COMMISSION STAFF WORKING DOCUMENT 2023 Country Report - Germany Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Germany and delivering a Council opinion on the 2023 Stability Programme of Germany
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Germany, digitisation, economic policy, economic recovery, economic reform, energy policy, fiscal policy, investment, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 605 final  COMMISSION STAFF WORKING DOCUMENT 2023 Country Report - Germany Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Germany and delivering a Council opinion on the 2023 Stability Programme of Germany {COM(2023) 605 final}  
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

Graph 1.1: Components of GDP growth 

Germany's economy is adjusting to  
a new and shifting environment 

GDP  has  now  recovered  beyond  pre-
pandemic  levels,  but  the  economy  is  still 
feeling  the  impact  of  Russia's  war  of 
aggression  against  Ukraine.  As  services 
reopened  and  households  started  using  the 
the  pandemic, 
savings  built  up  during 
in 
consumer  spending  rebounded  strongly 
2022.  However,  Russia’s  war  of  aggression 
against  Ukraine  caused  significant  disruptions 
to energy deliveries and to supply chains. This 
had  an  impact  on  the  economy  and  fuelled 
inflation, reining in the recovery both in terms 
of consumer spending and investment.  

inflation 

is  eroding  purchasing 
High 
power  and  putting  pressure  on  firms. 
Consumer  price  inflation  peaked  at  11.6%  in 
October  2022  –  a  rate  unseen  since  the  oil 
crisis in the 1970s. Since then it has gradually 
fallen  to  7.6%  in  April  2023.  The  rise  in 
inflation  was  mainly  driven  by  energy  prices, 
which  drove  up  the  cost  of  products  and 
services.  

Services  are  likely  to  keep  inflation  high  over 
the coming years. The rise in consumer prices 
has  dented  purchasing  power,  particularly  for 
less  affluent  households.  The  high  energy 
prices  also  had  a  significant  effect  on 
Germany’s 
base, 
increasing the cost of production and posing a 
particular  challenge  for  small  and  medium 
enterprises  and  firms 
in  energy-intensive 
sectors.  The  government  adopted  temporary 
support measures to provide financial relief to 
households and businesses (see Box 1a). 

large  manufacturing 

(1) Contribution to GDP growth in percentage points 
Source: Eurostat, European Commission 

The  labour  market  is  tight,  with  firms 
experiencing  major  labour  shortages.  At 
around  80%,  the  employment  rate  for  2022 
remained robust and one of the highest in the 
EU.  The  unemployment  rate  has  been  at 
levels  at  around  3%, 
historically 
significantly  below  the  EU  average  of  6%. 
However, 
regional 
there  are  significant 
disparities,  with  some  regions  having  an 
unemployment  rate  close  to  the  EU  average 
(see Annex 17).  

low 

Job  growth has remained strong, especially in 
services,  leading  to  a  vacancy  rate  that  is 
higher  than  the  unemployment  rate.  Reported 
labour  shortages  have  been  more  acute  in 
services  (the  IT  sector,  engineering,  logistics, 
the  care  sector)  and  in  manufacturing,  and 
they remain significant in construction. Due to 
ageing  and  the  decline  in  the  working  age 
population  by  3.7  million  in  the  2020s, (1)  a 
net  migration  balance  at  around  400 000 
people  a  year  would  be  needed  to  offset  a 

(1)  The 2021 Ageing Report: Economic and Budgetary 

Projections for the EU Member States (2019-2070). 

2 

-5-4-3-2-10123420172018201920202021202220232024Consumer spendingPublic spendingFixed capital formationInventoriesNet exportsGDP 
 
 
  
                                                 
decreasing  level  of  potential  labour  force (2). 
Meanwhile,  the  number  of  hours  worked  per 
employed  person  have  continued  to  fall 
relative  to  pre-pandemic  years.  This  reflects 
untapped  potential,  particularly  of  part-time 
workers.  The  share  of  part-time  workers  is 
particularly  high  among  women  and  Germany 
is among the Member States with the highest 
share of women in part-time work.  

Graph 1.2: Unemployment, wages and prices 

(1) Unemployment in % 
(2) Wage growth and inflation in % year-on-year 
Source: Eurostat 

business 

profitability 

Overall 
has 
remained  robust  as  firms  passed  on  the 
higher  costs  to  prices.  Nominal  wages 
increased  markedly  in  2022  (4.7%),  though 
the increase is still below inflation (Graph 1.2). 
High  inflation  is  set  to  continue  to  be  a  drag 
on  consumer  spending  in  2023  until  real 
wages  grow  again.  So  far,  companies  have 
been  able  to  pass  on  the  increases  in  labour 
and  input  costs  to  customers,  helping  them 
maintain profitability. 

country's 

macroeconomic 
The 
vulnerabilities  relating  to  the  persistent 
current  account  surplus  have  been 
gradually reduced,  as assessed in the In-

to 

towards 

increase 

depth  Review  for  Germany (3).  The  current 
account  balance  fell  from  7.7%  in  2021  to 
4.2%  of  GDP  in  2022.  Though  the  key  factor 
was a surge in energy prices, the decrease was 
also the result of a stronger rise in imports of 
non-energy  goods  and  services.  At  the  same 
time,  the  investment  ratio  increased  while 
savings  came  down 
their  pre-
pandemic level. The current account surplus is 
expected 
towards  6%  yet 
remaining  below  pre-pandemic  levels  for  the 
next  few  years  and  stay  below  the  MIP 
threshold.  While  in  the  past  decade  house 
prices  have  become  increasingly  overvalued, 
since  the  second  half  of  2022  house  price 
increases 
increasing 
interest  rates  and  the  reduced  purchasing 
power  of  buyers.  At  the  same  time,  housing 
supply 
constrained  and  house 
completions have been declining further below 
government targets.  

reflecting 

receded, 

remains 

Productivity  has  stalled  for  the  last  five 
labour  productivity  has 
years.  Aggregate 
largely recovered to its pre-pandemic level, but 
productivity  is  set  to  remain  sluggish.  The 
German  economy  has  structural  weaknesses 
such  as  low  investments  in  intangible  assets 
(including  research  and  innovation),  shortages 
of  skilled  labour  and  a  decline  in  business 
dynamism.  Regulatory 
the 
access  to  and  exercise  of  certain  business 
services are higher than in the EU on average, 
resulting  in  less  competition,  higher  average 
costs  and  lower  competitiveness.  Dismissals 
are  avoided  as  businesses  anticipate  a 
recovery and attempt to mitigate the shortage 
of skilled labour.  

restrictions 

in 

Some  sectoral  trends  can  partly  explain  the 
sluggish  productivity  growth.  Manufacturing 
activity remains below its peak in 2018, as the 
transition to  decarbonisation  and  adjustments 
to supply chains to mitigate the impact of high 
energy  costs  and  other  disruptions  still 
constrain  the  level  of  output.  The  growth  in 
construction  has  been  hindered  by  shortages 
of material and labour, rising costs of material 
and  administrative  restrictions.  Job  growth  in 

(2)  Research Institute of the Federal Employment Agency 

(IAB) (2021), Projektion des Erwerbspersonenpotenzials 
bis 2060 - Demografische Entwicklung lässt das 
Arbeitskräfteangebot stark schrumpfen. 

(3)  European Commission (2023), In-Depth Review for 
Germany, Commission staff working document, 
(COM(2023) 629 final). 

3 

-4-2024681012IIIIIIIVIIIIIIIVIIIIIIIVIIIIIIIVIIIIIIIVIIIIIIIVIIIIIIIVIIIIIIIV20152016201720182019202020212022wage growthunemployment rateHICP inflation 
   
                                                 
                                                 
Germany  performs  relatively  well  on 
implementing  the  European  Pillar  of 
Social  Rights,  but  challenges  remain 
related  to  inequalities  in  education  and 
training,  employment  and  housing  (Annex 
14). In stark contrast to the EU-wide trend, the 
early  school  leaving  rate  from  education  and 
training  deteriorated  significantly  in  Germany 
over  the  past  decade  (12.2%  against  the  EU 
average  of  9.6%  in  2022).  For  non-EU  born 
people,  the  rate  is  28.8%,  also  reflecting  the 
challenge  of 
inflows  of 
newcomers  in  recent  years.  The  impact  of  a 
person's  socio-economic  background  on  their 
educational outcome has increased, and about 
one-fifth  of  10-year-olds  do  not  meet  basic 
standards in German and mathematics, which 
risks aggravating skills shortages (Annex 15).  

integrating 

large 

Access  to  early  childhood  education  and  care 
for  children  below  the  age  of  3  remains  low 
(31.4%  against  the  EU  average  of  36.2%).  At 
49%  in  2021,  Germany  is  below  the  EU 
average  of  54%  of  individuals  aged  16-74 
with at least basic digital skills, hampering the 
digital transition. A large gap remains between 
the  employment  rate  of  people  with  and 
in  2021). 
without  disabilities 
Reflecting the challenge of affordable housing, 
the  share  of  people  living  in  households  with 
housing costs above 40% of their total income 
(11% in 2021) is above the EU average (8.3%) 
and rising (up from 9% in 2020). 

(30.5pps 

labour-intensive  public-sector  employment 
such  as  healthcare,  social  services,  education 
and  public  administration  has  also  slowed 
productivity  growth.  Regional  differences  in 
labour  productivity  have  decreased  as 
Germany  has  seen  its  less  developed  regions 
gradually  catch  up.  However,  significant 
disparities still remain (see Annex 17). 

The energy crisis highlights the 
urgency of the green and digital 
transitions for sustainable growth 

Germany’s  energy  mix  made  it  highly 
exposed  to  the  ongoing  energy  crisis, 
leading  to  dramatic  adjustments.  Before 
Russia's  war  of  aggression  against  Ukraine, 
Germany had a very high level of exposure to 
Russian  gas  and  oil,  at  65%  and  34% 
respectively in 2021 (4). Over the past years, it 
has reduced this reliance significantly, to zero 
for gas and to below 25% for oil (5). However, 
more  action  is  warranted  on  electricity  and 
digital  networks,  digital  public  services, 
permitting,  green  and  digital  skills,  energy 
efficiency,  natural  carbon  sinks  and  the 
circular economy. 

boost 

energy 

job  creation 

security, 
Decarbonisation, 
digitalisation  and  skills  are  key  to 
competitiveness, raising productivity, and 
to  achieving  a  fair  transition.  Germany 
could  use  the  green  and  digital  transitions  as 
productivity, 
an 
to 
opportunity 
competitiveness  and 
in  the 
medium-to-long  term.  The  green  transition 
offers  unique  opportunities  to  help  shape  the 
economy for competitive sustainability. To this 
end,  Germany  has  carried  out  a  series  of 
energy-related  investments  and  reforms.  This 
includes  new  legislation  to  accelerate  the 
rollout  of  renewable  energy,  wind  energy  in 
particular,  and 
to  accelerate  work  on 
the  grid.  Germany  has  also 
expanding 
achieved a high level of gas supply security.  

(4)  Eurostat (2021) 

(5)  BMWK 

4 

 
                                                 
 
Box 1a:  Energy policy response in Germany – Part 1 

Germany  adopted  several  support  measures  to  cushion  the  impact  of  energy  price 
inflation  on  households  and  businesses.  The  Commission's  2023  spring  forecast 
projects  the  gross  budgetary  costs  of  these  measures  to  amount  to  2.0%  of  GDP  in 
2023. (6) Most measures maintain the price incentive to consume less energy, although 
they  are  insufficiently  targeted  to  the  most  vulnerable.  In  2022,  the  government 
adopted  a  bundle  of  one-off  measures,  but  from  2023  onwards,  the  main  energy 
measures  are  energy  price  brakes  set  to  last  until  April  2024.  Depending  on  price 
developments, this can be funded by a dedicated fund of up to EUR 200 billion (worth 
4.9% of GDP). 

Notable  measures  in  2022  included  one-off  lump-sum  payments  of  EUR 300  to 
employed  persons  and  pensioners  and  EUR 200  to  other  groups,  such  as  people 
receiving  social  assistance.  The  government  paid  heating  allowances  and  covered  the 
December  2022  bill  for  natural  gas  and  heat  consumers.  For  three  months,  taxes  on 
petrol  and  diesel  were  reduced.  A  EUR 9  monthly  ticket  was  offered  for  local  public 
transport. In 2023, the main energy measures are a  natural  gas and heat price brake 
and an electricity price brake that cap energy prices for households, small and medium-
sized enterprises and for industrial companies.  

The  price  brakes  are  based  on  consumption  levels  over  the  previous  year,  and  cover 
80% of past consumption by households and small and medium enterprises and 70% 
for  industrial  companies.  For  these  quantities,  energy  retail  prices  are  capped  for 
households  at  12  cents/kWh  for  gas,  at  9.5  cents/kWh  for  district  heating  and  at  40 
cents/kWh for electricity. Industrial companies qualify for a price cap on the wholesale 
energy  price  without  network  and  distributions  costs  of  7  cents/kWh  for  gas,  7.5 
cents/kWh for district heating and 13 cents/kWh for electricity.  

The government also reduced VAT on gas and district heating from the normal rate of 
19% to 7% for the period October 2022 to March 2024. 

(6)  For 2022, gross budgetary costs of measures amounted 

to 1.2% of GDP.  

5 

 
 
                                                 
 
 
Box 1b:  Energy policy response in Germany – Part 2 

An  analysis  of  the  consequences  of  high  inflation  on  income  distributions  shows  that 
the expenditure burden rose particularly sharply for people on the lowest income decile, 
by around 14% of household disposable income, compared to only 5% at the top decile. 
Government  measures  such  as  the  electricity  and  gas  price  breaks  are  of  greater 
benefit to lower-income households by stabilising their relative disposable income and 
reducing the expenditure burden by up to 2 pps in the bottom decile. But they are not 
enough  to  compensate  for  the  negative  consequences  of  high  inflation.  Overall, 
Germany's  price  brake  measures  have  not  been  very  targeted  to  support  vulnerable 
households,  are  insufficient  to  tackle  inequality  and  add  to  fiscal  cost.  (Source: 
European  Commission's  Joint  Research  Centre,  calculations  based  on  the  EUROMOD 
model, version I5.0+ and its Indirect Tax Tool extension (ITTv4).) 

Germany  applies  the  EU  solidarity  contribution  under  Council  Regulation  (EU) 
2022/1854 for the fiscal years 2022 and 2023, with a defined rate of 33%. (7)  

Germany  took  several  measures  to  improve  the  security  of  its  energy  supply.  This 
included  energy  savings  in  buildings  and  industry,  bringing  in  changes  to  an  existing 
scheme  for  building  renovation,  and  adopting  two  energy  conservation  ordinances 
mandating  measures  in  public  buildings  and  obliging  companies  to  take  energy 
efficiency  measures.  Germany  decided  to  nationalize  a  former  subsidiary  of  Russia’s 
Gazprom and bailed out energy suppliers in financial  trouble such as Uniper to secure 
Germany’s  energy  supply.  The  German  government  initially  planned  to  phase  out 
nuclear  energy  by  the  end  of  2022 but  agreed  to  keep  its  three  active  nuclear  power 
plants in operation until April 2023. It also granted the temporary reactivation of hard 
coal and lignite power plans to save gas. 

