jobs across Europe.  

for 

by 

Germany’s  circular  material  use  rate  has 
steadily  improved  over  the  past  decade.  The 
circular  (secondary)  use  of  material  in  Germany 
increased  from  11.4%  in  2017  to  12%  in  2020, 
slightly below the EU average of 12.8%. Germany 
remains  far  behind  EU 
leaders  Netherlands 
(30.9%), Belgium (23%), and France (22.2%).  

Resource  productivity  in  Germany  is  above 
the  EU  average.  Resource  productivity,  the 
efficiency of use of material resources to produce 
wealth,  continuously 
last 
decade, with a slight reduction in 2020. Improving 
to  minimise 
resource  productivity  can  help 

increased  over  the 

Table A7.1: Selected resource efficiency indicators 

Source: Eurostat 

Germany seems to be on track in decoupling 
economic  growth  from  the  generation  of 
waste.  Since  2014,  Germany´s  total  waste 
generation  has  remained  steady  overall,  but  for 
some waste types such as plastic packaging there 
has  been  a  steep  increase.  Given  that  gross 

Source: Eurostat  

32 

1.41.51.51.50.951.000.981.041.721.731.751.710.940.940.960.970.00.51.01.52.02015201620172018Persons employed in the circular economy, DE (% of totalemployment)Value added at factor cost, DE (% of GDP )Persons employed in the circular economy, EU27 (% of totalemployment)Value added at factor cost, EU27 (% of GDP )SUB-POLICY AREA201520162017201820192020EU27 CircularityResource Productivity (Purchasing power standard (PPS) per kilogram)2.32.32.42.52.72.82.22020Material Intensity (kg/EUR)0.40.40.40.40.40.40.42020Circular Material Use Rate (%)10.711.211.411.111.512.012.82020Material footprint (Tones/capita)15.215.816.016.015.1-14.62019Waste Waste generation (kg/capita, total waste)-4 858-4 891--5 2342018Landfilling (% of total waste treated)-18.1-18.4--38.52018Recycling rate (% of municipal waste)66.767.167.267.166.76747.82020Hazardous waste (% of municipal waste)-5.8-6.0--4.32018CompetitivenessGross value added in environmental goods and services sector (% of GDP)1.81.91.92.02.0-2.32019Private investment in circular economy (% of GDP)0.10.10.10.1--0.12018Latest year EU 27 
 
 
 
   
 
 
 
   
 
domestic  product  continued  to  grow,  the  trend 
indicates that economic growth is decoupling from 
waste generation. Still, given the overall high level 
of  municipal  waste,  waste  prevention  measures 
have not been impactful enough. 

leading  position 

Further measures can help Germany maintain 
its 
in  environmental 
technology.  This  affects  notably  sustainable 
product  design, 
resource-efficient  production 
processes,  digital  solutions,  industrial  symbiosis, 
remanufacturing  in  key  value  chains,  alternatives 
to  unsustainable  extraction  of  raw  materials  and 
new circular business models. There is also scope 
to shift reusable and recyclable waste away from 
economic 
including 
incineration, 
the  post-2020 
to  ensure 
instruments, 
recycling targets are met. 

through 
that 

33 

 
the 

SME 

national 

12%)  and the share of SMEs selling online cross-
border is at 10% (slightly above the EU average of 
9%). There are several initiatives in Germany that 
support  SMEs  in  their  digital  transformation,  such 
as 
strategy 
programme 
(Mittelstandsstrategie), 
‘Mittelstand-Digital’  (SMEs  Digital)  -  which  itself 
consists  of  the  three  pillars  (i)  the  network 
‘Mittelstand  Digital 
(ii)  the 
investment  support  scheme  Digital  Now  (Digital 
Jetzt)  and 
‘Cybersecurity  for  SMEs 
Initiative’,  (IT-Sicherheit-in-der-Wirtschaft)  -  and 
the Digital Hub Initiative. 

Innovation  Hubs’, 

(iii)  the 

the 

Germany  is  starting  to  improve  its  digital 
public  services,  but  implementation  is  still 
slow.  The  country  scores  around  the  EU  average 
for  digital  public  services  for  businesses  and  for 
the general public. The National Regulatory Control 
Council  acknowledges  Germany’s  efforts  on  the 
digitalisation  of  public  administration,  but 
considers that the country is still lagging behind as 
regards quantifiable results (53).  

ANNEX 8: DIGITAL TRANSITION 
ANNEX 8: DIGITAL TRANSITION 

integration  of  digital 

The Digital Economy and Society Index (DESI) 
monitors EU Member States’ digital progress. 
The  areas  of  human  capital,  digital  connectivity, 
the 
technologies  by 
businesses  and  digital  public  services  reflect  the 
Digital  Decade’s  four  cardinal  points  (50).  This 
Annex  describes  Germany’s  DESI  performance. 
Under  its  recovery  and  resilience  plan,  Germany 
dedicates  more  than  50%  of  its  budget  to  the 
digital  transformation  (one  of  the  highest  of  any 
plan) and invests in all digital areas except digital 
connectivity,  which 
is  addressed  by  national 
funds (51).  

Germany  has  a  mixed  performance  in  the 
DESI dimension on human capital. The country 
scores below the EU average in basic digital skills, 
but  above  average  for  the  percentage  of  ICT 
specialists,  and  at  EU  average  for  female  ICT 
specialists.  

Very high-capacity network coverage in rural 
areas and fibre coverage in general remain a 
key  challenge  for  Germany.  Despite  recent 
significant  improvements,  Germany  is  still  below 
the  EU  average  in  very  high-capacity  networks  in 
rural  areas  (22.5% (52)  compared  to  37.1%).  Fibre 
coverage  and  take-up,  overall  and  in  rural  areas, 
are  only  picking  up  very  slowly  and  remain 
considerably  below  EU  average  (15%  overall  and 
11%  rural  compared  to  the  EU  average  of  50% 
and 33.8%). It scores above the EU average in 5G 
coverage  in  2021  (87%  vs  the  EU  average  of 
66%).  

The  country  has  a mixed  performance  in the 
integration  of  digital  technology.  Germany 
scores above the EU average for most indicators in 
this  area,  e.g.  digital  intensity  for  SMEs,  and 
adoption  of  advanced  digital  technologies  like  big 
data or AI, except for cloud, which is slightly below 
the EU average. The performance of SMEs is close 
to  the  EU  average  for  several  indicators.  The 
proportion  of  SMEs  selling  online  is  19%  (just 
above the EU average of 18%), their e-commerce 
turnover  is  10%  (just  below  the  EU  average  of 

(50)  2030 Digital Compass: the European Way for the Digital 

Decade Communication, COM (2021) 118 final 

(51)  The share of financial allocation contributing to digital 

objectives has been calculated using Annex VII of the RRF 
Regulation.  

(52)  Key Indicators — Digital Scoreboard - Data & Indicators 

(53)  Source: National Regulatory Control Council: Monitor Digital 

(digital-agenda-data.eu) 

Administration, Number 6 

34 

 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
Table A8.1: Key Digital Economy and Society Index indicators 

* The 5G coverage indicator does not measure users’ experience, which may be affected by a variety of factors such as the type 
of device used, environmental conditions, number of concurrent users and network capacity. 5G coverage refers to the percentage 
of populated areas as reported by operators and national regulatory authorities. 
Source: Digital Economy and Society Index 

35 

EUEU top-performanceHuman capitalDESI 2020DESI 2021DESI 2022DESI 2022DESI 2022At least basic digital skillsNANA49%54%79%% individuals202120212021ICT specialists4.0%4.7%4.9%4.5%8.0%% individuals in employment aged 15-7420192020202120212021Female ICT specialists17%18%19%19%28%% ICT specialists20192020202120212021ConnectivityFixed Very High Capacity Network (VHCN) coverage33%56%75%70%100%% households201920202021202120215G coverage(*)NA18%87%66%99.7%% populated areas2020202120212021Integration of digital technologySMEs with at least a basic level of digital intensityNANA59%55%86%% SMEs202120212021Big data15%18%18%14%31%% enterprises20182020202020202020CloudNANA32%34%69%% enterprises202120212021Artificial IntelligenceNANA11%8%24%% enterprises202120212021Digital public servicesDigital public services for citizensNANA7675100Score (0 to 100)202120212021Digital public services for businessesNANA8082100Score (0 to 100)202120212021Germany 
 
 
 
  
 
ANNEX 9: INNOVATION 
ANNEX 9: INNOVATION 

The  Annex  provides  a  general  overview  on 
the  performance  of  the  Germany’s  research 
and  innovation  system.  Germany  is  a  strong 
innovation  performer  according  to  the  2021 
edition of the European Innovation Scoreboard (54), 
but  its  performance  decreased  relative  to  the  EU 
average.  Total  R&D  intensity  reached  3.14%  in 
2020,  placing  Germany  among  the  five  EU 
member states reaching the European 3% goal by 
2020.  However,  it  is  still  below  the  target,  set  in 
2018,  of  3.5%  for  2025  and  reconfirmed  in  the 
coalition  agreement  of 
the  new  German 
government in 2021.  

Germany  invests  considerable  resources  in 
R&D  but 
in  SMEs 
innovation  activity 
innovation  remains 
continues  to  decline; 
concentrated  in  fewer  and  mainly  large 
businesses.  Germany  has  one  of  the  lowest 
percentages  of  business  R&D  expenditure 
performed  by  SMEs  in  the  EU  (0.19%  in  2019, 
against 0.36% for the EU). The downward trend in 
SME’s  innovation  activity  was  already  apparent 
before  the  crisis.  The  proportion  of  innovators 
among  SMEs  has  been  on  the  decline  for  around 
15 years. To improve this situation and to support 
the  financing  of  research and  innovation  projects, 
the  Federal  Ministry  for  Economy  and  Climate 
Protection  recently  launched  SME  grants  and 
favourable 
interest  rates.  The  2020  German 
Research  Allowance  Act  provides  a  tax-free 
subsidy  of  25%  of  salaries  and  wages  for  R&D 
purposes and a tax-free subsidy  of 25 % of 60% 
of external research contracts up to a total limit of 
EUR 1 000 000 per business year. 