Although  overall  Germany  performs  well 
on  the  UN’s  Sustainable  Development 
Goals  (SDGs),  challenges  remain  related 
inequality,  quality  education  and 
to 
environmental  sustainability 
(Annex  1). 
Germany performs above the EU average and 
made  further  progress  on  decent  work  and 
economic  growth  (SDG  8),  on  macroeconomic 
stability (SDG 16, 17) and productivity (SDG 9). 
It  also  performs  well  on many  SDG indicators 
related  to  fairness  (SDG  1,  3,  8),  but  it  is 
moving  away  from  SDG  5  (Gender  equality). 
Further,  Germany  is  moving  away  from  the 
targets  and  needs  to  catch  up  with  the  EU 

(7)  I.e. applying a mandatory temporary solidarity 
contribution at a rate of at least 33% to the 
extraordinary and unexpected profits of businesses 
active in the extraction of crude petroleum, natural gas, 
coal, and refinery sectors. It is calculated on taxable 
profits, as calculated under national tax rules in the 
fiscal year starting in 2022 and/or in 2023, which are 
above a 20% increase in the average yearly taxable 
profits in 2018-2021. 

sustainability, 

average on reducing inequalities (SDG 10) and 
on  delivering  quality  education  (SDG  4).  On 
environmental 
Germany 
performs well (SDG 2, 9, 11) or is improving on 
underperforming 
(SDG  7,  12). 
indicators 
However, it is moving away and needs to catch 
up with the EU average on climate action (SDG 
13).  

Although it expects to run a deficit 
in the coming years, Germany's 
public finances remain healthy 

Public  finances  provided  fiscal  space  for 
the government to react decisively to the 
recent crises. In 2023, the pandemic support 
measures are expected to be phased out, with 
the  cost  going  down  to  0.2%  of  GDP  from 
3.0% in 2020, 4.9% in 2021 and 1.8% of GDP 
in 2022. With the increase in energy prices in 

6 

 
                                                 
 
2022,  the  government  took  several  support 
measures  amounting  to  around  1.2%  of  GDP. 
The  size  of  the  energy  measures  for  2023, 
notably  the  gas  and  electricity  price  brakes, 
will depend on the evolution of energy market 
prices (8). 

Extra-budgetary funds are set to increase 
government  spending  and  deficits  over 
the  coming  years.  The  budgetary  surpluses 
seen  between  2014  and  2019,  before  the 
pandemic, are not expected to return soon for 
several  reasons. First, rising interest rates will 
entail  higher  interest  costs  in  the  future. 
Second, the extra-budgetary funds (9)  adopted 
in 2021/2022 will increase the deficit over the 
coming  years.  These  include  for  the  coming 
years an extra EUR 100 billion (2.4% of GDP) 
for defence and an increase in the Climate and 
Transition  Fund  of  EUR  60  billion  (1.5%  of 
GDP).  

The government also created a EUR 200 billion 
fund  (4.9%  of  GDP)  to  help  households  and 
businesses cover the higher energy costs (see 
Box  1b).  Overall,  these  extra-budgetary  funds 
investment  and 
allow  to 
the 
limit 
spending,  but 
transparency of the budgetary framework and 
the  associated  expenditure  will  count  in  the 
deficit from an EU perspective.  

increase  public 
they 

tend 

to 

Despite  recent  measures,  public  finances 
remain  sustainable  in  the  medium-term. 
The  level  of  government  debt  increased  by 
around  10  percentage  points  during  the 
pandemic  and  peaked  in  2021  at  69.3%  of 
GDP. In 2022, debt started to fall again, aided 
by  increasing  inflation,  which  generated  extra 
revenue  and  fuelled  nominal  GDP  growth. 
Despite 
items, 
Germany  has  declared  that  it  will  reapply  its 

the  additional 

spending 

(8)  Falling energy prices in recent months make it likely 

that the take-up of this fund will fall; the Commission is 
predicting support amounting to 2.0% of GDP in 2023 
and 0.3% of GDP in 2024. 

(9)  Extra-budgetary funds (Sondervermögen, 

Extrahaushalte) lie outside of the core budget 
(Kernhaushalt) though they still count towards the 
federal government level. Since 2022, they already 
count for the national debt brake when funded from the 
core budget and no longer only when actually spent. 

national  debt  brake (10)  already  in  2023.  As 
nominal  GDP  growth  is  expected  to  exceed 
yearly  deficits, 
is 
expected to continue to fall. 

the  debt-to-GDP 

ratio 

The  tax  mix  in  Germany  is  based  heavily 
on  labour  taxes,  while  the  share  of 
environmental  taxes  is  below  the  EU 
aggregate  and  Germany  continues  to 
grant  environmentally  harmful  subsidies. 
Labour  taxes  in  Germany  are  among  the 
highest in the EU, providing weak incentives in 
the tax and transfer system for low-wage and 
second earners to increase hours worked. The 
low rate of environmental taxation in Germany 
is  driven  by  energy  and  transport  taxes,  both 
below  the  EU  average. (11)  Environmentally 
harmful  subsidies  remain  substantial  and 
hamper the green transition (Chapter 3).  

the 

retirement  of 

low-income  workers.  The 

Ageing and early retirement put pressure 
on  the  sustainability  of  the  pension 
system.  The  working  age  population 
is 
expected to fall substantially in the 2020s due 
to 
the  baby-boom 
generation. This will  considerably increase the 
financing  needs  of  the  first  pillar  mandatory 
pay-as-you-go  system  and  require  action  to 
ensure pensions remain adequate, particularly 
for 
statutory 
retirement age is gradually increasing and due 
to  reach  67  years  in  2031.  Although  the 
employment rate of workers aged 55-64 was 
among the highest in the EU (at 73.3% against 
the EU average of 62.3%), the increase in the 
effective retirement age has slowed over time, 
and  employment in  the  age  group  of  over  65 
lags  behind  EU  top  performers.  The  state-
subsidised  private  pension  schemes  (third-
pillar personal pension schemes, Riester Rente) 
have  so  far  been  underused,  proving  less 
attractive  for  low-income  earners  and  people 
with  unstable  employment.  Despite  efforts  to 
increase  the  use  of  occupational  pensions 

(10)  The national debt brake limits new net debt to 0.35% of 
GDP at federal government level and prohibits it at 
Länder level. 

(11)  Germany applies carbon prices in the transport and 

heating sectors through a national emissions trading 
system. 

7 

 
                                                 
                                                 
(second pillar), the rate of coverage remains at 
about 56%.  

8 

 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

Germany’s  recovery  and  resilience  plan  aims 
to  tackle  the  key  challenges  related  to  the 
green  and  digital  transition,  to  improving  its 
education  system,  healthcare  and  public 
administration. It  consists  of  15  reforms  and 
25  investments  funded  by  EUR  26.4  billion  in 
grants, representing 0.8% of GDP (see Annex 3 
for more details).   

to 

implementation 

of  Germany's 
The 
recovery and resilience plan is underway, 
however  with  significant  delays.  Limited 
resources attached to the plan implementation 
led 
insufficient  prioritisation  have 
and 
Germany 
the 
regarding 
fall  behind 
implementation  process.  Germany  still  needs 
to  sign  its  operational  arrangements  and 
submit its  first  payment  request.  This  request 
would  cover  36  milestones  and  targets  that 
track  progress  across  all  components  of  the 
resilience  plan,  potentially 
recovery  and 
leading  to  a  disbursement  of  up  to  EUR  4 
billion. 

Germany’s  recovery  and  resilience  plan 
was  already  amended  once  in  February 
2023,  adjusting  two  investment  measures 
that  could  not  be  fully  completed  due  to 
objective  circumstances (12).  The  plan 
is 
expected to be revised again in 2023, to cover 
among  others  additional 
reforms  and 
investments  in  the  REPowerEU  chapter,  with 
the  overall  aim  to  increase  the  value  of  its 
plan  to  over  EUR  30.3  billion,  making  full  use 
of the grants available. However, negotiations 
to 
on 
accommodate  the  increase  of  non-repayable 
support are still ongoing.  

REPowerEU 

chapter 

and 

the 

review  of 
The  following,  more  detailed 
measures being implemented under the RRP in 

(12)  Council Implementing Decision amending Council 

Implementing Decision of 13 July 2021 on the approval 
of the assessment of the recovery and resilience plan 
for Germany, Brussels, 14 February 2023, 5536/23. 

9 

no way implies formal Commission approval or 
rejection of any payment requests. 

Germany 
is  rolling  out  measures  to 
decarbonise  the  economy,  in  particular 
industry  and  transport,  with  a  special 
focus  on  hydrogen.  Together  with  action  to 
increase  energy  efficiency,  the  measures 
contribute  to  reaching  the  green  target  set 
under the plan and to the REPowerEU objective 
of  diversifying  away  from  imported  fossil 
fuels.  On  hydrogen,  Germany  carried  out  an 
expression of interest procedure for Important 
Projects of Common European Interest. Part of 
the  projects  are  currently  being  assessed  by 
the  Commission  for  state  aid  considerations. 
Some  projects  receive  additional  grants  for 
research  and  innovation  under  the  National 
Hydrogen  Strategy,  and 
implementing 
programmes  such  as  the  national  innovation 
programme hydrogen and fuel cell technology, 
and  will  tackle  the  challenges  of  producing 
water  electrolysers,  offshore  production  and 
transport technologies.  

its 

It  plans  to 

Germany  is  also  promoting  sustainable 
transport and energy efficiency. Recipients 
can  receive  support  to  purchase  560  000 
electric vehicles, alongside an extension of tax 
exemptions for e-vehicles that also applies to 
businesses. 
improve  charging 
infrastructure  by  funding  both  public  and 
residential  recharging  points.  Funding  is  also 
planned  to  accelerate  the  uptake  of  buses 
fuelled  by  greener  alternatives  to  diesel. 
Projects  in  the  building  sector  are  underway 
with  energy-efficient  renovation  schemes  and 
the  start  of  23  network  projects  on  climate-
friendly timber construction. 

Reforms  of  the  public  administration 
have  progressed.  A  first  set  of  laws  to 
accelerate  planning  and  approval  procedures 
in the transport sector have entered into force 
and resulted in simpler, more transparent and 
Further  efforts  are 
digital  procedures. 

 
 
                                                 
for 

requesting 

underway  to  shorten  administrative  planning 
and  approval  procedures,  standardise  the 
requirements 
financing 
subsidies, accelerate housing construction and 
increase the number of successful transfers of 
business  ownership  to  the  next  generation, 
and 
diligent 
implementation.  The  public  consulting  agency 
PD  –  Berater  der  öffentlichen  Hand  provides 
technical  assistance  to  public  authorities  to 
stimulate 
level, 
including digitalising schools. 

investment  at  municipal 

require 

efforts 

these 

projects, 

Progress  is  being  made  on  numerous 
digitalisation 
including 
proposals 
for  microelectronics  and 
communication  technologies.  The  aim  of 
the  microelectronics 
Important  Project  of 
Common European Interest (EUR 1.5 billion) is 
to  boost  the  EU’s  capabilities  in  electronics 
design and roll out the next generation of low 
power  trusted  processors  and  other  electronic 
components.  A  call  for  expressions  of interest 
was launched to identify potential participants. 
Several  pilot  projects  contributing  to  the 
digitalisation  of  the  railway  under  the  ‘Digital 
Rail  Germany’  initiative  and  the  ‘fast  track’ 
programme  are  due  to  be  completed,  which 
should 
standardised, 
interoperable modules for the digitalisation of 
the railway.  

develop 

help 

Vehicle manufacturers and their suppliers 
have  received  support  to  manage  the 
digital  and  ecological  transition.  The 
continuing 
federal 
education  and 
(CET 
activities, 
networks)’ 

programme 

promotes 

networks 

‘Building 

training 

training 

funded 

led  by 

especially for employees of small and medium 
enterprises.  The  recovery  and  resilience  plan 
research,  development,  and 
has 
innovation 
the  Digitalisation  and 
Technology  Research  Centre  of  the  German 
armed  forces  (dtec.bw).  This  has  funded 
research 
strategic 
innovation 
technological  areas,  strengthening  German 
technological 
and  European  digital  and 
sovereignty.  

and 

in 

Germany has also advanced on measures 
to  improve  education,  social  and  health 
outcomes.  During  the  COVID-19  pandemic, 
the  plan  funded  grants  for  at  least  70 000 
apprentices,  provided 
learning  support  for 
pupils  and  provided  teachers  with  digital 
devices  when  an 
share  of 
educational  activities  had  to  be  organised 
online.  The  commitment  that  the  total  social 
security  contribution  rate  would  stay  below 
40% in 2021 was a reassurance at a time of 
high  insecurity.  Funding  for  research  into 
COVID-19  vaccines  helped  BioNTech  develop 
and produce life-saving vaccines. 

increasing 

Germany  is  preparing  additional  social 
measures requiring longer-term planning. 
These  include  a  pension  information  portal 
(Digitale  Rentenübersicht)  informing  citizens 
about  their  individual  pension  rights  from  all 
three  pension  pillars  (statutory,  company  and 
private  pensions),  the  first  national  education 
platform 
Bildungsplattform) 
providing  easy  access  to  multiple  education 
offers,  the  digitalisation  of  public  health 
offices  and  the  modernisation  of  hospitals, 
digitalisation 
including 
action 
Krankenhäuser). 
(Zukunftsprogramm 

(Nationale 

on 

      Box 2: 

Key deliverables under the recovery and resilience plan in 2023-24 

 

 

 

Funding at least 400 000 recharging points in residential buildings 

Launching the beta version of the national education website (Nationale Bildungsplattform) 

Launching the Digital Pension Overview (Digitale Rentenübersicht), a web portal that informs citizens 
about their individual pension rights 

  Completing energy-efficient renovations of 10 000 housing units 

 

Increasing the digitalisation of hospitals and public health offices 

  Modernising 60 educational institutions of the armed forces (Bundeswehr) 

  Completing pilot registers and a technical architecture ready to be connected with priority registers  

10 

 
 
FURTHER PRIORITIES AHEAD 

Graph 3.1: Total installed capacity of the main 
renewable energy sources and the national 
expansion goals in Germany 

Source: Bundesnetzagentur (2023), Council of Economic 
Experts (2022), EEG 2023, Flächenentwicklungsplan 
2023 

progress 

Germany  faces  challenges  additional  to 
in  the  recovery  and 
those  tackled 
resilience plan. The government has recently 
put  in  place  important  reforms  (see  Annex  2 
on 
country-specific 
on 
recommendations).  Further  action  will  be 
required  to  make  progress  on  numerous 
priority  challenges.  They  include  accelerating 
the green and digital transitions by swiftly and 
smoothly implementing permitting procedures, 
rolling out fibre optic networks, promoting the 
skills  needed  for  the  green  and  digital 
transitions, 
and 
tax  mix, 
improving 
competitiveness, 
improving education and training, and readying 
the pension system for population ageing.  

productivity 
the 

boosting 

Removing bottlenecks to 
investment and boosting the green 
transition 

net-zero 

Streamlining  and  speeding  up  permitting 
procedures  would  help  accelerate  the 
roll-out of renewable energy sources and 
additional 
technologies. 
Renewable electricity is vital for the successful 
roll-out  of  Germany’s  green  transition  plans 
(renewable  hydrogen  production,  electric 
vehicles,  heat  pumps,  etc.)  and  for  achieving 
energy security in the medium term due to the 
high dependence on imported fossil fuels.  

the  main 

Graph  3.1  shows  the  total  (planned)  installed 
capacity  of 
renewable  energy 
sources. A three-fold acceleration is needed to 
meet  the  national  targets  (from  a  +67% 
expansion  over  the  past  8  years  to  a  +196% 
over  the  coming  8  years).  While  41%  of 
electricity is currently generated by renewable 
energy,  further  progress  is  achievable.  This  is 
particularly  important  since  otherwise  fossil 
fuels  will  continue  to  be  used  to  offset  the 
phase-out  of  nuclear,  especially  coal  and 
lignite-fired power plants.  

In  addition  to  the  energy-related  investments 
and reforms made by Germany (see Economic 
Snapshot),  further  improvements  could  be 
made  to  digitalise  the  related  administrative 
processes,  develop  related  skills,  speed  up 
consultations and procedures in administrative 
courts, provide  incentives to  roll  out  hydrogen 
infrastructure,  and 
to 
understaffed authorities (13).  

support 

provide 

Tackling  these  additional  challenges  will  also 
help  Germany  make  further  progress 
in 
achieving  the  UN  Sustainable  Development 
Goals  (SDGs),  where  Germany  currently  has 
room  for  further  improvement,  namely  on 
climate  action  (SDG  13),  quality  education 
(SDG 4) and reduced inequalities (SDG 10).  

Cross-border  collaboration,  such  as 
the 
initiatives to accelerate the roll-out of offshore 

(13)  In particular, local municipalities and administrative 

districts depend on adequate support from the Länder. 

11 

0501001502002503003504002012201420162018202020222024202620282030GigawattsOffshore windSolar photovoltaicOnshore windRolloutplan+ 67%+196%installedenvisioned 
 
          
                                                 
energy, 

including 

cross-border 
wind 
infrastructure,  in  the  North  and  Baltic  Seas 
helps  address 
implementation  challenges 
(Annexes 7 and 12). 

Expanding  and  upgrading  the  electricity 
networks  would  help  meet  the  needs  for 
the  green  transition.  Germany  has  taken 
steps  to  stimulate  flexible  solutions  for  the 
electricity  system  and  to  expand  the  power 
grid. However, more effort seems warranted to 
remove  the  remaining  bottlenecks  to  grid 
flexibility,  including  storage,  and  to  accelerate 
the  expansion  of  high  voltage  transmission 
grids.  This  could  include  realising  projects  of 
common interest and streamlining the related 
court and consultation procedures.  

vehicles, 

In addition, Germany's distribution grids would 
benefit  from  being  digitalised  and  upgraded 
further  to  accommodate  new  producers  and 
of 
consumers 
solar 
electric 
systems  and  heat  pumps. 
photovoltaic 
to  become 
Electricity  storage 
likely 
increasingly 
to  smoothen  out 
fluctuations  and  peak  demand,  help  integrate 
renewable energy, reduce congestion and grid 
investment  costs,  and  increase  the  resilience 
and reliability of the energy system.  

is 
important 

several 

industry 

competitiveness 

Accelerating  action  on  energy  efficiency, 
including  in  transport,  domestic  heating 
help  maintain 
and 
can 
Germany’s 
while 
continuing  the  transition  to  a  green 
and 
relief 
economy.  Despite 
protection  measures, 
including  voluntary 
energy demand reduction measures, transport 
and  industry  need  to  structurally  reduce  their 
energy  intensity  to  manage  the  persistently 
high  energy  costs.  While  energy  prices  have 
decreased,  they  remain  historically  high  and 
uncertainty  remains  regarding  next  winter, 
which requires continued efforts to structurally 
energy 
reduce 
efficiency 
the 
electrification of transport and industry, are an 
opportunity 
boost 
competitiveness  and  job  creation,  including  in 
the clean tech sector. The current recovery and 
in 
includes 
resilience  plan 
decarbonising  industry,  carbon  contract-type 
schemes,  and  energy  renovation  in  buildings. 

demand. 
measures, 

investments 

Germany 

including 

Targeted 

gas 

for 

to 

Greening the heating network and accelerating 
the  roll-out  of  heat  pumps  in  an  affordable 
way would help reduce Germany’s reliance on 
fossil  fuels.  Municipal  heat  planning  would 
help facilitate the progressive decarbonisation 
of Germany's heating system.  

New  gas  terminals  can  improve  the  EU’s 
security  of  supply,  if  installed  without 
delay.  Germany  has  planned  and  started 
implementing  natural  gas  infrastructure (14) 
that  would  replace  Russian  gas 
imports 
completely  in  the  medium  term.  Germany 
fulfilled its gas storage obligations last winter, 
reaching 90.1% by 31 December 2022.  

Due  to  interconnected  gas  markets,  liquified 
natural  gas imported to Germany can also be 
transmitted  to  other  European  countries  and 
help  boost  Europe’s  security  of  supply. 
Notably,  the  floating  storage  regasification 
units in Lubmin could contribute to secure gas 
supply for other Member States. It is essential 
to  continue  the  energy  diversification  efforts 
and stick to the envisaged timeline in order to 
improve  the  security  of  supply  within  and 
beyond  national  borders.  However,  new  gas-
related  infrastructure  should  not  create  lock-
ins;  instead,  it  should  pave  the  way  for  the 
green  transition.  Land-based  liquified  natural 
gas  terminals  should  be  compatible  with 
hydrogen or ammonia in the medium term.   

requires 

further  action 

Reaching  Germany’s  climate  and  energy 
targets 
to 
decarbonise  the  transport  and  building 
sectors  and  protect  carbon  sinks.  The 
climate  policy  measures  set  out 
in  the 
recovery  and 
resilience  plan  and  other 
to  date,  such  as 
government  measures 
introducing  a  national  carbon  price  to  bring 
down  emissions  in  the  transport  and  building 
sectors, were not sufficient to enable Germany 
to reach its sectoral national emission targets 
in  2022 (15):  While  progress  was  made  on 
energy  and  industry-related  emissions,  the 

(14)  Six floating storage regasification units, one floating 

regasification unit and two stationary liquefied natural 
gas terminals. 

(15)  Federal Environmental Agency (2023) press release No 

11/2023 from 15.03.2023. 

12 

 
                                                 
transport  and  building  sectors  have  failed 
again 
sector-specific 
emission targets for 2022.  

to  meet  national 

target  under 

More  progress  is  needed  in  the  transport 
sector  in  particular  to  help  Germany  meet  its 
2030 
the  Effort  Sharing 
Regulation.  Action  is  also  needed  to  achieve 
net  carbon  removal  targets  in  land  use,  land 
use  change  and  forestry  (LULUCF).  The  trend 
seen  since  2017  of  falling  net  carbon 
removals  needs  to  be  reversed (16).  There  is 
significant  potential  to  boost  the  capacity  of 
the LULUCF  sector  to  act as  a  carbon  sink by 
rewetting peatlands.  

protection, 

climate 
Environmental 
adaptation  and  the  circular  economy  can 
boost  Germany's 
resilience.  Adapting 
forests  to  climate  change  and  improving  the 
LULUCF  sector  would  yield  added  co-benefits 
for  biodiversity (17).  This  would  also  be 
beneficial  in  view  of  unprecedented  levels  of 
water  scarcity,  which  affects  water  quality, 
energy  management  and  agriculture (18). 
Urgent  action  is  needed  to  minimise  the 
growing  risks  of  extreme  heat,  drought  and 
flooding  events  and  their  impacts  on  human 
health,  biodiversity,  agriculture, 
forestry, 
transport and infrastructure (19).  

Lastly,  as  Germany  strengthens  its  strategic 
supply chains for the green transition, shifting 
to  circular  economy  business  models  and 
increasing 
critical 
components and materials will help  boost  the 
resilience  of  supply  chains,  while  reducing 
emission-intensive production procedures.  

circularity 

the 

of 

(16)  This value is indicative and does not prejudge the 

legally binding 2030 national target on LULUCF that 
will be set in 2025, according to revised Regulation (EU) 
2018/841 

(17)  92% of Germany’s peat soils are currently drained, 

releasing greenhouse gases of around 53 Mt CO2eq, 
about 7.5% of Germany’s total emissions in 2020. See 
also Umweltbundesamt (ed.) Emissionen der 
Landnutzung, -änderung und Forstwirtschaft.  

(18)  Federal Environmental Agency (2019), Monitoringbericht 

2019 zur Deutschen Anpassungsstrategie an den 
Klimawandel. 

Tackling labour shortages and 
boosting productivity by 
strengthening skills, digitalisation, 
research and innovation 

and 

reforms 

further 
Structural 
investments  are  needed 
to  boost 
productivity and business dynamism, with 
a particular focus on skills, digitalisation 
and innovation. Sluggish productivity growth 
in  Germany  reflects  an  investment  gap  in 
intangible  assets,  such  as  research  and 
development, 
databases, 
digitalisation,  digital  skills,  fibre  coverage  and 
skilled 
labour,  which  are  all  barriers  to 
investment. The risk is that these barriers have 
a  lasting  negative  effect  on  Germany’s  long-
term competitiveness, in particular for regions 
in  which  productivity  is  already  below  the  EU 
average.  

software 

and 

Germany  is  one  of  the  EU's  Eco-Innovation 
Leaders (20),  performing  strongly  both 
in 
absolute  numbers  and  in  the  share  of  green 
patents,  thereby  supporting  the  Green  Deal 
Industrial  Plan (21).  However,  the  share  of 
business  R&D  expenditure  by  small  and 
medium  enterprises  has  stalled  at  below  the 
EU  average  (Annex  11).  Firms’  access  to 
growth  and  later-stage  capital  remains  a 
major challenge. The lack of skilled workers is 
a 
investment, 
barrier 
undermining  the  innovation  performance  of 
small  and  medium-sized  enterprises 
in 
particular. The slow take-up rate of technology 
and  weaknesses  in  eGovernment  affect  the 
business  environment,  leading  to  an  overall 
drop in business dynamism (22).  

considerable 

to 

restrictive 

Reducing 
in 
business services could boost competition 
and  productivity.  Business  services  are 
essential  to  manufacturing  and  other  service 

regulation 

(20)  Eco-innovation index, Eco-Innovation (europa.eu). 

(21)  Overall Strategic Analysis of Clean Energy Technology in 

the European Union, JRC (2022). 

(19)  Umweltbundesamt (Eds.). Klimawirkungs- und 

(22)  OECD, OECD Economic Surveys: Germany 2020, OECD 

Risikoanalyse 2021 für Deutschland. 

Publishing, Paris (2020). 

13 

 
                                                 
                                                 
important 

sectors.  However,  barriers  to  competition  in 
several 
regulated  professions 
remain high in Germany, in comparison to the 
EU average, including for tax advisers, lawyers 
(Annex  12).  For  example, 
and  architects 
exclusive  rights  to  exercise  tax  advice  and 
legal  advisory  services  stifle  competition. 
These  restrictions  contribute  to  an  overall 
decline in business dynamism and competition, 
as indicated by below average business churn 
rates and shares of high growth enterprises as 
well  as  above  average  markups  in  certain 
business services.  

Despite  significant  improvements  in  the 
coverage of very-high-capacity networks, 
fibre coverage remains low. Germany is at 
risk  of  missing  the  target  of  connecting  50% 
of  households  and  businesses  to  the  network 
via  fibre  optics  by  2025  and  of  achieving 
nationwide  uninterrupted  mobile  (voice  and 
data)  communication  by  2026  (and  100%  by 
2030). Despite significant improvements in the 
very-high-capacity 
of 
overall 
networks,  rural  areas  still  lag  behind.  Only 
19.3%  of  households  have  access  to  a  fibre 
connection,  making  Germany  one  of  the 
Member States with the lowest fibre coverage 
(second lowest in the EU; the top five having a 
fibre coverage of at least 85%). (23)   

coverage 

It 

Improving framework conditions is crucial 
to  accelerate  fibre  coverage. 
is 
particularly  important  to  increase  capacity  in 
local  administrations  for  permit-granting  and 
the  number  of  qualified  experts  employed. 
Meeting  the  network  targets  will  also  require 
improvements 
administrative 
procedures for permit application and granting 
and  the  standardisation  of  alternative,  less 
time-consuming installation techniques. 

the 

to 

public 

services 

Digitalising 
and 
administrative  procedures  can  improve 
business  dynamism  and  productivity.  The 
COVID-19  pandemic  and  the  energy  crisis 
have  shown  that  a  strong  digital  base  is 
response 
important 
digitally-run 
measures, 

for  effective 
including 

crisis 

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

(digital-agenda-data.eu) 

14 

compensation schemes. To significantly reduce 
the burden on users – businesses and citizens 
–  and  on  the  public  authorities,  digital,  user-
friendly  services  could  be  set  up,  at  least  to 
the  extent  originally  planned  under  German 
legislation.  

The  Online  Access  Act  mandates  digitalising 
user-facing  services  beyond  requirements  of 
the  related  measure  in  Germany's  recovery 
and  resilience  plan  to  full  geographical  and 
comprehensive  thematical  coverage.  Germany 
could  make  significant  progress  at  all  stages 
of  this  process  by  swiftly  modernising  the 
registers,  as  envisioned  in  the  recovery  and 
and 
resilience 
significant 
taking 
plan, 
inter-
to  digitalise  and 
additional  steps 
operationalise  service  handling  within  and 
between public authorities (24). This would free 
up  resources  and  increase  agility,  raising  the 
efficiency  and  efficacy  of  public  service 
delivery. To reach these goals, it is essential to 
secure commitment and coordination between 
all 
the  public  administration. 
Increasing transparency on service design and 
delivery may also enhance user buy-in (25). 

levels  of 

lack  of  qualified  workers 

is 
Germany's  working  age  population 
shrinking.  The  working  age  population  is 
expected  to  fall  by  3.7  million  in  the  2020s, 
and  the 
is  a 
significant factor hampering economic growth. 
Demographic  ageing  and  the  need  for  skills 
linked  to  the  digital  and  green  transitions  are 
expected  to  exacerbate  labour  shortages.  The 
Research Institute  of the Federal  Employment 
Agency estimates that a net migration balance 
at  around  400 000  people  a  year  would  be 
needed  to  offset  a  decreasing 
level  of 
potential  labour  force.  The  lack  of  skilled 
workers 
to 
investment,  especially  for small  and medium-
sized enterprises (26). 

considerable  barrier 

is  a 

(24)  The eGovernment Benchmark (2022) suggests Germany 
is one of nine Member States with non-consolidated 
eGovernments that need to digitalise both front and 
back offices of public-service providers. 