Skills shortages are a major factor affecting 
the  development  of  high-growth  enterprises. 
Germany  performs  above  the  European  average 
for the proportion of new graduates in science and 
engineering (19.7% in 2019 against 16.3% for the 
EU). However, the lack of qualified personnel is still 
the  most  significant  factor  hampering  investment 
in  innovation  and  digitalisation  given  Germany’s 
strong  focus  on  manufacturing.  To  overcome  the 
shortage  of  skilled  labour,  the  recovery  and 
resilience  plan  envisages  various  measures  that 
will  contribute  to  upgrading  skills  and  enhancing 
productivity. 

(54)  2021 European Innovation Scoreboard, Country profile: 

Germany https://ec.europa.eu/docsroom/documents/45915  

36 

 
 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A9.1: Key research, development and innovation indicators 

Source: Source: DG Research and Innovation - Common R&I Strategy and Foresight Service - Chief Economist Unit 
Data: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe 

37 

CompoundEUannual growthaverage2010-20R&D Intensity (as % of GDP)2.732.933.113.173.141.422.32Public expenditure on R&D as % of GDP0.900.920.970.981.031.360.78Business enterprise expenditure on R&D performed by SMEs as % of GDP:0.170.170.19:-0.900.36Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 11.211.310.5::-0.89.9Patent Cooperation Treaty patent applications per billion GDP (in Purchasing Power Standards)6.36.46.3::-1.83.5Public-private scientific co-publications as % of total publications10.310.911.711.611.30.89.05New graduates in science & engineering per thousand pop. aged 25-3415.117.116.219.7:3.816.3Total public sector support for Business enterprise expenditure on R&D as % of GDP:0.082:0.084:-2.00.196Share of environment-related patents in total patent applications filed under Patent Cooperation Treaty (%) 16.6 13.8 13.6::-2.512.8Venture Capital (market statistics) as % of GDP3.22.644.95.55.35.4Employment in fast-growing enterprises in 50% most innovative sectors5.94.65.86.1:0.45.5Finance for innovation and Economic renewalKey indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)Green innovation 2020Germany 2010201520182019 
 
 
 
  
 
ANNEX 10: INDUSTRY AND SINGLE MARKET 
ANNEX 10: INDUSTRY AND SINGLE MARKET 

level, 

Barriers to private and public investment and 
lack of competition, especially in the service 
sector, are obstacles to further growth. Public 
investment,  especially  at  municipal 
is 
hampered  by  capacity  and  financing  constraints, 
and  by  lengthy  and  complex  planning  and  permit 
procedures.  These  also  affect  private  investment, 
including  in  energy  infrastructure  and  renewables 
the 
deployment.  Moreover, 
to 
Commission’s  2021  updated 
restrictiveness 
indicator  for  regulated  professions (59),  regulatory 
regulated 
barriers 
in  business  services  and 
international 
professions 
comparison, for example for architects, engineers, 
lawyers  and  tax  counsels.  Despite  a  related 
country-specific 
issued  from 
recommendation 
2011  to  2019,  there  has  been  very  limited 
progress in this field.  

according 

remain 

high 

in 

The  German  economy  has  been  significantly 
affected  by  global  supply  chain  disruptions. 
Due to its strong integration in international value 
chains,  German  industry  has  been  particularly 
affected  by  recent  supply  chain  bottlenecks  for 
raw  materials  and  components,  such  as  semi-
conductors.  In  December  2021,  almost  82%  of 
companies  in  industry  reported  disruptions  in 
supply  chains,  which  held  back  production 
activity. (60).  When  global  supply  chains  were 
starting to recover from the effects caused by the 
pandemic,  Russia’s  invasion  of  Ukraine  led  to 
further  disruptions  in  key  sectors  of  German 
industry,  including  the  automotive,  metals  and 
engineering, and the chemical sectors. 

is  ensured, 

prosperity,  well-being 

Productivity  growth  is  a  critical  driver  of 
and 
economic 
convergence  over  the  long  run (55).  A  major 
source  of  productivity  for  the  EU  economy  is  a 
well-functioning  single  market,  where  fair  and 
effective  competition  and  a  business-friendly 
environment 
in  which  small  and 
medium-sized enterprises (SMEs) can operate and 
innovate  without  difficulty.  Businesses  and 
industry rely heavily on complex supply chains but 
are facing barriers that bear a negative impact on 
their productivity levels, employment, turnover and 
impact  Germany’s 
entry/exit  rates.  This  may 
capacity  to  deliver  on  Europe’s  green  and  digital 
transformation.  

of 

declining 

investment 

long-term 

The  pandemic  hit  Germany’s  economy  at  a 
time 
labour 
productivity,  but  advances  in  digitalisation 
could give a positive impetus for productivity 
growth.  The  decline  was  driven  mainly  by  the 
manufacturing  sector,  including  the  automotive 
industry,  but  also  services  productivity  slowed. 
According  to  the  German  National  Productivity 
Board,  the  main  drivers  of  productivity  growth  in 
the  future  will  be 
in  education, 
research and innovation and framework conditions 
to  set  the  right  incentives  for  private  investment. 
The  pandemic  has  brought  about  advances  in 
digitalisation  that  could  boost  productivity (56). 
However,  while 
in 
investment 
software  and  databases,  it  still  remains  lower  in 
Germany  compared  with  other  western  Member 
States  relative  to  the  size  of  the  economy. (57) 
Innovation 
increasingly 
concentrated  in  large  companies,  whereas  the 
contribution  of  SMEs  to  innovation  activity  is 
modest  (see  Annex  9).  The  lack  of  skills  has 
become  the  main  obstacle  for  investment  in 
innovation  and  digitalisation,  in  particular  for 
SMEs, and therefore hampers productivity growth, 
too. (58)  

expenditure 

increasing 

is 

is 

(55)  Annual Sustainable Growth Survey 

(56)  German Council of Economic Experts, Productivity: 
Coronavirus crisis and structural change, 2021 

(57)  JRC Country Factsheet on Productivity – Germany, European 

Commission, internal communication, 2022 

(58)  DIHK-Fachkräftereport 2021, ZEW Innovationserhebung 

2021, KfW SME Innovation Report 2021,  
 IHK Digitalisierungsumfrage 2021 

(59)  European Commission, COM (2021) 385, 2021 

(60)  ifo Institut, 2022 

38 

 
 
 
                                                 
 
 
                                                 
 
Table A10.1: Key Single Market and Industry Indicators 

*latest data 
Source: See above in the table the respective source for each indicator in the column “description” 

39 

SUB-POLICY AREAINDICATOR NAMEDESCRIPTION20172018201920202021Growth ratesEU27 average*Value added by source (domestic)VA that depends on domestic intermediate inputs, % [source: OECD (TiVA), 2018]73.7162.6%Value added by source (EU)VA imported from the rest of the EU, % [source: OECD (TiVA), 2018]11.5719.7%Value added by source (extra-EU)% VA imported from the rest of the world, % [source: OECD (TiVA), 2018]14.717.6%Cost competitivenessProducer energy price (industry)Index (2015=100) [source: Eurostat, sts_inppd_a]96.6101.910499.8124.629%127.3Material Shortage using survey dataAverage (across sectors) of firms facing constraints, % [source: ECFIN CBS]514121149880%26%Labour Shortage using survey dataAverage (across sectors) of firms facing constraints, % [source: ECFIN CBS]162216102238%14%Sectoral producer pricesAverage (across sectors), 2021 compared to 2020 and 2019, index [source:Eurostat]5.3%5.4%Concentration in selected raw materialsImport concentration a basket of critical raw materials, index [source: COMEXT]0.240.210.170.150.16-33%17%Installed renewables electricity capacity Share of renewable electricity to total capacity, % [source:Eurostat, nrg_inf_epc]53.552.854.656.96%47.8%Net Private investmentsChange in private capital stock, net of depreciation, % GDP [source: Ameco]2.62.82.92.1-19.2%2.6%Net Public investmentsChange in public capital stock, net of depreciation, % GDP [source: Ameco]0.040.10.10.2400%0.4%Single Market integrationIntra-EU tradeRatio of Intra-EU trade to Extra-EU trade, index [source: Ameco]1.301.341.341.351.408%2.00Professional services restrictivenessRegulatory restrictiveness indicatorRestrictiveness of access to and exercise of regulated professions (professions with above median restrictiveness, out of the 7 professions analysed in SWD (2021)185 [source: SWD (2021)185; SWD(2016)436 final])4   3-25%3.37Professional qualifications recognitionRecognition decisions w/o compensationProfessionals qualified in another EU MS applying to host MS, % over total decisions taken by host MS [source: Regulated professions database]45%Transposition - overall5 sub-indicators, sum of scores [source: Single Market Scoreboard]On averageOn averageOn averageAbove averageInfringements - overall4 sub-indicators, sum of scores [source: Single Market Scoreboard]On averageBelow averageBelow averageBelow averageInvestment protectionConfidence in investment protectionCompanies confident that their investment is protected by the law and courts of MS if something goes wrong, % of all firms surveyed [source: Flash Eurobarometer 504]6956%BankruptciesIndex (2015=100) [source: Eurostat, sts_rb_a]n.a.n.a.n.a.n.a.n.a.70.1Business registrationsIndex (2015=100) [source: Eurostat, sts_rb_a]n.a.n.a.n.a.n.a.n.a.105.6Late paymentsShare of SMEs experiencing late payments in past 6 months, % [source: SAFE]n.a.n.a.33.53533.4-0.3%45%EIF Access to finance index - LoanComposite: SME external financing over last 6 months, index from 0 to 1 (the higher the better) [source: EIF SME Access to Finance Index]0.590.630.720.7120.4%0.56EIF Access to finance index - EquityComposite: VC/GDP, IPO/GDP, SMEs using equity, index from 0 to 1 (the higher the better) [source: EIF SME Access to Finance Index]0.40.40.30.2-50.6%0.18% of rejected or refused loansSMEs whose bank loans’ applications were refused or rejected, % [source: SAFE]2.705.506.904.107.00165.2%12.4%SME contractorsContractors which are SMEs, % of total [source: Single Market Scoreboard]4445495729.5%63%SME bidsBids from SMEs, % of total [source: Single Market Scoreboard]73757271-2.7%70.8%Business demographyAccess to financeBUSINESS ENVIRONMENT - SMEsPublic procurement Investment dynamicsSINGLE MARKETCompliance - cooperation EC and MS32.1HEADLINE INDICATORSEconomic structureRESILIENCEShortages/supply chain disruptionsStrategic dependencies 
 
  
 
ANNEX 11: PUBLIC ADMINISTRATION 
ANNEX 11: PUBLIC ADMINISTRATION 

capacity 

administrative 

Good 
enables 
economic  prosperity,  social  progress  and 
fairness. Public administrations at all government 
levels deliver crisis response, ensure the provision 
of  public  services  and  contribute  to  building 
resilience  for  the  sustainable  development  of  the 
EU economy.  

Graph A11.1: E-government benchmark scores and 
e-government users 

Source: Eurostat (ICT use survey) and E-government 
benchmark report 

Overall,  Germany’s  public  administration  is 
among  the  most  effective  in  the  EU27 (61). 
Germany has a developed regulatory system. It is 
relatively advanced in the promotion of open data, 
with  the  Federal  Government  having  recently 
adopted  an  Open  Data  Strategy  (2021  –  2026). 
Due  to  Germany's  decentralised  federal  structure, 
many  public  administration  responsibilities  lie  at 
the  state  (Länder)  level.  Public  administration 
modernisation  reforms  therefore  need  thorough 
coordination  and  agreements  across  government 
levels.  

of 

administration 
Digitalisation 
public 
topic. 
reform 
remains  an  overarching 
Germany scores below the EU average in terms of 
the  proportion  of  e-government  users  and  across 
the  various  dimensions  of  the  e-government 
benchmark  indicators  (Graph  A11.1).  The  new 
coalition agreement puts a strong focus on public 
administration modernisation and the German RRP 
aims  to  boost  investment  for  digital  transition  of 
public administration.  

(61)  Worldwide Governance Indicators, 2020.  

Germany’s  civil  service  workforce  is  ageing 
more  rapidly  than  most  EU-countries.  This  is 
due  to  the  lower  attractiveness  of  civil  service 
compared to the private sector in some fields and 
reflected  in  a  decreasing  proportion  of  younger 
employees (62). Within 10 years about a third of all 
federal, state and local government employees will 
retire.  Gender  inequality  for  senior  civil  service 
management positions is relatively high. Moreover, 
the  participation  rate  of  public  administration 
employees  in  adult  learning  is  below  the  EU-27 
average.  

Graph A11.2: Public procurement performance 

(1) The competition and transparency indicators are triple-
weighted, whereas the efficiency and quality indicators have 
unitary weights. All others receive a 1/3 weighting in the SMS 
composite indicator. 
Source: Single market scoreboard 2020 data. 

room 

Germany’s  overall  performance  on  public 
procurement  is  at  the  EU  average.  There  is 
the 
however, 
relatively  low  level  of  procurement  advertised  on 
Tenders  Electronic  Daily  (TED)  and  low  scores  in 
indicators measuring the quality  of information in 
procurement (see Graph A11.2). 

improvement  given 

for 

The  justice  system  performs  efficiently.  The 
main challenge concerns administrative cases both 
as  regards  the  time  for  concluding  a  case 
(426 days in the in the first instance in 2020) and 
the  number  of  pending  cases  (0.9  per  100 
inhabitants in 2020), though the clearance rate in 
this  area  has  been  high in  recent  years  (110% in 
2020). The overall quality of the justice system is 
good.  Digital  tools  are  widely  used  in  courts, 

(62)  European Commission, Directorate-General for Structural 
Reform Support, “Public administration and governance: 
Germany”, Publications Office, 2022.  

40 

 
 
 
                                                 
 
                                                 
 
Table A11.1: Public Administration indicators 

(1) High values stand for good performance barring indicators # 7 and 8. 
(2) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as the 
existence of key enablers for the provision of those services. 
(3) Defined as the absolute value of the difference between the share of men and women in senior civil service positions.  
(4) Breaks in the series: indicator 1: 2018; indicators #5, 6 and 8: 2020 and 2021 
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Fiscal Governance 
Database (# 4, 9, 10); Labour Force Survey, Eurostat (# 5, 6, 8), European Institute for Gender Equality (# 7), Single Market 
Scoreboard public procurement composite indicator (# 11); OECD Indicators of Regulatory Policy and Governance (# 12).  

including  an  electronic  case  management  system, 
technology for secure remote work by judges and 
staff,  means  of  distance  communication,  and  an 
electronic  case  allocation  system.  As  regards 
judicial  independence,  no  systemic  deficiencies 
have been reported. (63) 

(63)  For more detailed analysis of the performance of the justice 
system in Germany, see the 2022 EU Justice Scoreboard 
(forthcoming) and the country chapter for Germany of the 
Commission’s 2022 Rule of Law Report (forthcoming).  

41 

DE20172018201920202021EU27159.061.063.069.055.070.72nananana63.270.93nananana89.081.1452.052.052.052.0na56.8541.041.541.942.742.155.3612.612.412.612.011.918.670.60.60.50.60.60.3825.226.226.526.526.021.390.480.630.630.63na0.72101.41.51.51.5na1.5111.3-1.3-1.3-0.7na-0.7122.31nana2.27na1.7E-government Public Financial Management Evidence-based policy makingIndicator (1)Medium term budgetary framework indexStrength of fiscal rules indexPublic procurement composite indicatorShare of individuals who used internet within the last year to interact with public authorities (%)2021 e-government benchmark´s overall score (2) 2021 open data maturity indexScope Index of Fiscal InstitutionsShare of public administration employees with tertiary education, levels 5-8 Index of regulatory policy and governance practices in the areas of stakeholder engagement, Regulatory Impact Assessment (RIA) and ex post evaluation of legislation Educational attainment level, adult learning, gender parity and ageingOpen government and independent fiscal institutionsParticipation rate of public administration employees in adult learningGender parity in senior civil service positions (3)Share of public sector workers between 55 and 74 years 
 
 
                                                 
 
  
 
FAIRNESS 
FAIRNESS 
ANNEX 12: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
ANNEX 12: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The European Pillar of Social Rights provides 
for  upward  convergence 
the  compass 
towards better working and living conditions 
in the EU. The implementation of its 20 principles 
on  equal  opportunities  and  access  to  the  labour 
market,  fair  working  conditions,  social  protection 
and inclusion, supported by the 2030 EU headline 
targets  on  employment,  skills  and  poverty 
reduction, will strengthen the EU’s drive towards a 
digital,  green  and  fair  transition.  This  annex 
provides  an  overview  of  Germany’s  progress  in 
achieving  the  goals  under  the  European  Pillar  of 
Social Rights.  

Table A12.1:  Social Scoreboard 

While  the  labour  market  is  recovering,  the 
participation  of  some  underrepresented 
groups  remains a  challenge.  Germany  has  one 
of the highest employment rates for women in the 
EU  (75.9%  vs  an  EU  average  of  67.7%  in  2021), 
with a gender employment gap of 7.3 pps (against 
an EU average of 10.8 pps). However, female part-
time employment remains high with a wide gender 
pay gap (also reflecting the lower number of hours 
worked).  High  taxes  on  labour  and  a  specific  tax 
regulation for married couples (Ehegattensplitting), 
and  an  insufficient  provision  of  high  quality 
childcare  and  all-day  school  facilities,  remain  key 
labour  market 
factors  behind 
participation of women. In particular, children with 
a migrant background are highly underrepresented 
in  early  childhood  education  and  care.  The 
investment  in  90 000  additional  childcare  places 
as  part  of  the  recovery  and  resilience  plan  (RRP) 
will contribute to addressing this challenge.  

lower 

the 

Strengthening the provision of upskilling and 
reskilling  is  key  for  addressing  persistent 
skills  shortages.  In  2020,  14.8%  of  Germans 
aged  20-64  had  low  qualifications  and  their 
employment  rate,  at  60.4%,  was  19.2  pps  lower 
than  the  overall  employment  rate  (against  an  EU 
average  difference  of  17  pps).  Pre-existing 
shortages  of  skilled  labour  remained  in  place 
during the COVID-19 pandemic. Population ageing 
as  well  as  the  digital  and  green  transitions  are 
expected  to  further  reinforce  these  shortages. 
Moreover,  the  employment  gap  of  people  with 
disabilities  (at  32.4  pps)  widened  in  Germany  in 
2020.  EU  cohesion  policy  funds  will  support 
measures to strengthen the provision of upskilling 
and reskilling given their key role in matching the 
labour  market,  contributing  to 
need  of  the 
addressing 
labour  shortages  and  skills  gaps. 
Tackling  these  challenges  is  key  for  Germany  to 
contribute to reaching the 2030 EU headline target 
on employment. 

Socio-economic  and  migrant  backgrounds 
still strongly influence educational outcomes. 
The incidence of early school  leaving and training 
interruption  increased  slightly  and  is  now  above 
the  EU  average  (11.8%  vs  9.7%  in  the  EU). 
However,  for  the  non-EU  born  the  rate  is  26%. 

Note: Update of 29 April 2022. Members States are classified 
on the Social Scoreboard according to a statistical 
methodology agreed with the EMCO and SPC Committees. It 
looks jointly at levels and changes of the indicators in 
comparison with the respective EU averages and classifies 
Member States in seven categories. For methodological 
details, please consult the Joint Employment Report 2022. 
Due to changes in the definition of the individuals' level of 
digital skills in 2021, exceptionally only levels are used in the 
assessment of this indicator; NEET: neither in employment nor 
in education and training; GDHI: gross disposable household 
income. 
Source: Eurostat.  