(25)  Germany underperforms on transparency in the 

eGovernment Benchmark (2022). 

(26)  In 2021, over 350 000 people worked in Germany in 

renewable energy jobs, but around 40% of businesses 
in clean-energy-relevant manufacturing experience 

 
                                                 
                                                 
 
To alleviate these labour shortages, more 
could  be  done  to  tap  the  potential  of 
women as well as of low-qualified people, 
people  with  disabilities  and  migrants. 
Germany  has  one  of  the  highest  employment 
rates  for  women  in  the  EU  (76.8%  in  2022) 
and a relatively small gender employment gap. 
Nevertheless, 
the  high  share  of  women 
working  part-time  and  the  low  number  of 
hours  paid  contributes 
to  a  substantial 
unadjusted  gender  pay  gap  (17.6%  in  2021) 
and to the pension gap (31.6% in 2021).  

There is potential to increase the employment 
of 
low-qualified  people,  which  was  15.4 
percentage  points  (pps)  lower  than  overall 
employment  in  2022  (for  the  age  group  20-
64).  In  addition,  considerable  employment 
gaps  remain  for  people  born  outside  the  EU, 
and  the  employment  gender  gap  is  especially 
wide for non-EU-born women (see Graph 3.2).  

Although  skilled  immigration  can  alleviate 
shortages  of  skilled  labour,  measures  for 
labour  market  and  social  integration  with 
implications for schools and social services are 
a  precondition  to  better  tap  this  potential. 
Targeted labour market inclusion measures for 
people  with  disabilities  and  improving  basic 
skills  of  disadvantaged  groups  could  also 
contribute to tackling labour shortages and to 
raising  the  employment  rate  to  Germany's 
national target of 83% by 2030.  

labour shortages that have limited their production 
between Q4 2021 and Q1 2023. 

15 

Graph 3.2: Employment rate of people aged 
20-64 by country of birth 

Source: Eurostat 

Skills  policies  are  key  for  the  green  and 
digital  transition  and  can  also  alleviate 
labour shortages.  Adult learning is essential 
to  tackle  persistent  skills  shortages,  but  over 
the  last  10  years,  the  participation  rate  of 
adults  in  learning  over  the  past  four  weeks 
was roughly stable and below the EU average 
(8.1%  in  2022;  EU  average  11.9%)  and  only 
4.0%  for  low-qualified  workers.  Improving 
digital, entrepreneurial and STEM (27) skills can 
contribute  to  automation,  to  modernising  the 
economy  and  to  tackling  labour  shortages 
across the economy. However, only 49% of the 
population  in  Germany  aged  16-74  had  at 
least basic digital skills, below the EU average 
of 54%.  

It  is  crucial  to  develop  skills  for  the  green 
transition  (to  install  heat  pumps  and  solar 
panels,  and  make  energy  efficiency  upgrades, 
for example) to achieve Germany's energy and 
climate  goals (28).  Promoting  participation  in 
initial and continuous vocational education and 
learning  programmes  to  support  the  green 
transition  would  be  in  line  with  Germany’s 
target  of  having  65%  of  adults  in  learning 

(27)  Science, technology, engineering and mathematics. 

(28)  In 2022, labour shortages were reported in Germany for 

20 occupations that required specific skills or 
knowledge for the green transition, including incinerator 
and civil engineering technicians, civil engineers, and 
plumbers and pipe fitters. 

8382678687788176570102030405060708090100DEEU except DENon-EUTotalMalesFemales 
                                                                        
      
                                                 
every year by 2030. Despite the shortages on 
the  labour  market,  the  share  of  students 
following a STEM course in their first semester 
fell from 40.5% in 2015 to 37.7% in 2021.  

socio-economic 

The  educational  outcomes  of  young 
people  are  strongly  influenced  by  their 
migrant  and 
status. 
in  education  outcomes  have 
Inequalities 
worsened  during  the  pandemic.  Children  of 
parents with a higher secondary education are 
more likely to succeed in school. The share of 
early  leavers  from  education  and  training 
increased slightly in 2022 to 12.2%, above the 
EU  average  of  9.6%  and  well  above  the  EU 
target of 9% by 2030. The rate was more than 
double  (28.8%)  for  non-EU  born  (Annexes  1 
and 14).  

Further  assistance  to  young  people  from 
disadvantaged  backgrounds,  especially  those 
with a migrant background, and an increase in 
qualified  teachers  may  improve  education 
outcomes  and  help  tackle  staff  shortages  in 
schools. 
teachers’  digital  and 
pedagogical skills also remains a priority. 

Improving 

Improving  early  childhood  education  and 
care and all-day schooling could enhance 
both educational outcomes and the share 
of  parents  working  full-time.  Around  30% 
of  children  under  3  are  enrolled  in  early 
childhood  education  and  care,  below  the  new 
Barcelona  target  of  40.4%  by  2030.  This  low 
participation rate is key to  explaining why the 
employment  rate  of  women  aged  25-49  with 
children  younger  than  6 
lower 
(18.6pps)  than  for  women  of  the  same  age 
without children. Since 2013, all children under 
the age of 3 have the legal right to a place in 
early  childhood  education  and  care,  but  in 
2021, the places available were still 12.4 pps 
behind  the  needs  identified  in  some  regions 
and issues with service quality remain (29).  

is  much 

A tax mix for inclusive and 
sustainable growth, incentivising 

(29)  BMFSFJ, Kindertagesbetreuung Kompakt Ausbaustand 

und Bedarf 2021 (2021).  

labour supply for the green and 
digital transitions 

The  tax  mix  in  Germany  is  skewed  to 
taxing  labour,  hampering  labour  supply. 
Labour  taxes  in  Germany  are  among  the 
highest in the EU  and the interplay of the tax 
and  transfer  system  result  in  weak  incentives 
for  low-wage  and  second  earners  to  increase 
their  working  hours.  Women  are  particularly 
affected  by the  high  tax wedge  for  low-wage 
and second earners (see Annexes 18 and 12).  

The measures taken, such as adjusting the tax 
schedule  and  tax-free  allowances  to  account 
for inflation (kalte Progression – bracket creep) 
benefit low-income earners more than others, 
but  this  group  is  also  the  hardest  hit  by 
inflation (30). Increasing the earning thresholds 
for  mini-jobs  and  midi-jobs (31)  above  which 
full  employee  social  contributions  gradually 
apply  is  only  a  partial  remedy  to  this  long-
standing challenge. It increases the take-home 
pay  for  low-income  earners  but  does  not 
significantly  raise  the  incentives  to  increase 
hours  worked 
thresholds, 
beyond 
compounding the part-time work trap.  

the 

The  government  does  not  plan  to  carry  out  a 
major reform of the joint income taxation and 
the  current  option  to  allocate  the  tax  benefit 
more equally (Faktorverfahren) has been used 
by less than 1% of married couples, due to a 
complex application process. At the same time, 
tax  bases  that  are  less  harmful  to  inclusive 
and sustainable growth remain underused.  

Germany’s  share  of  environmental  taxes 
is  below  the  EU  aggregate.  This  applies  to 
both  the  share  of GDP  and  the share  of  total 

(30)  An analysis of the consequences of high inflation for 

the income distribution carried out by DG JRC based on 
EUROMOD shows that low-income earners face a 
particularly pronounced increase in spending. 
Government measures such as price caps on electricity 
and gas benefit lower-income households more by 
stabilising their relative disposable income but they are 
not enough to compensate for the negative 
consequences of high inflation. 

(31)  These are labour contracts where employee social 
security contributions are lower than for regular 
contracts. 

16 

 
                                                 
                                                 
tax  revenues.  The  low  rate  of  environmental 
taxation 
in  Germany  relative  to  the  EU 
aggregate  is  the  result  of  low  scores  on  all 
types of environmental taxes: both energy and 
transport  taxation  are  below  the  EU  average. 
Unlike  many  other  Member  States,  Germany 
does  not  levy  resource  or  pollution  taxes. 
Vehicle  taxation  does  not  promote  more 
environmentally friendly transport.  

Environmentally  harmful  subsidies  are 
hampering  the  green  transition.  Germany 
continues to grant substantial environmentally 
harmful subsidies (Annex 6) such as fossil fuel 
subsidies (32) (33).  Implementing  the  coalition 
government’s  commitment  to  reduce  these 
subsidies would generate revenue to invest in 
the green transition and help achieve emission 
targets  under 
law, 
especially in the transport sector.  

the  German  climate 

Safeguarding the pension system 
to prepare for population ageing 
and raising the employment rates 
of older workers 

An ageing population puts social security 
systems  under  financial  pressure.  The 
working  age  population  is  expected  to  fall 
substantially  over  the  coming  decade  due  to 
the  retirement  of  the  baby-boom  generation 
and  the  old-age  dependency  ratio is  expected 
to  increase  by  over  12  pps  to  46.4%  in 
2030 (34).  This  will  considerably  increase  the 

(32)  Such as company car tax benefits, the excise tax refund 
for diesel fuel used in agriculture, the lower energy tax 
rate for light fuel oil used in mobile machinery, the fuel 
tax refund for agriculture, the excise tax exemption and 
tax relief for natural gas for industrial consumers or the 
reduced carbon tax rate on diesel used in agriculture. 

(33)  According to the German Federal Environmental Agency, 
these subsidies amount to EUR 65 billion. The German 
Finance Ministry uses a narrower definition.  

(34)  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. 

financing  needs  of  the  first  pillar  mandatory 
pay-as-you-go system.  

to 

reactivate 

In  recent  years,  an 
increasing  share  of 
financing  needed  to  come  from  the  federal 
budget, in 2022 amounting to EUR 101 billion 
(2.6%  of  GDP). (35)  This  share  has  increased 
over time and is a drag on public finances. By 
faces  a 
standards,  Germany 
European 
sustainability risk for the pension system.  The 
move 
the  catch-up  factor 
(Nachholfaktor)  from  2022  that  prevents 
pensions  from  outpacing  wage  developments 
improves  pension  system  sustainability,  but 
the  challenges  are  broader.  The  government’s 
plan  for  a 
that 
pensions  do  not  fall  below  48%  of  previous 
income  is  expected  to  have  a  positive  impact 
on  the  adequacy  of  pensions.  However,  it  is 
expected  to  result  in  further  fiscal  transfers, 
unless  accompanied  by  a  major  shift  in  how 
the statutory pension system is financed.  

long-term  commitment 

is 

age 

retirement 

Early  retirement  puts  pressure  on  the 
sustainability  of  the  pension  system  and 
compounds  the  labour  shortages.  The 
statutory 
gradually 
increasing  to  reach  67  years  in  2031,  while 
adjustments  after  2031  will  need  further 
responses following increasing life expectancy. 
Although Germany  continues to be one of the 
top performers in the EU in the employment of 
older  workers,  the  increase  in  the  effective 
retirement  age  has  slowed  over  time,  and 
employment in the age group of over 65 lags 
behind  EU  top  performers.  After  at  least  35 
years  of  work,  workers  can  retire  early  with 
relatively  small  reductions  in  their  pension 
benefits (36).  Since  2014,  workers  can  retire 
after at least 45 years of work without a loss 
(Rente  mit  63), 
of  pension  entitlements 

(35)  Rentenversicherungsbericht (2022). 

(36)  If retiring before the statutory retirement age, benefits 
in Germany are reduced by 3.6% for each year under 
the statutory retirement age. This is low by international 
standards, as the reduction for each early retirement 
year is about 5% in France, Finland and Austria, 6% in 
Greece, 6.5% in Slovakia, and 6% to 8% in Spain 
depending on contribution years. It is not possible at all 
to retire early under the basic old-age scheme in 
Denmark, Poland and in the Netherlands.  

17 

 
                                                 
                                                 
accounting  now  for  about  one-third  of  people 
retiring, or 260 000 people a year (37).  

Second  and  third-pillar  pensions  remain 
underdeveloped.  Germany  would  need  to 
scale  up  plans  to  strengthen  the  funded 
elements  of  the  pension  system  to  have  a 
noticeable  positive  effect  both  for  individuals 
and  for  public  finances.  The  current  state-
subsidised  private  pension  schemes  (third-
pillar personal pension schemes, Riester Rente) 
have  been  underused,  with  the  coverage  rate 
stalling  at  around  34%  over  the  past  ten 
years.  They  invest  in  low-yielding  safe  debt, 
suffer from high commissions, resulting in low 
rates of return and limited uptake. As a result, 
the  system  has  failed  to  provide  sufficient 
incentives  for  private  retirement  savings, 
especially for low-income earners.  

its 

to  bring 

in  a 
The  government  plans 
standardised  investment  product  by  the  state 
for  the  Riester  Rente  which  could  lower  costs 
and  raise  returns  and  the  take-up  of  funded 
personal  pension  schemes.  The  planned 
Aktienrente  (a  debt-financed  fund  of  EUR  10 
billion  which  will  transfer 
investment 
returns  to  the  public  pension  system  in  the 
2030s)  is  limited  compared  to  the  annual 
contribution  made  by  the  federal  government 
to  the  pension  system.  The  latter  already 
exceeds  EUR  100  billion  (2.6%  of  GDP)  per 
year,  accounting  for  one-third  of  overall 
pension  expenditure.  Despite  efforts 
to 
increase the use of second-pillar occupational 
Altersvorsorge), 
pensions 
coverage 
remains  at  about  56%.  The 
increasing  share  of  volatile  employment 
careers is likely to be a barrier to significantly 
scaling  up  this  coverage.  Pensions  from  the 
second  pillar  can  be  boosted  by  facilitating 
agreements between social partners. 

(Betriebliche 

(37)  Taking the average pension at EUR 1 500, the 

additional pension expenditure is around EUR 4.7 billion 
for each year of retirement before the statutory age.  

18 

 
                                                 
KEY FINDINGS 

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

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

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

  action  to  tackle  the  learning  disparities 
exacerbated  by  the  COVID-19  pandemic, 
and to provide additional childcare places. 

Germany  should  significantly  accelerate  the 
implementation  of  its  amended  recovery  and 
resilience  plan,  also  by  ensuring  sufficient 
resources,  and  swiftly  finalise  the  addendum 
and  the  REPowerEU  chapter  with  a  view  to 
rapidly starting its implementation. 

to 

the 

reforms  and 
In  addition 
investments  set  out  in  the  recovery  and 
resilience  plan,  Germany  would  benefit 
from: 

  boosting 

investment 

swiftly 
implementing  permitting  procedures  to  roll 
out 
sources  and 
energy 
electricity networks;  

renewable 

and 

  boosting  the  labour  supply  and  promoting 
the skills needed for the green transition; 

  reducing  further  its  reliance  on  fossil  fuels 
and  strengthening  competitiveness,  by 
harmful 
environmentally 
reforming 
subsidies,  improving  energy  efficiency  and 
incentivising  energy  savings,  accelerating 
decarbonisation 
transport, 
building  and  heating  networks  and 
strengthening the circular economy and the 

industry, 

in 

capacity  of  the  land  use  sector  for  carbon 
removals; 

  boosting  productivity  and  competitiveness 
by  promoting  digital  skills  and  digital 
administration,  accelerating  the  roll-out  of 
networks, 
very-high-capacity 
including  by 
especially 
improving 
framework 
administrative 
conditions,  and  stimulating  investment  in 
research  and  innovation,  in  particular  in 
small and medium enterprises; 

fibre  optics, 

digital 

  tackling 

educational 
inequalities 
outcomes,  particularly 
the 
educational  outcomes  of  disadvantaged 
groups; 

improve 

in 
to 

  improving the tax mix to provide incentives 
to  increase  hours  worked  and  promote 
environmental sustainability; and 

  ensuring the pension system is sustainable, 
given the ageing population, and raising the 
employment  rates  of  older  workers  by 
reducing the incentives for early retirement.  

19 

 
 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan - overview 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy security and affordability 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

A22.  Macroeconomic imbalance procedure assessment matrix 

23 

26 

26 

28 

31 

33 

36 

37 

37 

42 

47 

50 

50 

52 

55 

57 

61 

63 

63 

65 

68 

70 

73 

73 

75 

78 

79 

82 

 
 
 
LIST OF TABLES 

A2.1. 
Summary table on 2019-2022 CSRs 
A3.1. 
Key elements of the German RRP('s) 
A5.1. 
Resilience indices aggregating the country situation across RDB dimensions and areas 
A6.1. 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
A7.1. 
Key Energy Indicators 
A8.1. 
Key indicators for a fair transition in Germany 
A9.1. 
Overall and systemic indicators on circularity 
A10.1.  Key Digital Decade targets monitored by DESI indicators 
A11.1.  Key innovation indicators 
A12.1. 
Industry and the Single Market 
A13.1.  Public administration indicators 
A14.1.  Social Scoreboard for Germany 
A14.2.  2030 National targets for Germany 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework 
A16.1.  Key health indicators 
A17.1.  Selected indicators at regional level 
A18.1.  Financial Soundness Indicators 
A19.1.  Taxation indicators 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Germany 
A21.2.  Heat map of fiscal sustainability risks - Germany 
A22.1.  Assessment of macroeconomic imbalances matrix 

LIST OF GRAPHS 

Progress towards the SDGs in Germany in the last 5 years 
Germany’s progress on the 2019-2022 CSRs (2023 European Semester) 
Share of RRF funds contribution to each policy pillar 
Total grants disbursed under the RRF 
Cohesion policy funds 2021-2027 in Germany: budget by fund 
Synergies between Cohesion policy funds and RRF six pillar in Germany 
Cohesion policy funds contribution to the SDGs in 2014-2020 and 2021-2027 in Germany 
Thematic – greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2021 
Energy mix (top) and electricity mix (bottom), 2021 
Thematic- Environmental investment needs and current investment, p.a. 2014-2020 
Underground storage levels in Germany 
Share of gas consumption per sector, 2021 
Gas consumption per industrial sector, 2021 (% of total gas consumption in industry) 
Germany´s retail energy prices for industry (top) and households (bottom) 
Patent families in Energy Union R&I priorities 
Fair transition challenges in Germany 
Distributional impacts of energy prices due to rising energy expenditure (2021-2023) 
Trend in material use 
Treatment of municipal waste 

A1.1. 
A2.1. 
A3.2. 
A3.1. 
A4.1. 
A4.2. 
A4.3. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A7.3. 
A7.4. 
A7.5. 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A11.1.  Venture Capital in Germany (2022) as % of GDP 
A12.1.  Total factor productivity 
A12.2.  Productivity by sector 
A12.3.  Business environment and productivity drivers 
A13.1.  Germany. E-government maturity and e-government users 
A13.2.  Germany. a) Participation rate of 25-64 year olds in adult learning (%) by sector and occupation; b) Share of women and 

men in senior positions and c) Accounting maturity by government sector 

A15.1.  Low-achieving 15-year-olds in reading in 2015 and 2018 (PISA) 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2019-2070 
A17.1.  GDP per capita (2010) and real GDP growth (2011-2020) in Germany 
A17.2.  Evolution of labour productivity in Germany (2000-2020) 

24 

29 
31 
36 
37 
42 
47 
50 
52 
55 
57 
61 
63 
64 
65 
68 
71 
73 
75 
78 
80 
81 
82 

27 
28 
31 
31 
33 
33 
34 
37 
38 
39 
42 
43 
43 
44 
45 
47 
48 
50 
50 
55 
57 
57 
59 
61 

62 
65 
68 
68 
70 
70 

 
 
A19.1.  Tax revenues from different tax types as % of total taxation 
A19.2.  Tax wedge for single and second earners as % of total labour costs, 2022 

76 
76 

25 

 
 
 
 
 
CROSS-CUTTING INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

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  and  the 
environmental crisis, 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.  The  graph 
below  is  based  on  the  EU  SDG  indicator  set 
developed  to monitor progress  on  the  SDGs  in  an 
EU context. 

While Germany performs well (SDGs 2, 9, 11) 
or  is  improving  (SDGs  7,  12)  on  most  of  the 
SDG 
indicators  related  to  environmental 
sustainability,  it  is  moving  away  from  SDG 
14  and  needs  to  catch  up  with  the  EU 

final 

energy 

in  gross 

average  on  climate  action  (SDG  13).  The 
country  has  made  some  progress  on  energy 
consumption  indicators,  including  the  share  of 
energy 
renewable 
consumption  (SDG  7;  from  14.9%  in  2016  to 
19.2%  in  2021).  Nevertheless,  it  remains  below 
the  EU  average  (21.8%).  On  SDG  13  (Climate 
action),  net  greenhouse  gas  emissions  decreased 
from  11  tonnes  per  capita  in  2016  to  9.2  tonnes 
per  capita 
in  2021.  Similarly,  average  CO2 
emissions  per  km  from  new  passenger  cars  have 
fallen considerably over the last 5 years (126.9 g 
in  2016  vs  113.6  g  in  2021).  However,  on  both 
indicators  Germany  is  still  performing  worse  than 
the EU average (7.4 tonnes per capita and 116.3 g 
respectively).  Various  measures  in  the  recovery 
and  resilience  plan  (RRP)  that  support  the  use  of 
renewable  hydrogen in  industry  and  the transport 
sector  will  help  reduce  greenhouse  gas  emissions 
and increase the share of renewable energy. 

Germany  is  performing  well  on  some  SDG 

Graph A1.1: Progress towards the SDGs in Germany in the last 5 years 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on extensive country-specific data on the short-term progress of Member States: Key findings – Sustainable development 
indicators – Eurostat (europa.eu). The status of each SDG in a country is the aggregation of all indicators for the specific goal 
compared to the EU average. A high status does not mean that a country is close to reaching a specific SDG, but signals that it is 
doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 5 
years. The calculation does not take into account any target values as most EU policy targets are only valid for the aggregate EU 
level. Depending on data availability for each goal, not all 17 SDGs are shown for each country. 
Source: Eurostat, latest update of early April 2023, except for the EU Labour Force Survey (LFS) indicators released on 27 April 
2023. Data mainly refer to 2016-2021 or 2017-2022. 

26 

 
 
 
 
 
 
skills ((SDG 4); 48.9% vs 53.9% in the EU in 2021). 
The German RRP targets bottlenecks related to the 
digitalisation  of  administration  and  the  economy, 
for  instance  by  interconnecting  business  registers 
to reduce the administrative burden for businesses 
and individuals. It further helps address challenges 
related to digital education and training.  

Germany 
is  performing  well  on  SDG 
indicators related to macroeconomic stability 
(SDGs 8, 16, 17) and has further improved its 
performance. The country 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 further increased 
its  employment  rate  from  78.2%  in  2017  to 
80.7% in 2022, which is very high compared to the 
EU  average  (74.6%  in  2022).  The  share  of  young 
people  not  in  education,  employment  or  training 
reached  8.6%  in  2022,  below  the  EU  average 
(11.7%), and long-term unemployment is low (1% 
vs  EU  2.4%  in  2022).  On  the  other  hand,  though 
improving, Germany’s investment share, at 22.6% 
of GDP, remained below the EU average of 23.2% 
of  GDP  in  2022.  The  RRP  includes  a  package  of 
reforms to speed up public investment and tackle 
investment  bottlenecks  in  order  to  unlock  private 
investment  and  reduce  the  savings-investment 
imbalance. 

As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
depicted with icons in the other Annexes. 

indicators  related  to  fairness  (SDGs  1,  3,  8), 
but  it  is  moving  away  from  SDG  5  (Gender 
equality).  Further,  it  is  moving  away  and 
needs  to  catch  up  with  the  EU  average  on 
reducing inequalities (SDG 10) and delivering 
quality  education 
(SDG  4).  The  country 
generally  performs  better  than  the  EU  average  in 
domains linked to poverty, health and decent jobs 
and growth. The unadjusted gender pay gap  (SDG 
5),  however,  is  particularly  high  in  Germany 
(17.6%  vs  12.7%  in  the  EU  in  2021).  While  the 
overall share of people at risk of poverty or social 
exclusion (SDG 1) is slightly below the EU average 
(21% vs 21.7% in the EU in 2021), the urban-rural 
gap for people at risk of poverty or social exclusion 
(SDG  10)  is  more  than  ten  times  the  EU  average 
and  increasing  (7.8  percentage  points  (pps)  in 
2021 vs 6.5 pps in 2016 and 0.6 pps in the EU in 
2021). 
for 
improvement  in  integrating  non-EU  citizens  into 
education  and  training  as  well  as  into  the  labour 
market  (SDG  10).  Germany  performs  worse  than 
the EU average on EU/non-EU citizenship gaps for 
both  young  people  not  in  education,  employment 
or  training  (14.8  pps  vs  11.4  pps  in  the  EU  in 
2022) and the employment rate (21.9 pps vs 13.5 
pps  in  the  EU  in  2022).  On  quality  education,  the 
share of early leavers from education and training 
(SDG  4)  amounts  to  12.2%,  higher  than  the  EU 
average  (9.6%  in  2022),  and  even  higher  among 
students  with  a  migrant  background  (SDG  10). 
Tertiary  educational  attainment  (SDG  4),  though 
improving,  remained  below  the  EU  average  in 
2022  (37.1%  vs  EU  42%).  The  German  RRP  will 
help  improve  educational  outcomes  for  students 
with a learning backlog, often from disadvantaged 
backgrounds,  and  promote  apprenticeships.  This 
will help young people enter the labour market. 

Furthermore, 

room 

there 

is 

is  further 
Germany  performs  well  and 
improving  on  SDGs  on  productivity  (SDGs  8 
and  9),  but  is  moving  away  from  SDG  4 
(quality education). The country performs above 
the  EU  average  on  SDG  8  (Decent  work  and 
economic  growth)  and  on  SDG  9 
(Industry, 
innovation and infrastructure). With 3.13% of GDP 
allocated  to  R&D  in  2021,  Germany  has  some  of 
the highest R&D spending in the EU. The share of 
R&D  personnel  in  the  active population  rose  from 
1.59%  in  2016  to  1.8%  in  2021  (EU:  1.5%  in 
2021).  However,  adult  participation  in  learning  is 
below  the  EU  average  (11.9%  in  2022)  and  has 
further  decreased  over  the  last  5  years  (8.4%  in 
2017  vs  8.1%  in  2022).  This  is  also  reflected  in 
the low share of adults with at least  basic digital 

27 

 
 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

Graph A2.1: Germany’s progress on the 2019-2022 
CSRs (2023 European Semester) 

Source: European Commission. 

The Commission has assessed the 2019-2022 
country-specific  recommendations  (CSRs) (75) 
addressed  to  Germany  as  part  of  the 
European  Semester.  These  recommendations 
concern  a  wide  range  of  policy  areas  that  are 
related to  12  of  the  17  Sustainable Development 
Goals  (see  Annexes  1  and  3). The  assessment 
considers  the  policy  action  taken  by  Germany  to 
date (76) and the commitments in its recovery and 
resilience  plan  (RRP) (77).  At  this  stage  of  RRP 
implementation,  70%  of  the  CSRs  focusing  on 
structural  issues  from  2019-2022  have  recorded 
at  least  ‘some  progress’,  while  30%  recorded 
‘limited  progress’  (see  Graph  A2.1).  As  the  RRP  is 
implemented  further,  considerable  progress  in 
addressing structural CSRs is expected in the years 
to come. 

(75)  2022 CSRs: EUR-Lex - 32022H0901(05) - EN - EUR-Lex 

(europa.eu) 

      2021 CSRs: EUR-Lex - 32021H0729(05) - EN - EUR-Lex 

(europa.eu) 
2020 CSRs: EUR-Lex - 32020H0826(05) - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(05) - EN - EUR-Lex 
(europa.eu) 

(76)  Including policy action reported in the national reform 

programme and in Recovery and Resilience Facility (RRF) 
reporting (twice a year reporting on progress in implementing 
milestones and targets and resulting from the payment 
requests assessment). 

(77)  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 considers the 
degree of implementation of the measures included in the 
RRP and of those carried out outside of the RRP at the time 
of assessment. Measures laid down in the Annex of the 
adopted Council Implementing Decision on approving the 
assessment of the RRP, which are not yet adopted or 
implemented but considered 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. 