42 

11.849.09.27.36.579.63.61.2113.222.525.131.532.419.916.40.1Critical situationTo watchWeak but improvingGood but to monitorOn averageSocial Scoreboard for GERMANYEqual opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24) (2021)Youth NEET(% of total population aged 15-29) (2021)Gender employment gap (percentage points) (2021)Income quintile ratio (S80/S20) (2020)Individuals' level of digital skills (% of population 16-74) (2021)Dynamic labour markets and fair working conditionsSocial protection and inclusionAt risk of poverty or social exclusion for children (in %) (2020)Disability employment gap (ratio) (2020)Better than averageAt risk of poverty or social exclusion (in %) (2020)Employment rate(% population aged 20-64) (2021)Unemployment rate(% population aged 15-74) (2021)Long term unemployment(% population aged 15-74) (2021)GDHI per capita growth (2008=100) (2020)Best performersImpact of social transfers (other than pensions) on poverty reduction (% reduction of AROP) (2020)Children aged less than 3 years in formal childcare (% of under 3-years-olds) (2020)Self-reported unmet need for medical care (% of population 16+) (2020)Housing cost overburden (% of population) (2020) 
 
 
 
  
 
 
 
Adult  participation  in  learning (64)  remained  stable 
in  the  last  ten  years  and  slightly  below  the  EU 
average  (7.7%  vs  10.8%  in  the  EU  in  2021), 
however,  only  3.7%  for  the  low  qualified  (yet 
higher  than  the  EU  average).  Germany  performs 
with 49% below the EU average of 54% on basic 
digital  skills  of  individuals  aged  16-74  in  2021. 
Investment  in  skills  is  key  to  achieving  the  EU 
headline target on adult learning. 

indicators  point  to  a  number  of 
Social 
challenges 
in  Germany.  Most  recent  data 
suggest  a  deterioration  in  some  social  indicators, 
but  this  needs  to  be  interpreted  with  caution  as 
this  might 
in  statistical 
reflect  a  change 
methodology (65).  In  2020,  the  at-risk-of-poverty 
or  social  exclusion  rate  increased  from  21.4%  to 
22.5%,  above  the  EU  average  of  21.9%.  In 
particular,  children  are  affected  by  poverty  and 
social  exclusion  risks,  with  a  share  above  the  EU 
average.  The  share  of  persons  with  disabilities  at 
risk of poverty or social  exclusion was (at 31.5%) 
higher  than  the  EU  average  (28.4%).  To  address 
these  challenges,  Germany 
is  allocating  a 
considerable  share  of  European  Social  Fund  Plus 
(ESF+) funding to programmes aimed at fostering 
social  inclusion.  Income  inequality,  measured  by 
the ratio of total income received by the 20 % of 
the  population  with  the  highest  income  (top 
quintile) to that received by the lowest quintile, is 
one of the highest in the EU and over 1 pp higher 
than the EU average. The housing cost overburden 
rate  (i.e.  the  percentage  of  people  living  in 
households with housing costs above 40% of total 
income) is above the EU  average, highlighting the 
importance  of  providing  affordable  housing. 
Overall,  there  is  scope  for  reinforced  social  policy 
action in order for Germany to contribute to lifting 
people out of poverty and in this way reaching the 
2030 EU headline target on poverty reduction. 

(64)  The indicator on adult learning participation over the previous 
four weeks is used in the country report, rather than the 
indicator on learning over the previous 12 months, as Adult 
Education Survey (AES) data for the 12-month indicator are 
only available for 2016 at the moment, while the new 
Labour Force Survey (LFS) indicator agreed for use in the 
social scoreboard and as 2030 headline target on skills will 
only be available in 2023 

(65)  From 2020 on, Germany transmits data on the AROPE 
indicator and its sub-indicators to the EU-SILC from a 
different survey (the ‘Mikrozensus’). To ensure comparability 
between 2019 and 2020, Eurostat published revised 2019 
AROPE and AROP values for Germany, on which the current 
analysis relies. 

43 

 
                                                 
 
ANNEX 13: EDUCATION AND SKILLS 
ANNEX 13: EDUCATION AND SKILLS 

This  annex  outlines  the  main  challenges  for 
Germany’s  education  and  training  system  in 
light of the EU-level targets of the European 
Education  Area  strategic  framework  and 
other  contextual  indicators,  based  on  the 
analysis  from  the  2021  Education  and 
Training  Monitor.  Germany’s  education  and 
training  system  struggles  with  equity  challenges 
that  could  worsen  due  to the  pandemic.  Germany 
lags behind the EU average and EU-level targets in 
terms of participation in early childhood education 
and care as well as in tertiary education. Germany 
still misses the EU-level targets in basic skills and 
for early leavers from education and training. 

recruited  teachers  in  2018  had  not  completed 
initial  teacher  training  (51%  in  Saxony,  40%  in 
Berlin  and  one  quarter  in  several  other  regions). 
Apart  from  regional  differences,  not  all  types  of 
schools  and  subjects  are  affected  by  staff 
the  same  way.  Teachers  without 
shortages 
completed  initial  teacher  training  are  frequently 
allocated  to  schools  or  classes  with  pupils  from 
disadvantaged backgrounds, which can exacerbate 
the  equity  problem.  Teachers  also  need  more 
training  on  ICT  in  education,  where  Germany  lags 
behind but is planning sizeable investments. 

Graph A13.1: Low achievement in reading by 
migrant background, PISA 2018 

rates 

in  early 

Participation 
childhood 
education  and  care  have  decreased.  Germany 
is  increasing  places  in  early  childhood  education 
and  care,  however  demand 
is  rising  faster. 
Therefore further investment is needed.  

subjects.  Especially 

Basic skill levels have deteriorated over time 
and  socio-economic  and  migrant  background 
strongly  affect  education  outcomes.  Between 
2015 and 2018, the proportion of underachieving 
pupils,  as  measured  by  PISA,  increased  for  all 
tested 
socioeconomically 
disadvantaged  and  migrant  students  are  more 
affected.  The  gap  in  the  share  of  low-achievers 
among  native  born  and  foreign-born  pupils  is  the 
largest  in  the  EU,  corresponding  to  2  years  of 
schooling.  However,  the  gap  is  significantly  lower 
for  second-generation  migrant  pupils.  Low-  and 
high-performing students cluster in certain schools 
more often than on average in the OECD. Learning 
losses that are expected due to the pandemic risk 
further  aggravating  the  situation.  The  percentage 
of  early  leavers  from  education  and  training 
among  young  people  born  abroad  is  three  times 
higher  than  that  of  native-born  young  people 
(25.5% vs 8.5%). 

The  ageing  of  teaching  staff  and  emerging 
teacher  shortages  risk  affecting  both  the 
quality and equity of education (66). Germany’s 
teachers are older than the EU average, while the 
demand  for  teachers  is  increasing  because  of  a 
growing  school  population  and  the  expansion  of 
all-day  schools.  Some  13%  of  the  36  000  newly 

(66)  Autorengruppe Bildungsberichterstattung, 2020; National 
Report on Education in Germany; OECD Education Policy 
Outlook 2020; Education and Training Monitor Germany 
2021 

44 

Source: OECD (2019), PISA 2018. Note: The EU average does 
not include Spain. Member States with a share of migrant 
pupils lower than 5% are not shown in the chart. 

Tertiary  education  attainment  is  increasing, 
but is still lower than the EU average adding 
to a skills gap. The urban-rural gap is significant 
and  has  widened.  The  share  of  non-EU-born 
students  is  close  to  that  of  native  students  (-1.8 
pps) the gap being smaller than the EU average. In 
2020, tertiary attainment is 3.8 pps higher for EU-
born  young  people  aged  25-34  than  for  native-
born  (35.1%),  reflecting  the  capacity  to  attract 
talent from abroad.  

The reforms and investment measures under 
the recovery and resilience plan contribute to 
addressing  some  of  these 
long-standing 
challenges. Key support focuses on digitalisation 
in  education,  increasing  places  in  early  childhood 
education  and  care  and  in  providing  for  some 
COVID-19 related support to students.  

010203040506070MTIECYHRLUPTEEDKFRBESIATELFINLSEDE%Pupils without a migrant backgroundNative-born pupils with parents born abroadPupils born abroad 
 
                                                 
  
 
 
 
Table A13.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

(1) The 2018 EU average on PISA reading performance does not include ES; b = break in time series, p = provisional, : = not 
available; Data are not yet available for the remaining EU-level targets under the European Education Area strategic framework, 
covering underachievement in digital skills, exposure of vocational education and training graduates to work based learning and 
participation of adults in learning. 
Source: Eurostat (UOE, LFS); OECD (PISA) 

45 

96%96.0%91.9%94.0%201992.8%2019Reading< 15%16.2% 20.4%20.7%201822.5%2018Mathematics< 15%17.2% 22.2%21.1%201822.9%2018Science< 15%17.0% 21.1%19.6%201822.3%2018< 9 %10.1%11.0%11.8% 9.7%Men10.4%12.5%13.5% 11.4%Women9.8%9.4%9.9% 7.9%Cities10.3%9.6%11.8% 8.7%Rural areas8.3%12.2%9.4%10.0%Native8.6%10.0%9.2%8.5%EU-born:20.7%31.6% 21.4%Non EU-born:23.4%27.6% 21.6%45%29.6%36.5%35.7% 41.2%Men28.6%31.2%33.9% 35.7%Women30.6% 41.8%37.7% 46.8%Cities37.5%46.2%43.0% 51.4%Rural areas21.7%26.9%28.4% 29.6%Native29.9%37.7%36.2% 42.1%EU-born:32.7%36.5%40.7%Non EU-born:27.0%33.5% 34.7%44.6% 38.3%40.1%201938.9%201920152021IndicatorTargetGermanyEU27GermanyEU27Participation in early childhood education (age 3+)Low achieving 15-year-olds in:By country of birthTotalBy genderBy degree of urbanisationBy country of birthEarly leavers from education and training (age 18-24)Tertiary educational attainment (age 25-34)TotalBy genderBy degree of urbanisationShare of school teachers (ISCED 1-3) who are 50 years or over 
 
  
 
(IT-related  investments  in  hospitals  and  public 
health  service,  including  the  related  construction 
and refurbishment of buildings). 

Graph A14.2: Life expectancy at birth in years 

ANNEX 14: HEALTH AND HEALTH SYSTEMS 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

Especially  relevant  in  light  of  the  ongoing 
COVID-19 pandemic, resilient healthcare is a 
prerequisite  for  a  sustainable  economy  and 
society.  This  Annex  provides  a  snapshot  of  the 
healthcare sector in Germany. 