28 

Limited progress30%Some progress56%Substantial progress12%Full implementation2% 
 
                                                 
 
 
               
 
Table A2.1: Summary table on 2019-2022 CSRs 

(Continued on the next page) 

29 

GermanyAssessment in May 2023*RRP coverage of CSRs until 2026**Relevant SDGs2019 CSR 1Some 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.SDG 8, 9, 16Focus investment-related economic policy on education;Limited ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.SDG 4, 10, 11research and innovation;Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022 and 2023.SDG 9, 10, 11digitalisation and very-high capacity broadband;Some ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.SDG 9, 10, 11sustainable transport Some ProgressRelevant RRP measures planned as of 2020 and 2021.SDG 10, 11as well as energy networks Some ProgressRelevant RRP measures planned as of 2020, 2021 and 2023.SDG 7, 9, 10, 11, 13and affordable housing, taking into account regional disparities. Limited ProgressRelevant RRP measures planned as of 2021.SDG 1, 2, 8, 10, 11Shifttaxesawayfromlabourtosourceslessdetrimentaltoinclusiveand sustainable growth.Some ProgressRelevant RRP measures planned as of 2021.SDG 8, 10, 12Strengthencompetitioninbusinessservicesandregulatedprofessions.Limited ProgressSDG 92019 CSR 2Some ProgressReduce disincentives to work more hours,Some ProgressRelevant RRP measures planned as of 2021.SDG 8, 10, 12including the high tax wedge,  in particular for low-wageSome ProgressRelevant RRP measures planned as of 2020, 2021.SDG 8, 10, 12and second earners.Limited ProgressRelevant RRP measures planned as of 2020, 2021.SDG 8, 10, 12Take measures to safeguard the long-term sustainability of the pension system, while preserving adequacy.Limited ProgressRelevant RRP measures planned as of 2021.SDG 8Strengthen the conditions that support higher wage growth, while respecting the role of the social partners. Substantial ProgressRelevant RRP measures planned as of 2021.SDG 8Improve educational outcomes and skills levels of disadvantaged groups.Limited ProgressRelevant RRP measures planned as of 2020, 2021, 2022.SDG 4, 8, 102020 CSR 1Some ProgressTakeallnecessarymeasures,inlinewiththegeneralescapeclauseoftheStabilityandGrowthPact,toeffectivelyaddresstheCOVID-19pandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuring debt sustainability, while enhancing investment. Not relevant anymoreNot applicableSDG 8, 16Mobiliseadequateresourcesandstrengthentheresilienceofthehealth system, including by deploying e-health services.Some ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.SDG 32020 CSR 2Some ProgressFront-load mature public investment projects Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022.SDG 8, 16and promote private investment to foster the economic recovery. Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022.SDG 8, 9Focus investment on the green and digital transition, in particular on sustainable transport, Some ProgressRelevant RRP measures planned as of 2020 and 2021.SDG 11clean, efficient and integrated energy systems, Some ProgressRelevant RRP measures planned as of 2020, 2021 and 2023.SDG 7, 9, 13digital infrastructure and skills, Some ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.SDG 4, 9housing, Limited ProgressRelevant RRP measures planned as of 2021.SDG 1, 2, 8, 10education Limited ProgressRelevant RRP measures planned as of 2020, 2021 and 2022.SDG 4and research and innovation. Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022 and 2023.SDG 9Improve digital public services across all levels Limited ProgressRelevant RRP measures planned as of 2021 and 2022.SDG 9, 16and foster the digitalisation in SMEs. Some ProgressRelevant RRP measures planned as of 2020 and 2021.SDG 8, 9Reduce the regulatory and administrative burden for businesses.Some ProgressRelevant RRP measures planned as of 2020, 2021, 2022.SDG 8, 92021 CSR 1Some ProgressIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationally financed investment.Full ImplementationNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term. Substantial ProgressNot applicableSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupportingthegreenanddigitaltransition. Some ProgressNot applicableSDG 8, 16 
 
 
 
  
 
Table (continued) 

Note: 
* See footnote  (77).  
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as 'being implemented' 
are only those included in the RRF payment requests submitted and positively assessed by the European Commission.  
Source: European Commission 

30 

Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Limited ProgressNot applicableSDG 8, 162022 CSR 1Some ProgressIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspendingtothe evolving situation.Substantial ProgressNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Substantial ProgressNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachieving prudent medium-term fiscal positions.Substantial ProgressNot applicableSDG 8, 16Improvethetaxmixformoreinclusiveandsustainablegrowth,inparticular by improving tax incentives to increase hours worked.Some ProgressRelevant RRP measure being planned as of 2021.SDG 8, 10, 12Safeguard the long-term sustainability of the pension system.Limited ProgressRelevant RRP measure being planned as of 2021.SDG 82022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 13 July 2021.SwiftlyfinalisethenegotiationswiththeCommissiononthe2021–2027cohesionpolicyprogrammingdocumentswithaviewtostarting their implementation.2022 CSR 3Limited ProgressRemove investment obstaclesLimited ProgressRelevant RRP measure being planned as of 2021.SDG 8, 9andboostinvestmentinvery-high-capacitydigitalcommunicationnetworks.Some ProgressSDG 92022 CSR 4Some ProgressReduce overall reliance on fossil fuels and diversify their importsSome ProgressRelevant RRP measures being planned as of 2020, 2021 and 2023.SDG 7, 9, 13by improving energy efficiency, incentivising energy savings,Some ProgressRelevant RRP measures being planned as of 2021 and 2023.SDG 7diversifying energy supplies and routes,Some ProgressRekevant RRP measures being planned as of 2020, 2021 and 2023.SDG 7, 9, 13removinginvestmentbottlenecks,furtherstreamliningpermittingprocedures,boostinginvestmentinandacceleratingthedeploymentof electricity networks and renewable energy,Some ProgressRelevant RRP measures being planned as of 2021.SDG 7, 8, 9, 13andfurtheradvancingparticipationinenergy-relatedcross-bordercooperation.Limited ProgressRelevant RRP measures being planned as of 2021.SDG 7, 9, 13RRP implementation is monitored by assessing RRP payment requests and analysing reports published twice a year on the achievement of the milestones and targets. These are to be reflected in the country reports. Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN - OVERVIEW 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the centrepiece of the EU’s efforts to help it 
recover  from  the  COVID-19  pandemic,  speed 
up  the  twin  transition  and  strengthen 
resilience  against  future  shocks.  The  RRF 
also  contributes  to  implementation  of  the 
SDGs  and  helps  to  address  the  Country 
Specific  Recommendations  (see  Annex 4). 
recovery  and 
its 
Germany  submitted 
(RRP)  on  28 April 2021.  The 
resilience  plan 
on 
Commission’s 
positive 
22 June 2021 
on 
13 July 2021  paved  the  way  for  disbursing  25.6 
billion  in  grants    under  the  RRF  over  the  2021-
2026 period.   

assessment 

Council’s 

approval 

initial 

and 

Table A3.1: Key elements of the German RRP('s) 

Source: RRF Scoreboard 

Since  the  entry 
into  force  of  the  RRF 
Regulation  and  the  assessment  of  the 
national  recovery  and  resilience  plans, 
geopolitical  and  economic  developments 
have caused major disruptions across the EU. 
In  order  to  effectively  address  these  disruptions, 
the  (adjusted)  RRF  Regulation  allows  Member 
States to amend their recovery and resilience plan 
for  a  variety  of  reasons.  In  line  with  article  11(2) 
of the RRF, the maximum financial contribution for 
Germany was moreover updated on 30 June 2022 
to an amount of EUR 28 billion in grants.  

this 

context,  Germany  submitted  an 
In 
amended  RRP  to  the  Commission  on  9 
December  2022  due  to  objective  circumstances 
that make it no longer possible to achieve certain 
milestones  and  targets  in  the  RRP  in  line  with 
Article  21  of  the  RRF  Regulation.  The  update  to 
Germany’s  plan 
It 
concerns  two  measures  in  Germany’s  plan,  one 

is  of  a  technical  nature. 

related  to  the  digitalisation  of  rail  (due  to 
exceptional  delays  in  construction  its  completion 
date  needed  to  be  postponed),  and  the  other  to 
research  and  development  of  vaccines  against 
SARS-CoV-2  (amendment  of  milestones  due  to 
uncertainty  in  R&D  outcomes).  The  Revised  RRP 
was approved by the Council on 14 February 2023 
for a total allocation of EUR 26.4 billion.  

Germany’s progress in implementing its plan 
is  published  in  the  Recovery  and  Resilience 
Scoreboard (41).  The  Scoreboard  also  gives  an 
overview  of  the  progress  made  in  implementing 
the RRF as a whole, in a transparent manner. The 
graphs below show the current state of play of the 
milestones and targets to be reached by Germany 
and  subsequently  assessed  as  satisfactorily 
fulfilled by the Commission. 

Under  the  RRF,  EUR  2.25  billion  has  so  far 
been  disbursed  to  Germany.  It  received  this 
amount  in  pre-financing  on  26  August  2021, 
equivalent 
financial 
allocation. 

to  9%  of 

(initial) 

the 

Graph A3.1: Total grants disbursed under the RRF 

Note: This graph displays the amount of grants disbursed so 
far under the RRF. Grants are non-repayable financial 
contributions. The total amount of grants given to each 
Member State is determined by an allocation key and the 
total estimated cost of the respective RRP. 
Source: RRF Scoreboard  

(41)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-scoreboard/country_overview.html 

31 

Current RRPScope Revised plan (article 21)CID adoption date14 February 2023Total allocation EUR 26.4 billion in grants (0.7% of 2021 GDP) Investments and reforms 25 investments and 15 reforms Total number of milestones and targets129€ 2.25billion 
 
 
     
 
 
 
      
 
                                                 
 
Graph A3.2: Share of RRF funds contribution to each policy pillar 

Note: 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 RRP. The bottom part represents the amount of the primary pillar, the 
top part the amount of the secondary pillar. 
Source: RRF Scoreboard 

32 

0%10%20%30%40%50%60%Green transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic, socialand institutionalresiliencePolicies for thenext generation 
 
 
      
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The  EU  budget  of  over  EUR  1.2  trillion  for 
2021-2027  is  geared  towards  implementing 
the  EU’s  main  priorities.  Cohesion  policy 
investment amounts to EUR 392 billion across the 
EU and represents almost a third of the overall EU 
budget, including around EUR 48 billion invested in 
line with REPowerEU objectives.   

Graph A4.1: Cohesion policy funds 2021-2027 in 
Germany: budget by fund 

(1) million EUR in current prices, % of total; (total amount 
including EU and national co-financing) 
Source: European Commission, Cohesion Open Data 

In  2021-2027,  in  Germany,  cohesion  policy 
funds (42)  will  invest  EUR  11.2  billion  in  the 
green  transition  and  EUR  1.2  billion  in  the 
digital  transformation  as  part  of  the 
country’s total allocation of EUR 40.3 billion. 
In  particular,  the  European  Regional  Development 
Fund  (ERDF) will  help  to  reduce  greenhouse  gas 
emissions by about 1.3 million tonnes CO2 eq./year 
through  investments  in  private  companies  and 
public  buildings.  Around  18.2  million  inhabitants 
are  to  benefit  from  protection  and  adaptation 
measures 
natural 
disasters,  including  floods.  The  ERDF  will  also 
support  more  than  112 000  companies,  with  a 
particular focus on small and medium enterprises 
(SMEs)  and 
line  with  the  regional  smart 
innovation  strategies.  A  key  challenge  will  be  the 
implementation  of  ambitious  climate-related 

climate-related 

against 

in 

diversification 

measures,  despite  major  supply  chain  risks  and 
the  growing  shortage  of  skilled  labour.  The  Just 
innovation,  deliver 
Transition  Fund  will  boost 
economic 
counteract 
and 
deindustrialisation  in  the  four  German  regions 
(North  Rhine-Westphalia,  Saxony,  Saxony-Anhalt 
and  Brandenburg),  where  the  phase-out  of  fossil 
fuel  extraction  and  related  activities  are expected 
to have the strongest impacts. Under the European 
(ESF+),  Germany  allocates 
Social  Fund  Plus 
notably  EUR  1.3  billion  to  improving  educational 
outcomes  of  disadvantaged  young  people,  and 
EUR 627 million to improving lifelong learning and 
career  transition.  This  funding  will  strengthen 
green and digital skills with a focus on vulnerable 
groups, 
in  particular  people  with  a  migrant 
background and refugees. 

Of  the  investments  mentioned  above,  EUR 
4.1  billion  will  be  invested  in  line  with  the 
REPowerEU objectives. This is on top of the EUR 
1.7  billion  dedicated  to  REPowerEU  under  the 
2014-2020  budget.  EUR  3.5  billion  (2021-2027) 
and  EUR  1.5  billion  (2014-2020)  is  for  improving 
energy efficiency; EUR 47 million (2021-2027) and 
EUR  206  million  (2014-2020)  for  renewable 
energy  and  low-carbon  R&I;  and  EUR  590  million 
(2021-2027) for smart energy systems.  

Graph A4.2: Synergies between Cohesion policy 
funds and RRF six pillar in Germany 

(1) million EUR in current prices (total amount, including EU 
and national co-financing)   
Source: European Commission  

In  2014-2020,  cohesion  policy  funds  made 
EUR  20.7  billion  available  to  Germany (43), 

(42)  European Regional Development Fund (ERDF), European 
Social Fund+ (ESF+), Just Transition Fund (JTF), excluding 
Interreg programmes. Total amount includes national and EU 
contributions. Data source: Cohesion Open Data.  

(43)  Cohesion policy funds include the ERDF, ESF and the Youth 
Employment Initiative (YEI). ETC programmes are excluded 
here. According to the ‘N+3 rule’, the funds committed for 
2014-2020 must be spent by 2023. REACT-EU is included in 
all figures. Data source: Cohesion Open Data. 

33 

22,867 57%13,385 33%4,044 10%ERDFESF+JTF5,14824711,52714,32916036411,2141,24312,21310,529153,6260200040006000800010000120001400016000Green transitionDigitaltransformationSmart, sustainableand inclusivegrowthSocial andterritorial cohesionHealth, economic,social andinstitutionalresiliencePolicies for the nextgenerationEU CP 2014-2020 (million EUR)EU CP 2021-2027 (million EUR) 
 
     
                                                 
     
                                                 
 
 
with  an  absorption  of  73% (44).  Including  national 
financing, the total investment amounts to EUR 33 
billion - around 0.1% of GDP for 2014-2020.  

Graph A4.3: Cohesion policy funds contribution to 
the SDGs in 2014-2020 and 2021-2027 in 
Germany 

flexibility 

Germany  continues  to  benefit  from  cohesion 
support  economic 
to 
policy 
recovery,  step  up  convergence  and  provide 
vital support to regions following the COVID-
19  pandemic.  The  Recovery  Assistance  for 
Cohesion and the Territories of Europe instrument 
(REACT-EU) (45)  under  NextGenerationEU  provides 
EUR 2.4 billion on top of the 2014-2020 cohesion 
policy allocation for Germany. Notable investments 
include the  purchase  of  medical  equipment  worth 
close  to  EUR  80  million.  REACT-EU  provides 
support  to  SMEs  particularly  affected  by  the 
pandemic, including for working capital, pandemic-
related  research,  digitalisation  of  schools,  cultural 
centres,  and  vocational  education  and  training 
premises,  and  energy  efficiency  measures.  In 
addition,  EUR  647  million  was  provisionally 
allocated 
the  Brexit 
Adjustment  Reserve  (BAR),  and  Cohesion’s  Action 
for  Refugees  in  Europe  (CARE)  supports  Germany 
and its regions in providing emergency assistance 
to  people  fleeing  from  Russia’s 
invasion  of 
Ukraine. With SAFE (Supporting Affordable Energy), 
the 2014-2020 cohesion policy funds may also be 
mobilised  by  Germany  to  support  vulnerable 
households, 
jobs  and  companies  particularly 
affected by high energy prices.  

to  Germany 

through 

(1) 5 largest contributions to SDGs in million (EUR) current 
prices 
Source: European Commission  

In both 2014-2020 and 2021-2027, cohesion 
policy  funds  have  contributed  substantially 
to 
the  Sustainable  Development  Goals 
(SDGs).  These  funds  support  11  of  the  17  SDGs, 
notably  SDG  9 
innovation  and 
‘Industry, 
infrastructure’  and  SDG  8  ‘Decent  work  and 
economic growth’ (46).  

Fund 

Other EU funds provide significant support to 
Germany.  The  common  agricultural  policy  (CAP) 
made available EUR 55.1 billion in 2014-2022 and 
will keep supporting Germany with EUR 30.7 billion 
in  2023-2027.  The  two  CAP  Funds  (European 
Agricultural  Guarantee  Fund  and  European 
Agricultural 
for  Rural  Development) 
contribute  to  the  European  Green  Deal  while 
ensuring  long-term  food  security.  They  promote 
social,  environmental  and economic  sustainability, 
and  innovation  in  agriculture  and  rural  areas,  in 
coordination  with  other  EU  Funds.  The  European 
Maritime  and  Fisheries  Fund  made  EUR  220 
million  available  to  Germany  in  2014-2020  and 
the  European  Maritime,  Fisheries  and  Aquaculture 
Fund allocates EUR 212 million in 2021-2027.  