Life expectancy in Germany was at the same 
level  as  the  EU  average,  but  fell  in  2020  by 
more  than  2  months  due  to  COVID-19.  As  of 
17  April  2022,  1.60  cumulative  COVID-19  deaths 
and  282  confirmed  cumulative  COVID-19  cases 
per  1 000  inhabitants  were  reported.  Germany 
fares  comparatively  well  in  avoiding  deaths  from 
treatable  causes,  also  reflected  in  low  cancer 
mortality.  

Graph A14.1: Projected increase in public 
expenditure on health care over 2019-2070 
(reference scenario) 

Source: Eurostat database 

Source: European Commission/EPC (2021)  

Health  spending  relative  to  GDP  in  Germany 
was the highest in the EU in 2019. Most health 
spending  comes  from  public  sources;  out-of-
pocket payments amount to only 12.7 %, which is 
well  below  most  other  EU  countries.  Public 
expenditure  on  health  is  projected  to  increase  by 
0.4 pps of GDP by 2070 (compared to 0.9 pps for 
the EU). 

Germany has the highest number of hospital 
beds  per  population  in  the  EU  and  the 
number of  health staff  is  well  above  the  EU 
average.  Access  to  health  services  is  very  good 
and  self-reported  unmet  needs  for  medical  care 
are close to zero. However, a comparatively strong 
separation  between  ambulatory  and  hospital  care 
and  a  lack  of  effective  coordination  between 
primary and specialist ambulatory care have led to 
problems with continuity and coordination. 

Through  its  recovery  and  resilience  plan, 
Germany plans to invest EUR 4.4 billion (17.3 
% of the total RRP) in healthcare. Investments 
focus on the digital transition of the health system 

46 

6.67.40.90.4468EUGermany% of GDP20192070increase80.580.980.981.081.380.480.781.081.181.081.381.1201520162017201820192020EUGermany 
 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A14.1: Key health indicators 

Source: Eurostat; except: * Eurostat and OECD, ** ECDC. Notes: Doctors' density data refer to practising doctors in all countries 
except FI, EL, PT (licensed to pratice) and SK (professionally active). Nurses' density data refer to practising nurses in all countries 
(imputation from year 2014 for FI) except IE, FR, PT, SK (professionally active) and EL (nurses working in hospitals only). More 
information: https://ec.europa.eu/health/state-health-eu/country-health-profiles_en  

47 

20162017201820192020EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)86.985.585.381.792.1 (2017)Cancer mortality per 100 000 population253.2246.6245.9243.7252.5 (2017)Current expenditure on health, % GDP 11.211.311.511.79.9 (2019)Public share of health expenditure, % of current health expenditure84.384.584.584.679.5 (2018)Spending on prevention, % of current health expenditure 3.33.23.33.32.8 (2018)Acute care beds per 100 000 population605.6601.5600.9594.9387.4 (2019)Doctors per 1 000 population *4.24.24.34.43.8 (2018)Nurses per 1 000 population *12.813.113.813.98.2 (2018)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day **12.812.611.711.49.014.5 (2020) 
 
 
 
  
 
ANNEX 15: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 
ANNEX 15: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

is  an 

The  regional  dimension 
important 
factor  when  assessing  economic  and  social 
developments  in  Member  States.  Taking  into 
account  this  dimension  enables  a  well-calibrated 
and targeted policy response that fosters cohesion 
and  ensures  sustainable  and  resilient  economic 
development across all regions.  

disparities  in  GDP  per  capita.  German  labour 
productivity,  measured  as  gross  value  added  per 
person  employed,  stands  at  106%  of  the  EU 
average  in  PPS  terms.  It  ranged  from  134%  in 
Upper Bavaria, Braunschweig and Hamburg to just 
84%-85%  in  neighbouring  Mecklenburg-Western 
Pomerania and Thuringia, and 82% in Chemnitz.  

Graph A15.1: Gross value added per worker 

Source: European Commission 

Similar  to  economic  output,  productivity  has 
been  slowly  converging  overall.  However, 
significant challenges remain: while between 2010 
and  2019,  Thuringia,  one  of  the  less  developed 
German  regions,  saw  the  third-highest  average 
annual  productivity  increase  (1.76%),  several  of 
the more developed regions also experienced high 
increases  (e.g.  Braunschweig,  Stuttgart,  Tübingen). 
In  addition,  productivity  growth  was  below  the 
German average of 0.9% in many lagging regions, 
such as Lüneburg, Schleswig-Holstein and Münster.  

The  transition  to  a  carbon-neutral  economy 
has  a  differentiated  effect  on  regions  and 
coal-mining  regions  are  especially  hard  hit. 
Closing the remaining lignite mining for electricity 
production  has  the  potential  for  a  fast  and 
significant  reduction  of  CO2  emissions.  However, 
this  change  puts  significant  socio-economic 
pressure  on 
in 
Brandenburg,  Saxony,  Saxony-Anhalt  and  in  North 
Rhine  Westphalia.  To  facilitate  the  transition,  the 
Just Transition Fund will concentrate its resources 
on these areas.  

three  mining  areas 

the 

However,  the  gap  between  regions  remains 
high.  In  2019,  Hamburg's  GDP  per  inhabitant  (in 
purchasing power standard (PPS)) corresponded to 
195%  of  the  EU  average,  while  the  runner-ups 
(Upper Bavaria, Stuttgart and Darmstadt) achieved 
between 173% and 154%. The remaining regions 
were  further behind,  and GDP per  head  bottomed 
out  at  84%  in  the  three  least  developed (67) 
regions  of  Mecklenburg-Western  Pomerania, 
Saxony-Anhalt  and  Lüneburg.  Germany’s  east-
west  economic  divide,  while  significantly  less 
pronounced  than  in  the  years  after  unification,  is 
still  obvious:  in  2019,  GDP  per  capita  (in  PPS  in 
eastern  German  regions  including  Berlin  was 
74.8% of their western counterparts. 

Convergence  with  the  EU  per  capita  GDP 
average  was  relatively  slow  between  2010 
and  2019  and  uneven  across  different 
regions  (Graph  A15.1).  Among  less  developed 
regions,  only 
in  Thuringia,  Leipzig,  Chemnitz, 
Dresden  (eastern  regions)  and  Koblenz  growth  of 
GDP  per  inhabitant  was  higher  than  in  Germany 
overall (1.6%), enabling them to catch up with the 
EU GDP average. More commonly, growth was just 
at  EU  average  (e.g.  in  the  eastern  regions  of 
Mecklenburg-Western  Pomerania  and  Saxony-
Anhalt)  or  lower  (e.g.  1.2%  -  1.0%  in  Trier, 
Schleswig-Holstein  and  Münster),  impeding  their 
economic  convergence.  A  more  mixed  picture 
emerges for the most developed regions, as some 
(e.g. 
have  been  driving  growth 
Braunschweig  and  Stuttgart  with  at  least  2.5%), 
while the growth of others was well below the EU 
average  (e.g.  Hamburg,  Darmstadt  and  Bremen 
with < 1%). Overall, most western German regions 
grew  slower  than  the  EU  average,  and  most 
southern ones and Berlin faster. 

in  Germany 

Labour  productivity  gaps  between  the  more 
less  developed  regions  mirror 
and  the 

(67)  The terms ‘Less/least developed’, ‘more/most developed’ 

refer to regions compared with other regions in this country. 
These terms should not be confused with the classification 
for fund eligibility criteria.  

48 

354555657585952000200220042006200820102012201420162018thousands of EUR per  personOther NUTS2 regionsEU27National AverageBerlin 
 
                                                 
  
 
Table A15.1: Regional data on economic and social performance 

Source: Eurostat, European Innovation Scoreboard 

high 

It  was 

especially 

Expenditure  on  R&D  is  unevenly  distributed 
and  associated  with  the  presence  of  large 
enterprises. 
in 
Braunschweig  (7.8%  of  GDP  in  2019,  thanks  to 
Volkswagen’s  headquarters  in  that  region)  and 
Stuttgart (7.3%), and was higher than the German 
average of 3.2% in many southern regions. It was 
low  (less  than  2%  of  GDP)  in  many  eastern  and 
western  regions,  with  less  than  1%  in  Lüneburg, 
Trier and Koblenz. 

Upper  Palatinate  and  peaked  at  5.8-6.3%  in  the 
regions of Bremen and Berlin.  

Graph A15.2: Territories most affected by climate 
transition in Germany 

Gross  fixed  capital  formation,  unlike  R&D 
expenditure,  is  just  below  the  EU  average, 
but similarly affected by regional disparities. 
More  than  10 pps  (GFCF  in  %  of  GDP,  2018)  lie 
between  the  regions  with  the  lowest  investment 
(such  as  Düsseldorf,  Bremen  and  Arnsberg)  and 
those  at  the  top  of  the  regional  distribution  in 
Germany  (such  as  Upper  Bavaria,  Lüneburg  and 
Trier). 

Some  labour  market  disparities  remained  in 
2020.  The  employment  rate  reached  85%  in 
Upper  Franconia  and  Swabia  and  was  almost  as 
high in several southern regions, while it bottomed 
out  at  around  70-75%  in  the  western  regions  of 
Bremen  and  Giessen.  The  unemployment  rate 
decreased  to  2.2-2.3%  in  in  Lower  Bavaria  and 

Source: European Commission 

49 

NUTS 1 RegionGDP per head (PPS)Productivity (GVA (PPS) per person employed)GDP per head growthPopulation growthUnemp-loyment rateR&D expendi-tureGross Fixed Capital FormationInnovation performanceEU27=100, 2019EU27=100, 2018Avg % change on preceding year, 2010-2019Total % change, 2011-2019% of active population, 2020% of GDP, 2019% of GDP, 2018RIS regional performance groupEuropean Union1001001.391.87.12.2322.02Germany1201061.603.73.83.1721.13Baden-Württemberg1371152.045.93.25.7423.04Leader innovatorBayern1411151.946.02.63.3924.47Mostly strong innovatorBerlin1231031.7411.86.33.3319.39Leader innovatorBrandenburg86921.492.44.51.8024.66Moderate innovatorBremen1441081.004.65.82.9916.17Strong innovatorHamburg1951340.708.34.92.1717.97Leader innovatorHessen1371171.065.33.93.0818.67Moderate - strong - leaderMecklenburg-Vorpommern84841.40-0.44.21.8025.28Moderate innovatorNiedersachsen1121031.912.73.93.1124.96Moderate - strong - leaderNordrhein-Westfalen1161041.162.34.22.1516.82mostly strong innovatorRheinland-Pfalz1031011.412.53.72.6023.03Moderate - strong - leaderSaarland107951.09-1.54.01.8917.59Strong innovatorSachsen92861.830.14.02.9720.59Strong innovatorSachsen-Anhalt84881.42-4.54.61.5318.86Moderate innovatorSchleswig-Holstein98951.243.73.31.6721.36Strong innovatorThüringen87852.11-2.83.52.3320.05Strong innovator 
 
 
  
 
MACROECONOMIC STABILITY 
MACROECONOMIC STABILITY 
ANNEX 16: KEY FINANCIAL SECTOR DEVELOPMENTS 
ANNEX 16: KEY FINANCIAL SECTOR DEVELOPMENTS 

This  Annex  provides  an  overview  of  key 
developments  in  Germany’s  financial  sector. 
German  banks  remain  well  capitalised  and  credit 
risks  appear  low  compared  with  EU  averages, but 
profitability  remains  disappointing.  Bank  balance 
sheets  appear  remarkably  sound  with  a  non-
performing  ratio  of  1.1%,  which  is  among  the 
lowest  in  the  EU.  In  2021,  German  banks  made 
some  progress 
improving  their  historically 
lagging profitability. Return on equity improved to 
5.0%  in  2021  from  2.2%  in  2020,  albeit  still  far 
below  the  EU  average  of  7.1%.  German  banks 
keep  on  struggling  with  poor  cost  efficiency  and 
the consequences of insufficient past investments 
in  digitalisation.  The  cost-to-income  ratio  remains 
high, but improved to 66.6% in 2021 from 70.7% 
in  2020,  compared  with  EU  averages  of  60.4% 
and 63.7%, respectively.  

in 

Risks  to  financial  stability,  in  particular  in 
the  housing  market,  have  intensified  during 
the  pandemic.  While  growth  in  credit  to  non-
financial  corporations  slowed  down  during  the 
pandemic, credit to households remained buoyant 
and  its  growth  accelerated  to  5.1%  in  November 
2021. Lending for house purchases expanded even 
more  briskly  by  8.2%  in  2021,  while  house  price 
growth  accelerated  to  12.9%  year  on  year  in  the 
third quarter of 2021, raising concerns on housing 
market  pressures.  The  European  Systemic  Risk 
Board  (ESRB)  responded  by  making  Germany  one 
of  two  EU  Member  States  to  which  it  addressed 
specific  recommendations  in  2022,  attesting  that 
overvaluations  were  ‘high  and  increasing’.  The 
ESRB  advocated  the  activation  of  legally  binding 
loan-to-value  limits  and  the  introduction  of  loan-
to-income limits.  

Graph A16.1: Credit growth 

Source: European Commission 
Note. NFC signifies non-financial corporations, HH signifies 
households 

The national regulator BaFin took some first steps 
to address such risks by introducing a 2% systemic 
risk  buffer  on  residential  real  estate  loans,  and 
increasing  the  countercyclical  capital  buffer  from 
0.0%  to  0.75%  as  of  early  2022.  While  leverage 
also rose in the non-financial corporate sector, the 
sector’s  debt  ratio  remains  far  below  the  euro-
area average. 

The  collapse  of  Wirecard  and  Greensill  exposed 
limitations in the capabilities and independence of 
the  German  banking  and  market  supervisors. 
Some  of  these  were  expressed  by  the  Financial 
Stability  Board  in  its  Peer  Review  of  Germany  in 
2020.  The  German  government  has  introduced 
legislation  and launched  an  organisational  reform 
that address some of the identified issues. 

50 

-4-20246810Total privateNFCHH% 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Table A16.1: Key financial soundness indicators 

Source:  ECB, Eurostat, Refinitiv. 

51 

20172018201920202021Total assets of the banking sector (% of GDP)236.0230.9239.3265.6258.5Share (total assets) of the five largest bank (%)29.729.131.234.0-Share (total assets) of domestic credit institutions (%)193.189.087.183.781.6Financial soundness indicators:1- non-performing loans (% of total loans)1.81.41.21.21.1- capital adequacy ratio (%)18.818.418.118.818.5- return on equity (%)2.92.42.12.25.0NFC credit growth (year-on-year % change)4.26.55.84.26.1HH credit growth (year-on-year % change)3.23.94.44.85.1Cost-to-income ratio (%)174.076.875.570.766.6Loan-to-deposit ratio (%)189.490.287.780.879.2Central bank liquidity as % of liabilities1.61.41.24.75.7Private sector debt (% of GDP)106.6107.7110.7120.1-Long-term interest rate spread versus Bund (basis points)0.00.00.00.00.0Market funding ratio (%)54.153.652.050.7-Green bond issuance (bn EUR)7.15.720.038.363.01Last data: Q3 2021. 
 
  
 
ANNEX 17: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX 
ANNEX 17: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX 

to 

increase  may  help 

wage 
reduce  wage 
inequalities  and  foster  domestic  demand.  Still,  its 
impact  is  likely  to  be  moderated  by  the  ongoing 
deterioration  in  purchasing  power  and  consumer 
confidence.  

For  those  reasons,  and  more  generally  on  the 
basis  of  the  elements  of  the  in-depth  review 
undertaken for Germany under Regulation (EU) No 
1176/2011  on  the  prevention  and  correction  of 
macroeconomic imbalances as summarised in the 
Staff  Working  Document  (SWD  (2022)629  final), 
its 
the  Commission  has  considered 
Communication  “European  Semester  –  2022 
Spring  Package”  (COM(2022)600  final)  that 
Germany 
experience 
macroeconomic imbalances.  

continues 

to 

in 

The  Macroeconomic 
Imbalance  Procedure 
matrix presents the main elements of the in-
depth  review  undertaken  for  Germany  in 
accordance  with  Article  5  of  Regulation  (EU)  No 
1176/2011  on  the  prevention  and  correction  of 
macroeconomic imbalances as summarised in the 
Staff  Working  Document 
(2022)629 
final) (68). 

(SWD 

 Germany continues to run a persistent large 
current  account  surplus,  reflecting  among 
others a subdued level of investment relative 
to  savings.  Existing  administrative  planning  and 
implementation  barriers,  constrain  public  and 
private  investment.  Income  and  wealth  inequality 
limit consumption growth and result in an elevated 
household  saving  rate.  The  persistent  excess  of 
savings  over  investment  indicates  an  underuse  of 
resources.  

The current account surplus will likely remain 
elevated.  Corporate  investment  has  remained 
somewhat  below  the  pre-pandemic  level  and 
corporations  have  continued  to  post  strong  net 
savings.  Residential  investment  has  increased  but 
supply  still  falls  short  of  housing  demand.  The 
current account surplus increased slightly in 2021 
to  7.4%  of  GDP  and  is  forecast  to  decline 
somewhat in 2022 to 6.4% of GDP on account of 
high  commodity  prices  and  trade  disruption.  It  is 
forecast  to  rebound  to  6.8  %  of  GDP  by  2023, 
by 
remaining  above 
fundamentals.  

indicated 

level 

the 

to 

and 

further 

increase 

investment  and 

There  are  promising  policy  announcements, 
thorough 
efforts 
still 
implementation  are  key  for  addressing 
investment  needs.  While  there  are  government 
plans 
tackle 
investment  bottlenecks,  the  resources  so  far 
allocated  may  nonetheless  not  cover  all  large 
investment  needs.  Increasing  ambition  along  with 
a  timely  and  targeted  implementation  of  the 
planned  investments  would  help  to  increase  the 
overall  investment  level.  This  would  be  further 
supported  by  tackling  the  investment  bottlenecks 
as  also  envisaged  in  the  Recovery  and  Resilience 
Plan  and  the  coalition  agreement. The  minimum 

(68)  European Commission (2022), COMMISSION STAFF 

WORKING DOCUMENT In-Depth Review for Germany in 
accordance with Article 5 of Regulation (EU) No 1176/2011 
on the prevention and correction of macroeconomic 
imbalances. 

52 

 
 
                                                 
 
Table A17.1: Assessment of Macroeconomic Imbalances matrix 

Source: European Commission 

53 

Gravity of the challengeEvolution and prospectsPolicy responseGermany has a persistently large current account surplus, considerably above what fundamentals suggest. Germany’s demographics and high manufacturing intensity imply a much smaller surplus of somewhat above 2% of GDP.The surplus reflects a substantial shortfall in domestic demand, notably due to relatively low investment. The under-investment impedes capital deepening and potential growth, and has considerable spillovers on EU partners.In 2021, the current account surplus increased slightly to 7.4% of GDP. This reflects the elevated net household saving rate, as the pandemic and supply shortages constrained consumption possibilities. The fiscal deficit again turned out smaller than forecast at 3.7% of GDP reflecting the operation of automatic stabilisers and incomplete uptake of funds committed to pandemic response.  Overall investment remained somewhat below the pre-pandemic level as supply bottlenecks constrained equipment investment and public non-residential construction. Corporations continued to post strong net savings. Residential investment increased compared to 2019, yet supply still falls short of housing demand and remains below completion ratios in neighbouring economies.  Going forward, the current account surplus is expected to decline in 2022 on account of record commodity prices and trade disruptions, rebound somewhat in 2023 and continue its moderate decline when commodities prices normalise in the future.   The current account balance remains linked to subdued private and public investment, which are constrained by various bottlenecks to investment.  Germany has taken some policy steps to address its imbalances. Real public investment increased by about 4% per year. on average over 2015-2020. In 2021, it increased by 1% in nominal terms, but declined by 3.7% in volume, due to surging construction costs and supply shortages. At 2.5%, the public investment ratio was marginally lower in 2021 than in 2020 (2.6%) but remained above its pre-pandemic level of 2.4% in 2019. Overall, the fiscal deficits in 2020 and 2021 helped shore up private sector balances and contain the decline in aggregate demand, which in turn helped to cushion euro-area domestic demand and GDP. Nevertheless, the overall current account surplus was not materially affected.  There are government plans to increase investment and tackle investment bottlenecks, while the resources so far allocated may have relatively limited impact on the current account surplus.Going forward, the minimum wage increase is set to foster the living standards of low income earners, and thus assist consumption, absent employment losses. In contrast, wage growth for the average employee is forecast to remain muted with respect to inflation and euro area peers, thus sustaining the demand shortfall.Imbalances (unsustainable trends, vulnerabilities and associated risks)External balance 
 