Germany  also  benefits  from  other  EU 
programmes,  notably  the  Connecting  Europe 
Facility,  which  under  CEF  2  (2021-2027)  has  so 
far  allocated  EU  funding  of  EUR  492.1  million  to 
transport 
31  specific  projects  on  strategic 

(44)  2014-2020 Cohesion policy EU payments by MS is updated 

daily on Cohesion Open Data.   

(45)  REACT-EU allocation on Cohesion Open Data. 

(46)  Other EU funds contribute to the implementation of the 
SDGs. In 2014-2022, this includes both the European 
Agricultural Fund for Rural Development (EARDF) and the 
European Maritime and Fisheries Fund (EMFF). 

34 

6,17010,9892,2684,7355,07111,48511,1884,5663,7043,08302,0004,0006,0008,00010,00012,00014,000SDG 9 Industry,innovation,infrastructureSDG 8 Decentwork andeconomic growthSDG 7 Affordableand clean energySDG 4 QualityeducationSDG 1 No povertyEU CP 2014-2020 (millions EUR)EU CP 2021-2027 (millions EUR) 
                                                 
     
                                                 
networks.  Similarly,  Horizon  Europe  has  so  far 
allocated  more  than  EUR  1.7  billion  for  German 
R&I  on  top  of  the  EUR  10.1  billion  earmarked 
under  the  previous  programme  (Horizon  2020). 
The  Public  Sector  Loan  Facility  set  up  under  the 
Just Transition Mechanism makes EUR 188 million 
of  grant  support  from  the  Commission  available 
for  projects  located  in  Germany  for  2021-2027, 
which  will  be  combined  with  loans  by  the  EIB,  to 
support  investments  by  public  sector  entities  in 
just transition regions. 

Instrument 
designing 

(TSI) 
The  Technical  Support 
and 
supports  Germany 
in 
implementing  growth-enhancing 
reforms, 
including  those  set  out  in  its  recovery  and 
resilience  plan  (RRP).  Germany  has  received 
significant  support  since  2018.  Examples (47) 
include  support  to  mainstream  gender  into  public 
policy and budget processes, and to develop  anti-
money laundering  risk  analysis  and  supervision in 
the area of correspondent banking. 

(47)  Country factsheets on reform support are available here. 

35 

 
                                                 
Table A5.1: Resilience indices aggregating the 
country situation across RDB dimensions and 
areas 

ANNEX 5: RESILIENCE 

This  Annex  illustrates  Germany’s  relative 
resilience capacities and vulnerabilities using 
the  Commission’s 
resilience  dashboards 
(RDB) (48).  Comprising  a  set  of  124  quantitative 
indicators,  the  RDB  provide  broad  indications  of 
Member  States’  ability  to  make  progress  across 
four interrelated dimensions: social and economic, 
green, digital, and geopolitical. The indicators show 
vulnerabilities (49)  and  capacities (50)  that  can 
become  increasingly  relevant,  both  to  navigate 
ongoing  transitions  and  to  cope  with  potential 
future shocks. To this end, the RDB help to identify 
areas  that  need  further  efforts  to  build  stronger 
and  more  resilient  economies  and  societies.  They 
in  Table  A5.1  as  synthetic 
are  summarised 
resilience 
illustrate  the  overall 
relative  situation  for  each  of  the  four  dimensions 
and  their  underlying  areas  for  Germany  and  the 
EU-27 (51).  

indices,  which 

lower 

slightly 

According  to  the  set  of  resilience  indicators 
under  the  RDB,  Germany  generally  displays 
similar  but 
levels  of 
vulnerabilities  compared  to  the  EU  average. 
Germany  exhibits  medium-low  vulnerabilities  in 
the  social  and  economic  and  the  geopolitical 
dimensions of the RDB, and medium vulnerabilities 
in the green and the digital dimensions. Compared 
to the EU level, Germany has higher vulnerabilities 
in the area 'security and demography’, due in part 
to high employment gaps between EU and non-EU 
citizens.  It  shows  relatively  low  vulnerabilities  in 
relation 
‘health,  education  and  work’, 
‘digitalisation  for  personal  space’  and  ‘financial 
globalisation’ (52). 

to 

(48)  For details see: https://ec.europa.eu/info/strategy/strategic-
planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en; see also 2020 Strategic 
Foresight Report (COM(2020) 493).  

(49)  Vulnerabilities describe features that can exacerbate the 

negative impact of crises and transitions or obstacles that 
may hinder the achievement of long-term strategic goals. 

(50)  Capacities refer to enablers or abilities to cope with crises 
and structural changes and to manage the transitions. 

(51)  This Annex is linked to Annex 1 on SDGs, Annex 6 on the 
green deal, Annex 8 on the fair transition to climate 
neutrality, Annex 9 on resource productivity, efficiency and 
circularity, Annex 10 on the digital transition and Annex 14 
on the European pillar of social rights. 

(52)  For example, German self-reported unmet need for medical 
care, long-term unemployment rate and NIIP fall into the 
lowest vulnerability category.  

(1) Data are for 2021, and EU-27 refers to the value for the 
EU as a whole. Data underlying EU-27 vulnerabilities in the 
area ‘value chains and trade’ are not available as they 
comprise partner concentration measures that are not 
comparable with MS level values. 
Source: JRC Resilience Dashboards - European Commission 

in 

Compared to the EU average, Germany shows 
an  overall  similar  level  of  capacities  across 
all  RDB  indicators.  It  displays  overall  medium-
in  the  social  and 
high  resilience  capacities 
economic,  the  digital  and  the  green  dimensions, 
and  medium  capacities 
the  geopolitical 
dimension.  Germany  shows  stronger  capacities 
than  the  EU  average  in  the  area  ‘inequalities  and 
social 
in 
‘cybersecurity’,  ‘public  space  digitalisation’,  ‘value 
chains  and  trade’,  and  most  areas  of  the  green 
dimension (53).  There 
improving 
is 
capacities  when  it  comes  to  ‘raw  material  and 
energy  supply’,  ‘financial  globalisation’  and  the 
digitalisation  of  personal 
(especially 
concerning  the  digital  skills  of  adults  and  young 
people). 

impact  of  the  transitions’ but  also 

room  for 

space 

(53)  Inequality considerations here are different from SDG 10 

(Annex 1); results are driven by a high household saving rate. 
Germany displays high capacities also in relation to resource 
productivity, terrestrial protected areas and organic farming. 

36 

DEEU-27DEEU-27Vulnerabilities IndexHighMedium-highMediumMedium-lowLowNot availableCapacities IndexHighMedium-highMediumMedium-lowLowNot availableDimension/AreaVulnerabilitiesCapacitiesSocial and economicHealth, education and workInequalities and social impact of the transitionsGreenEconomic & financial stability and sustainabilitySustainable use of resourcesClimate change mitigation & adaptationDigitalEcosystems, biodiversity, sustainable agricultureDigital for industryDigital for personal spaceCybersecurityDigital for public spaceRaw material and energy supplyGeopoliticalValue chains and tradeFinancial globalisationSecurity and demography 
 
                                                 
 
  
 
                                                 
 
 
objectives (58).  Germany’s  climate  law (59)  aims  to 
reduce  economy-wide  greenhouse  gas  emissions 
by at least -65% by 2030 and by -88% by 2040, 
compared to  1990,  to  reach  climate  neutrality  by 
2045.  This  could  generate  greenhouse  gas 
emission  reductions  in  the  effort  sharing  sectors 
that  exceed  Germany’s 
(new)  effort  sharing 
target (60). 

Graph A6.1: Thematic – greenhouse gas emissions 
from the effort sharing sectors in Mt CO2eq, 
2005-2021 

ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

green 

transition 

Germany’s 
requires 
continued action on several aspects including 
greening  electricity  generation,  transport, 
heating  networks,  buildings,  sustainable 
water management, and improving its carbon 
sinks. Implementation of the European Green Deal 
is  underway  in  Germany;  this  Annex  provides  a 
snapshot of the key areas involved (54). 

less  than 

Germany  has  not  yet defined  all  the  climate 
policy  measures  it  needs  to  reach  its  2030 
climate 
target  for  the  effort  sharing 
sectors (55).  Data  for  2021  on  greenhouse  gas 
emissions  in  these  sectors  are  expected  to  show 
its  annual 
the  country  generated 
emission  allocations (56).  Current  policies 
in 
Germany  are  projected  to  reduce these  emissions 
by  -29%  relative  to  2005  levels  in  2030,  not  a 
sufficient  reduction  to  reach  the  effort  sharing 
target  even  before  the  target  was  raised  in  line 
with  the  EU’s  55%  objective,  let  alone  Germany’s 
new target, -50% (57). In its recovery and resilience 
plan,  Germany  has  allocated  at  least  42%  of  its 
Recovery  and  Resilience  Facility  grants  to  key 
to  attain  climate 
reforms  and 

investments 

(54)  The overview in this Annex is complemented by the 

information provided in Annex 7 on energy security and 
affordability, Annex 8 on the fair transition to climate 
neutrality and environmental sustainability, Annex 9 on 
resource productivity, efficiency and circularity, Annex 11 on 
innovation, and Annex 19 on taxation. 

(55)  Member States’ greenhouse gas emission targets for 2030 
(‘effort sharing targets’) were increased by Regulation (EU) 
2023/857 (the Effort Sharing Regulation) amending 
Regulation (EU) 2018/842, aligning the action in the 
concerned sectors with the objective to reach EU-level, 
economy-wide greenhouse gas emission reductions of at 
least 55% relative to 1990 levels. The Regulation sets 
national targets for sectors outside the current EU Emissions 
Trading System, notably: buildings (heating and cooling), road 
transport, agriculture, waste, and small industry. Emissions 
covered by the EU ETS and the Effort Sharing Regulation are 
complemented by net removals in the land use sector, 
regulated by Regulation (EU) 2018/841 (the Land Use, Land 
Use Change and Forestry (LULUCF) Regulation) amended by 
Regulation (EU) 2023/839. 

(56)  Germany’s annual emission allocations for 2021 were some 
428.8 Mt CO2eq, and its approximated 2021 emissions were 
405.7 Mt. See European Commission, Accelerating the 
transition to climate neutrality for Europe’s security and 
prosperity: EU Climate Action Progress Report 2022, 
SWD(2022)343. 

(57)  See the information on the distance to the 2030 climate 

policy target in Table A6.1. Existing and additional measures 
as of 15 March 2021.  

Source: European Environmental Agency. 

Germany’s  net  carbon  removals  from  the 
land  use  sector  have  become  emissions  in 
recent years, with a growing distance to the 
2030  target.  Germany’s  forests  contribute  a 
major share of carbon removals. The conservation 
and  restoration  of  peatlands,  other  forms  of 
carbon farming and forest adaptation measures in 
particular have significant mitigation potential and 
would  yield  added  co-benefits  for  biodiversity (61). 

(58)  For example, investments in green hydrogen, support for 

electric cars, and energy efficiency renovations in residential 
buildings.  

(59)  Bundesklimaschutzgesetz (KSG); 2021. 

(60)  Under Germany’s national climate law and energy and 

climate plan. An update of the plan, mandated by Regulation 
(EU) 2018/1999 (the Governance Regulation), is underway. 

(61)  92% of Germany’s peat soils are currently drained, releasing 
greenhouse gases of around 53 Mt CO2eq, about 7.5% of 
Germany’s total emissions in 2020. See also 
Umweltbundesamt (ed.) Emissionen der Landnutzung, -
änderung und Forstwirtschaft. 

37 

05010015020025030035040045050020052021WasteSmall industryAgricultureBuildings (under ESR)Domestic transport (excl. aviation) 
 
 
                                                 
            
                                                 
 
 
    
 
For 2030, Germany’s target for the land use, land 
use  change  and  forestry  (LULUCF)  sector  implies 
the  removal  of  30 840  kt CO2eq  (see  Table 
A6.1) (62). 

In  2021,  Germany’s  energy  mix  was  still 
dominated  by  fossil  fuels.  The  energy  carriers 
with the  highest  share in the  energy  mix  were  oil 
and  oil  products  (excluding  biofuels)  (33%  %  of 
total energy consumption) and natural gas (26%), 
followed  by  solid  fuels  (mainly  coal  and  lignite) 
(18%)  and  renewable  energy  and  biofuels  (17%). 
The share of nuclear energy was almost halved in 
the last decade, to 6% in 2021.  

Graph A6.2: Energy mix (top) and electricity mix 
(bottom), 2021 

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. 

Germany needs to step up efforts to increase 
electricity 
renewable 
sources.  There  was  a  decrease  in  the  share  of 

generation 

from 

(62)  This value is indicative and will be updated in 2025 (as 

mandated by Regulation (EU) 2023/839). 

38 

renewable  energy  in  Germany’s  electricity  mix  in 
2021.  Renewables  accounted  for  41%  of  the 
electricity mix in 2021, compared to 46% in 2020. 
Wind  and  solar  energy  provided  20%  and  8%  of 
the  total  electricity  mix  respectively.  Germany 
national  energy  and  climate  plan  (NECP)  sets  a 
30%  target  of  renewable  sources  in  gross  final 
energy  consumption  by  2030,  which  was 
considered  as  adequate.  Germany  will  need  to 
in  the 
its  renewable  energy  target 
increase 
updated  NECP,  to  reflect  the  more  ambitious  EU 
climate  and  energy  targets  in  the  Fit  for  55 
Package and in the REPowerEU Plan. 

Germany  needs  to  step  up  energy  efficiency 
improvements.  NECP  targets  for  final  and 
primary  energy  consumption  were  (FEC  and  PEC) 
considered  modest  and  as  of  sufficient  ambition, 
respectively in the 2020 Commission assessment. 
Based  on  the  energy  consumption  trajectory  for 
2018-2021, Germany is expected to be on track to 
meet its 2030 target for FEC and for PEC, as these 
were  notified  in  its  NECP.  But  Germany  achieved 
only  88  %  of  the  energy  savings  required  under 
Art. 7 of the Energy Efficiency Directive (63).  

More  action 
is  needed  to  decarbonise 
transport.  Germany  aims  to  reach  15  million 
electric vehicles registered by 2030, and the share 
of  electric  passenger  cars  on  its  roads  is  rising 
fast. More action is needed to expand the charging 
infrastructure,  increase  the  use  of  sustainable 
public  transport  and  promote  a  modal  shift,  in 
particular  towards  rail,  for  both  passenger  and 
freight  transport.  Given  the  success  of  the 
EUR 9/month  ticket  for  regional  and  local  public 
transportation in summer 2022, Germany brought 
in  the  Deutschlandticket,  which  aims  to  offer  an 
attractive  alternative  to  more  polluting  transport 
is  a 
modes.  Digitalising  the  railway  system 
challenge  ahead,  including  improvements  to  the 
security  of  rail  communications.  Over  half  of 
Germany’s railway network is electrified, but this is 
below  the  EU  average.  Improving  the  quality  and 
service of rail operations should stimulate demand 
for  public 
transport.  This  would  ease  road 
congestion,  on  which  Germany  scores  worse  than 
the EU average and reduce fossil fuel dependence. 
Despite  significant  improvements  in  recent  years, 

(63)  After the conclusion of the negotiations for a recast EED, 
including REPowerEU, the ambition of both the EU and 
national targets as well as of the national measures for 
energy efficiency to meet these targets is expected to 
increase. 