 
 
  
 
ANNEX 18: TAXATION 
ANNEX 18: TAXATION 

This  Annex  provides  an 
indicator-based 
overview of Germany’s tax system. It includes 
information  on  the  tax  structure,  i.e.  the  types  of 
tax that Germany derives most revenue from, the 
tax  burden  for  workers,  and  the  progressivity  and 
redistributive  effect  of  the  tax  system.  It  also 
provides 
tax  collection  and 
compliance  and  on  the  risks  of  aggressive  tax 
planning activity. 

information  on 

Germany’s tax revenues are relatively high in 
relation  to  the  country’s  GDP,  and  the  tax 
system  relies  heavily  on  labour  taxation 
while  only  to  a  low  extent  on  relatively 
growth-friendly  tax  bases.  Reductions  in  the 
labour  tax  burden,  especially  of 
low-income 
earners,  and  a  greater  use  of  environmental  and 
recurrent property taxes can help support inclusive 
and  sustainable  economic  growth. 
In  2020, 
German  labour  tax  revenues  as  a  percentage  of 
GDP  were  among  the  highest  in  the  EU,  while 
revenues  from  consumption  taxes  and  from 
environmental taxes as a percentage of GDP were 
among the lowest. Revenues from recurrent taxes 
on  property  were  also  low  compared  with  the  EU 
aggregate. 

Graph A18.1: Tax wedge indicators 

Germany’s  labour  tax  burden  is  high  across 
all  income  levels.  The  labour  tax  wedge  for 
Germany  in  2021  was  substantially  higher  than 
the  EU  average  at  various  income  levels,  i.e.  for 
single people at the average wage (100%) as well 
as at 50%, 67% and 167% of the average wage. 
Second  earners  at  a  wage  level  of  67%  of  the 
average  wage,  whose  spouse  earns  the  average 
wage, also faced one of the highest tax wedges in 
the EU. Moreover, the difference between their tax 
wedge and the one of single persons at the same 
wage level was among the highest in the EU. The 
tax-benefit  system  helped  reduce  inequality,  as 
measured  by  the  Gini  coefficient,  by  slightly  less 
than the EU average in 2019.  

is  doing  moderately  well  on 
Germany 
digitalisation  efforts  in  tax  administration, 
which  can  also  help  reduce  tax  arrears  and 
cut  compliance  costs.  Outstanding  tax  arrears 
have  remained  low  at  1.1%  of  total  net  revenue. 
This  is  significantly  below  the  EU27  average  of 
31.8%,  although  that  average  is  inflated  by  very 
large  values in  a  few  Member  States  (EU median 
value  in  2019  was  12.5%).  The  Annual  Report  on 
Taxation  2021  highlights  scope  for  improvement 
in  the  rate  of  tax  return  e-filing  especially  for 
corporate  income  taxation,  which  has  the  lowest 

(1) The second earner average tax wedge measures how much extra personal income tax plus employee and employer social 
security contributions (SSCs) the family will have to pay as a result of the second earner entering employment, as a proportion of 
the second earner’s gross earnings plus the employer SSCs due on the second earner’s income. For a more detailed discussion, 
see OECD (2016), Taxing Wages 2016, OECD Publishing, Paris. http://dx.doi.org/10.1787/tax_wages-2016-en.  
(*) EU-27 simple average as there is no aggregated EU-27 value. 
Source: European Commission 

54 

41.344.248.150.753.2At 50% of Average Wage (Singleperson)At 67% of Average Wage (Singleperson)At 100% of Average Wage (Singleperson)At 167% of Average Wage (Singleperson)For second earner at 67% ofAverage Wage (Two earner couple,1st earner 100% of AW) (1)Tax wedge (%)DEEU-27 (*) 
 
 
 
  
Table A18.1: Taxation indicators 

(1) Forward-looking Effective Tax Rate (OECD). 
(*) EU-27 simple average as there is no aggregated EU-27 value 
Source: European Commission and OECD.  

indicator  of 

rate  of  return  e-filing  in  the  EU (69).  The  VAT  gap 
the  effectiveness  of  VAT 
(an 
enforcement and compliance) has been reduced by 
0.6  pps.  in  2019  and  is  at  8.8%,  below  the  EU 
average  of  10.5%.  Furthermore,  the  average 
forward-looking  effective  corporate  income  tax 
rates  were  considerably  (by  more  than  8  pps) 
above the EU average in 2020, similar to the years 
before (70).  

(69)  European Commission, Directorate-General for Taxation and 
Customs Union, Annual Report on Taxation 2021 : review of 
taxation policies in the EU Member States, Publications 
Office, 2021, https://data.europa.eu/doi/10.2778/294944, 
see Section 2.1.4 ‘Improving tax administration of the Annual 
Report on Taxation 2021’ for further details. 

(70)  Ibid. 

55 

2010201820192020202120102018201920202021Total taxes (including compulsory actual social contributions) (% of GDP)37.339.940.140.037.940.139.940.1Labour taxes (as % of GDP)21.022.623.123.920.020.720.721.5Consumption taxes (as % of GDP)10.710.110.29.710.811.111.110.8Capital taxes (as % of GDP)5.67.16.86.57.18.28.17.9Total property taxes (as % of GDP)0.81.11.21.31.92.22.22.3Recurrent taxes on immovable property (as % of GDP)0.40.40.40.41.11.21.21.2Environmental taxes as % of GDP2.21.81.81.72.42.42.42.2Tax wedge at 50% of Average Wage (Single person) (*)41.742.242.141.641.333.932.432.031.531.9Tax wedge at 100% of Average Wage (Single person) (*)49.049.549.348.848.141.040.240.139.939.7Corporate Income Tax - Effective Average Tax rates (1) (*)28.328.328.019.819.519.3Difference in GINI coefficient before and after taxes and cash social transfers (pensions excluded from social transfers)9.47.27.08.47.97.48.3Outstanding tax arrears: Total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)1.11.131.931.8VAT Gap (% of VTTL)9.48.811.210.5Dividends, Interests and Royalties (paid and received) as a share of GDP (%)4.34.34.010.710.5FDI flows through SPEs (Special Purpose Entities), % of total FDI flows (in and out)0.00.00.047.846.236.7Tax structureProgressivity & fairnessTax administration & complianceFinancial Activity RiskGermanyEU-27 
 
 
 
 
 
 
 
 
                                                 
 
 
 
  
 
 
ANNEX 19: KEY ECONOMIC AND FINANCIAL INDICATORS 
ANNEX 19: KEY ECONOMIC AND FINANCIAL INDICATORS 

Table A19.1: Key economic and financial indicators 

(1) NIIP excluding direct investment and portfolio equity shares 
(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
Source: Eurostat and ECB as of 2022-05-02, where available; European Commission for forecast figures (Spring forecast 2022) 

56 

2004-072008-122013-1820192020202120222023Real GDP (y-o-y)2.20.71.71.1-4.62.91.62.4Potential growth (y-o-y)1.31.01.61.21.01.21.31.4Private consumption (y-o-y)0.60.91.41.6-5.90.14.13.7Public consumption (y-o-y)0.72.12.13.03.53.10.50.2Gross fixed capital formation (y-o-y)2.90.72.21.8-2.21.50.82.7Exports of goods and services (y-o-y)9.82.2.1.1-9.39.92.44.2Imports of goods and services (y-o-y) 7.82.34.32.9-8.69.34.15.1Contribution to GDP growth:Domestic demand (y-o-y)1.01.01.61.8-2.81.12.32.6Inventories (y-o-y)0.0-0.40.2-0.1-0.91.0-0.20.1Net exports (y-o-y)1.10.1-0.1-0.7-0.80.8-0.6-0.2Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.20.10.50.10.00.10.20.2Capital accumulation (y-o-y)0.30.20.30.40.30.30.40.4Total factor productivity (y-o-y)0.80.60.70.70.70.70.80.8Output gap-0.3-0.80.41.5-3.9-2.0-1.4-0.1Unemployment rate9.66.34.13.03.73.63.33.2GDP deflator (y-o-y)0.91.21.72.11.63.05.43.6Harmonised index of consumer prices (HICP, y-o-y)1.91.71.21.40.43.26.53.1Nominal compensation per employee (y-o-y)0.72.22.63.40.43.43.44.0Labour productivity (real, hours worked, y-o-y)1.30.50.90.40.40.9..Unit labour costs (ULC, whole economy, y-o-y)-0.82.32.03.24.30.52.62.1Real unit labour costs (y-o-y)-1.71.10.21.22.7-2.4-2.6-1.4Real effective exchange rate (ULC, y-o-y)-1.9-0.21.5-0.4....Real effective exchange rate (HICP, y-o-y)-0.1-1.60.6-1.51.30.8..Net savings rate of households (net saving as percentage of net disposable income)10.610.310.210.816.115.0..Private credit flow, consolidated (% of GDP)0.21.23.45.86.0...Private sector debt, consolidated (% of GDP)125.9119.0108.3110.7120.1...of which household debt, consolidated (% of GDP)65.959.053.753.457.7...of which non-financial corporate debt, consolidated (% of GDP)60.060.054.557.362.5...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).2.11.81.11.1...Corporations, net lending (+) or net borrowing (-) (% of GDP)1.62.41.60.31.92.83.74.2Corporations, gross operating surplus (% of GDP)26.425.124.122.922.423.623.724.2Households, net lending (+) or net borrowing (-) (% of GDP)5.95.45.25.69.17.84.63.0Deflated house price index (y-o-y)-2.00.7.4.47.1...Residential investment (% of GDP)5.25.46.06.47.07.2..Current account balance (% of GDP), balance of payments5.56.17.87.67.17.46.46.8Trade balance (% of GDP), balance of payments5.65.56.85.75.75.4..Terms of trade of goods and services (y-o-y)-0.7-0.50.80.72.1-2.3-1.11.6Capital account balance (% of GDP)-0.10.00.00.0-0.20.0..Net international investment position (% of GDP)14.124.237.860.363.468.4..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)9.619.037.853.655.854.2..IIP liabilities excluding non-defaultable instruments (% of GDP) (1)125.9164.3149.7139.9163.8163.8..Export performance vs. advanced countries (% change over 5 years)15.6-1.1-1.8-2.91.9...Export market share, goods and services (y-o-y)-0.4-3.60.7-1.92.70.0-2.2-0.1Net FDI flows (% of GDP)1.71.21.32.2-0.12.9..General government balance (% of GDP)-2.0-1.71.01.5-4.3-3.7-2.5-1.0Structural budget balance (% of GDP)..0.90.7-2.4-2.6-1.8-1.0General government gross debt (% of GDP)65.976.270.158.968.769.366.464.5forecast 
 
 
 
 
  
 
ANNEX 20: DEBT SUSTAINABILITY ANALYSIS 
ANNEX 20: DEBT SUSTAINABILITY ANALYSIS 

‘adverse interest-growth rate’ scenario assumes a 
in  the 
less  favourable  snowball  effect  than 
baseline.  In  the  ‘financial  stress’  scenario,  the 
country  temporarily  faces  higher  market  interest 
rates in 2022.  

Graph 2 shows the outcome of the stochastic 
projections.  These  projections  show  the  impact 
on  debt  of  2  000  different  shocks  affecting  the 
government’s 
economic 
growth,  interest  rates  and  exchange  rates.  The 
cone covers 80% of all the simulated debt paths, 
therefore excluding tail events. 

budgetary 

position, 

Table  2  shows  the  S1  and  S2  fiscal 
sustainability 
indicators  and  their  main 
drivers.  S1  measures  the  consolidation  effort 
needed to bring debt to 60% of GDP in 15 years. 
S2  measures  the  consolidation  effort  required  to 
stabilise  debt  over  an  infinite  horizon.  The  initial 
budgetary position measures the effort required to 
cover  future  interest  payments,  the  ageing  costs 
component  accounts  for  the  need  to  absorb  the 
projected 
public 
expenditure  such  as  pensions,  health  care  and 
long-term  care,  and 
requirement 
measures  the  additional  adjustment  needed  to 

in  ageing-related 

the  debt 

change 

This  annex  assesses  fiscal  sustainability 
risks  for  Germany  over  the  short,  medium 
and  long  term.  It  follows  the  same  multi-
the  2021  Fiscal 
dimensional  approach  as 
Sustainability  Report, updated  on the basis  of the 
Commission 2022 spring forecast. 

Table  1  presents 
the  baseline  debt 
projections.  It  shows  the  projected  government 
debt  and  its  breakdown  into  the  primary  balance, 
the  snowball  effect  (the  combined  impact  of 
interest payments and nominal GDP growth on the 
debt  dynamics)  and  the  stock-flow  adjustment. 
These projections assume that no new fiscal policy 
measures  are  taken  after  2023,  and  include  the 
expected  positive  impact  of  investments  under 
Next Generation EU.  

Graph  1  shows  four  alternative  scenarios 
around  the  baseline, to  illustrate the  impact 
of changes in assumptions. The ‘historical SPB’ 
scenario  assumes  that  the  structural  primary 
balance (SPB) gradually returns to its past average 
level.  In  the  ‘lower  SPB’  scenario,  the  SPB  is 
permanently  weaker  than  in  the  baseline.  The 

Table A20.1: Debt sustainability analysis for Germany 

Source: European Commission 

57 

Table 1. Baseline debt projections20192020202120222023202420252026202720282029203020312032Gross debt ratio (% of GDP)58.968.769.366.464.562.861.159.358.357.456.956.756.857.0Change in debt-2.39.80.6-3.0-1.9-1.7-1.8-1.8-1.0-0.9-0.5-0.20.10.2of whichPrimary deficit-2.33.73.12.00.50.60.60.50.81.01.11.31.41.5Snowball effect-1.12.5-3.3-4.0-3.3-2.3-2.4-2.3-1.8-1.8-1.6-1.4-1.3-1.4Stock-flow adjustment1.03.70.8-0.90.90.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)10.920.316.313.313.412.512.211.811.911.912.012.212.412.6S1S2Overall index (pps. of GDP)-0.12.6of whichInitial budgetary position-1.40.5Debt requirement0.4Ageing costs1.02.1of whichPensions0.51.0Health care0.10.4Long-term care0.10.2Others0.20.5                                                                       Table 2. Breakdown of the S1 and S2 sustainability gap indicators3545556575852019202120232025202720292031BaselineHistorical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioGraph 1. Deterministic debt projections (% of GDP)p10-p20p20-p40p40-p60p60-p80p80-p9035455565758520192020202120222023202420252026Graph 2. Stochastic debt projections(% of GDP)MedianBaseline 
 
 
 
 
  
 
Table A20.2: Heat map of fiscal sustainability risks for Germany 

(1) Debt level in 2032: green: below 60% of GDP, yellow: between 60% and 90%, red: above 90%. (2) The debt peak year 
indicates whether debt is projected to increase overall over the next decade. Green: debt peaks early; yellow: peak towards the 
middle of the projection period; red: late peak. (3) Fiscal consolidation space measures the share of past fiscal positions in the 
country that were more stringent than the one assumed in the baseline. Green: high value, i.e. the assumed fiscal position is 
plausible by historical standards and leaves room for corrective measures if needed; yellow: intermediate; red: low. (4) Probability 
of the debt ratio exceeding in 2026 its 2021 level: green: low probability, yellow: intermediate, red: high (also reflecting the initial 
debt level). (5) The difference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 
2000 different shocks. Green, yellow and red cells indicate increasing uncertainty. 
Source: European Commission (for further details on the Commission’s multi-dimensional approach, see the 2021 Fiscal 
Sustainability Report). 

reach the 60% of GDP debt target. 

risk 

sustainability 

Finally,  the  heat  map  presents  the  overall 
fiscal 
classification 
(Table A20.2).  The  short-term  risk  category  is 
based  on  the  S0  indicator,  an  early-detection 
indicator of fiscal stress in the upcoming year. The 
medium-term  risk  category  is  derived  from  the 
debt  sustainability  analysis  (DSA)  and  the  S1 
indicator.  The  DSA  assesses  risks to  sustainability 
based  on  several  criteria: the  projected  debt level 
in 10 years’ time, the debt trajectory (‘peak year’), 
the plausibility of fiscal assumptions and room for 
tighter  positions  if  needed  (‘fiscal  consolidation 
space’),  the  probability  of  debt  not  stabilising  in 
the  next  5  years  and  the  size  of  uncertainty.  The 
long-term  risk  category  is  based  on  the  S2 
indicator and the DSA.  

signals that no fiscal adjustment would be needed 
to bring the debt ratio to 60% of GDP in 15 years’ 
time  (Table 2).  Overall,  the  low  risk  reflects  the 
current  moderate  public  debt  level,  favourable 
macro-financial  conditions,  despite  the  budgetary 
pressure  expected  from  the  cost  of  ageing,  in 
particular from public pensions. 

Long-term  risks  to  fiscal  sustainability  are 
medium.  Over  the  long  term,  the  sustainability 
gap  indicator  S2  (at  2.6  pps.  of  GDP)  points  to 
medium risks, driving the overall assessment. The 
S2  indicator  suggests  that,  to  stabilise  debt  over 
the  long  term,  it  will  be  necessary  to  address 
budgetary  pressures  stemming  from  population 
ageing,  especially  related  to  pension  and  health 
care expenditure (Table 2).  

short-term 

Overall, 
fiscal 
sustainability are low. The Commission’s early-
detection  indicator  (S0)  does  not  signal  major 
short-term fiscal risks (Table A20.2).  

risks 

to 

Medium-term  risks  to  fiscal  sustainability 
are  low.  The  two  elements  of  the  Commission’s 
medium-term  analysis  lead  to  this  conclusion. 
First,  the  debt  sustainability  analysis  (DSA)  shows 
that government debt is projected to decline from 
about 66% of GDP in 2022 to around 57% of GDP 
in 2032 in the baseline (Table 1). This debt path is 
robust to possible shocks to fiscal, macroeconomic 
illustrated  by 
variables,  as 
and 
alternative  scenarios  and  stochastic  simulations, 
all pointing to low risks (Tables A20.1 and A20.2). 
Moreover,  the  sustainability  gap  indicator  S1 

financial 

58 

BaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallLOWLOWLOWLOWLOWLOWDebt level (2032), % GDP5745646257Debt peak year20212021202120212021Fiscal consolidation space70%40%80%70%70%Probability of debt ratio exceeding in 2026 its 2021 level16%Difference between 90th and 10th percentiles (pps. GDP)25Short termMedium termLong termOverall                               (S0)Overall     (S1+DSA)S1Debt sustainability analysis (DSA)S2Overall     (S2+DSA)OverallMEDIUMMEDIUMDeterministic scenariosStochastic projectionsLOWLOWLOWLOW 
 
 
  
 
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  Agora  Energiewende 

für  Klimainvestitionen 

(2021),  Öffentliche 
im 
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2021-2030 

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und 

  KfW 

KfW 

(2021), 
/ 

PRESSEMITTEILUNG 

VOM 
07.10.2021 
Research: 
KFW. 
Klimaneutralität  bis  Mitte  des  Jahrhunderts 
erfordert  Investitionen  von  5  Billionen  EUR 
https://www.kfw.de/%C3%9Cber-die-
KfW/Newsroom/Aktuelles/Pressemitteilungen-
Details_673344.html 

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