18%26%33%6%17%Solid fossil fuels, peatand oil shaleGasOilNuclearRenewables30%16%1%41%12%Solid fossil fuels, peatand oil shaleGasOilRenewablesNuclear 
        
                                                 
                                                 
air  quality  in  Germany  remains  a  cause  for 
concern (64).  In  2021,  three  air  quality  zones 
registered exceedances of the EU air quality limits 
for NO2. 

Graph A6.3: Thematic- Environmental investment 
needs and current investment, p.a. 2014-2020 

Source: European Commission. 

investment 

Germany  would  benefit  from  investing  more 
in  meeting  its  environmental  targets  and 
objectives.  Between  2014  and  2020,  the  annual 
needs (65)  were 
environmental 
estimated  to  be  at  least  EUR 42.9  billion  while 
investment  was  at  about EUR 25.1  billion,  leaving 
a  gap  of  at  least  EUR 17.8  billion  per  year  (see 
Graph  A6.3) (66).  Germany’s  land  Natura  2000 
network  covers  15.5%  of  its  land (67),  but  it  has 
not  yet  allocated  sufficient  resources  to  protect 
and manage these areas. The resources needed to 

implement  the  2030  EU  biodiversity  strategy  are 
estimated at EUR 4 billion per year (68). 

in  Germany 

in  Germany, 
in 

Climate  change  has  physical  risks  and 
impacts 
in  several  areas, 
forest  management,  water 
including 
management  and  agriculture (69).  Since  2018, 
extreme weather events have caused damages of 
including 
least  EUR 80 billion 
at 
losses  of  EUR 25.6 billion 
forestry  and 
agriculture (70).  Climate  monitoring  shows  an 
increase  in  the  impacts  of  heatwaves,  droughts, 
floods, heavy rain, and flash floods in urban areas 
on human health, vegetation, and ecosystems (71). 
Some  areas  in  the  north-west  and  the  east  in 
particular  experienced  unprecedented  levels  of 
water  scarcity,  with  negative  impacts  on  water 
supply  and  quality,  energy  management  and 
agriculture (72).  Urgent  action 
to 
minimise  the  growing  risks  of  extreme  heat, 
drought  and  flood  events  and  their  impacts  on 
human  health,  biodiversity,  agriculture,  forestry, 
transport, and infrastructure (73). Sustainable water 
management  will  be  key  to  improving  climate 
adaptation  and  resilience (74).  Additional  efforts 
are  required  to  reach  the  government’s  target  of 
30%  of  utilised  agricultural  area  under  organic 
farming by 2030. Concerning water, problems with 
eutrophication  in  the  Baltic  and  North  Seas  and 
with  groundwater  persist.  Livestock  density  has 
decreased  slightly  in  Germany  but  varies  strongly 
between  regions  –  West  Germany  belongs  to  the 
cluster  of  regions  with  the  highest  livestock 
density  in  Europe (75),  which  exerts  pressure  on 
sustainable water management. Germany has the 
potential  to  rely  more  on  environmental  taxes  to 

is  needed 

(64)  See the data in table A6.5 below. For details on the 

methodology, see European Environment Agency, Air quality 
in Europe –2021 report, p.106. 

(65)  Environmental objectives include pollution prevention and 

control, water management and industries, circular economy 
and waste, biodiversity and ecosystems (European 
Commission, 2022, Environmental Implementation Review, 
country report Germany). 

(66)  When also accounting for needs estimated at EU level only 

(e.g., water protection, higher circularity, biodiversity 
strategy). 

(67)  In 2021, Germany had 37.4% terrestrial protected areas 

(Natura 2000 and nationally designated areas), against the 
EU average of 26.4% (European Environment Agency, 2023, 
Natura 2000 Barometer). 

(68)  European Commission, Biodiversity financing and tracking, 

2022. 

(69)  European Environmental Agency, Advancing towards climate 

resilience in Europe, forthcoming. 

(70)  https://www.prognos.com/de/folgen-klimakrise 

(71)  Dürremonitor Deutschland - Helmholtz-Zentrum für 

Umweltforschung UFZ. Germany monitors climate change 
impacts and publishes a 4-year-cycle adaptation strategy. 

(72)  Monitoringbericht 2019 zur Deutschen Anpassungsstrategie 

an den Klimawandel (umweltbundesamt.de) 

(73)  Umweltbundesamt (Eds.). Klimawirkungs- und Risikoanalyse 

2021 für Deutschland. 

(74)  Konferenz Klimawandel und Wasser, Abschlussbericht, 2021 

(75)  Eurostat, Livestock density in 2020. 

39 

1,09413,7925,3272,7392,1188,22715,87211,5234,2063,0420.02000.04000.06000.08000.010000.012000.014000.016000.018000.0Pollutionprevention andcontrolWater (industries,excl. protection)Circular Economy(incl. waste)Biodiversity andecosystemsR&I&D and otherEUR million (at current prices)Current investmentTotal need 
           
                                                 
                                                 
further  internalise  the  cost  of  air  pollution  and  to 
promote waste reduction (76)(see Annex 19). 

provides 

Germany 
fuel  and  other 
fossil 
environmentally  harmful  subsidies  that  could  be 
considered  for  reform,  while  ensuring  food  and 
energy  security  and  mitigating  social  effects.  In 
2021,  it  spent  EUR  11.8  billion  on  fossil  fuel 
subsidies  (cf.  Table  A6.1.),  which  puts  low-carbon 
alternatives  at  a  disadvantage.  Environmentally 
harmful  subsidies  have  been  identified,  via  an 
initial  assessment,  in the agriculture,  forestry  and 
fishing, electricity, gas, steam and air conditioning, 
transportation  and  storage,  manufacturing  and 
services  sectors.  Examples  of  such  subsidies 
include  company  car  tax  benefits,  the  excise  tax 
refund  for  diesel  fuel  used  in  agriculture,  the 
reduced  energy  tax  rate  for  light  fuel  oil  used  in 
mobile  machinery,  the  excise  tax  exemption  and 
tax relief for natural gas for industrial  consumers 
or  the  reduced  CO2  tax  rate  on  diesel  used  in 
agriculture (77). 
agreement 
acknowledges the need to address such subsidies, 
but the timeline and practical follow-up is unclear.  

coalition 

The 

(76)  European Commission, 2021, Green taxation and other 

economic instruments – Internalising environmental costs to 
make the polluter pay, Ensuring that polluters pay 
(europa.eu) 

(77)  Fossil fuel figures in EUR of 2021 from the 2022 State of 

the Energy Union report. Initial assessment of 
environmentally harmful subsidies done by the Commission 
in the 2022 toolbox for reforming environmentally harmful 
subsidies in Europe, using OECD definitions, and based on the 
following datasets: OECD Agriculture Policy Monitoring and 
Evaluations; OECD Policy Instruments for the Environment 
(PINE) Database; OECD Statistical Database for Fossil Fuels 
Support; IMF country-level energy subsidy estimates. Annex 4 
of the toolbox contains detailed examples of subsidies on 
the candidates for reform. 

40 

 
                                                 
Table A6.1: Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources: (1) Historical and projected emissions, as well as Member States’ climate policy targets and 2005 base year emissions 
under the Effort Sharing Decision (for 2020) are measured in global warming potential (GWP) values from the 4th Assessment 
Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ climate policy targets and 2005 base 
year emissions under the Effort Sharing Regulation (for 2030) are in GWP values from the 5th Assessment Report (AR5). The 
table above shows the base year emissions 2005 under the Effort Sharing Decision, using AR4 GWP values. Emissions for 2017-
2021 are expressed in percentage change from 2005 base year emissions, with AR4 GWP values. 2021 data are preliminary. The 
table shows the 2030 target under Regulation (EU) 2023/857 that aligns it with the EU’s 55% objective, in percentage change 
from 2005 base year emissions (AR5 GWP). Distance to target is the gap between Member States’ 2030 target (with AR5 GWP 
values) and projected emissions with existing measures (WEM) and with additional measures (WAM) (with AR4 GWP values), in 
percentage change from the 2005 base year emissions. Due to the difference in global warming potential values, the distance to 
target is only illustrative. The measures included reflect the state of play as of 15 March 2021.  
(2) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2023 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 
amending Regulation (EU) 2018/841 (LULUCF Regulation) – Annex IIa, kilotons of CO2 equivalent, based on 2020 submissions. 
(3) Renewable energy and energy efficiency targets and national contributions are in line with the methodology established under 
Regulation (EU) 2018/1999 (Governance Regulation).  
(4) Percentage of total revenue from taxes and social contributions (excluding imputed social contributions). Revenue from the EU 
Emissions Trading System is included in environmental tax revenue.  
(5) Expenditure on gross fixed capital formation for the production of environmental protection services (abatement and 
prevention of pollution) covering government, industry, and specialised providers.  
(6) European Commission, Study on energy subsidies and other government interventions in the European Union, 2022 edition.  
(7) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters. This 
indicator is based on modelling of the current risk from floods, wildfires and windstorms as well as earthquakes, and an 
estimation of the current insurance penetration rate. The indicator does not provide information on the split between the 
private/public costs of climate-related disasters. A score of 0 means no protection gap, while a score of 4 corresponds to a very 
high gap (EIOPA, 2022).  
(8) Sulphur oxides (SO2 equivalent), ammonia, particulates < 10 µm, nitrogen oxides in total economy (divided by GDP).  
(9) Battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV). 

41 

2030200520172018201920202021target/valueWEMWAMGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq; %; pp477.8-2%-9%-7%-15%--50%-21-21Net carbon removals from LULUCF (2)kt CO2eq7,832-10,705-7,657-6,8224,1973,998-30840n/an/a200520172018201920202021Share of energy from renewable sources in gross final consumption of energy (3)%7%15%17%17%19%19%30%Energy efficiency: primary energy consumption (3)Mtoe321.6298.1292.0285.2262.1267.0216.0Energy efficiency: final energy consumption (3)Mtoe219.7218.6215.2214.7201.9209.7185.0201620172018201920202021201920202021Environmental taxes (% of GDP)% of GDP1.91.81.81.81.71.82.42.22.2Environmental taxes (% of total taxation) (4)% of taxation 4.84.64.54.44.34.45.95.65.5Government expenditure on environmental protection% of total exp.1.31.21.31.31.31.11.71.61.6Investment in environmental protection (5) % of GDP0.40.40.40.4--0.40.40.4Fossil fuel subsidies (6)EUR2021bn15.315.014.513.413.811.853.050.0-Climate protection gap (7) score 1-41.61.71.5Net greenhouse gas emissions1990 = 10073.073.070.067.060.062.076.069.072.0Greenhouse gas emission intensity of the economykg/EUR'100.340.330.310.290.28-0.310.300.26Energy intensity of the economykgoe/EUR'100.110.110.110.100.10-0.110.11-Final energy consumption (FEC)2015=100101.9102.8101.1100.991.995.5102.994.6-FEC in residential building sector2015=100103.6103.3101.6105.1105.5106.9101.3101.3106.8FEC in services building sector2015=10098.798.689.585.383.189.3100.194.3100.7Smog-precursor emission intensity (to GDP) (8)tonne/EUR'100.770.770.760.690.61-0.930.86-Years of life lost due to air pollution by PM2.5per 100.000 inh.588.9576.6617.0439.6356.3-581.6544.5-Years of life lost due to air pollution by NO2per 100.000 inh.231.7209.5205.1171.6123.5-309.6218.8-Nitrates in ground watermg NO3/litre27.927.327.126.325.1-21.020.8-Land protected areas% of total30.637.7-37.637.637.426.226.426.4Marine protected areas% of total45.9--45.9-45.410.7-12.1Organic farming% of total utilised agricultural area6.86.87.37.89.69.78.59.1-201720182019202020212022202020212022Share of zero-emission vehicles (9)% in new registrations0.71.01.76.613.414.75.48.910.7Number of AC/DC recharging points (AFIR categorisation)---437196222382084188626330028432518Share of electrified railways%52.952.953.153.153.153.256.6n/a56.6Hours of congestion per commuting driver per year29.929.329.429.2n/an/a28.7n/an/aMobilityFiscal and financialindicatorsEnergyPollutionBiodiversityClimate'Fit for 55'DistanceProgress to policy targetsNational contribution to 2030 EU targetGermanyEU 
 
   
 
ANNEX 7: ENERGY SECURITY AND AFFORDABILITY 

15  April  2023 (82).  Germany  operates  around  40 
underground  storage  facilities  managed  by  27 
storage operators, with a total capacity of around 
25.2 billion cubic metres, representing around 25% 
of its total yearly demand. Before Russia stopped 
exporting  gas to Germany  in  August  2022,  it  was 
its  main  gas  supplier,  covering  half  of  its  gas 
consumption.  The  main  natural  gas  suppliers  are 
currently  Norway, 
the  Netherlands,  Belgium, 
latter  started 
Switzerland  and  France.  The 
supplying  gas  in  October  2022,  with  a  maximum 
handover capacity of 100 GWh/day. 

Graph A7.1: Underground storage levels in 
Germany 

Germany  managed  to  reduce 
its  heavy 
dependence  on  Russian  oil  and  gas 
effectively  through  a  variety  of  measures, 
but  more  remains  to  be  done.  Before  Russia 
invaded  Ukraine,  Germany  was  already  heavily 
exposed  to  Russian  gas  and  oil,  notably  65%  and 
34% respectively in 2021 and thus well above the 
EU average (78). However, it managed to reduce its 
reliance  on  Russian  oil  to below  25% (79)  and  gas 
to nearly zero, after Russia stopped delivering gas 
in August 2022. Still, Germany is highly dependent 
on imported fossil fuels in general. This makes its 
economy  particularly  sensitive  to  global  price 
developments, requiring it to step up efforts on the 
energy  transition.  This  Annex (80)  sets  out  actions 
carried out by Germany to achieve the REPowerEU 
objectives,  including  through  the  implementation 
of  its  recovery  and  resilience  plan,  in  order  to 
improve  energy  security  and  affordability  while 
accelerating  the  clean  energy  transition,  and 
contributing to enhancing the EU’s competitiveness 
in the clean energy sector (81).   

Its 

natural 

planned 

Germany  has  achieved  a  high  level  of  gas 
supply  security  in  the  face  of  challenging 
circumstances. 
gas 
infrastructure,  six  floating  storage  regasification 
units (FSRUs), one floating regasification unit (FRU) 
and  two  stationary  liquefied  natural  gas  (LNG) 
terminals  will 
imports 
completely  in  the  medium  term.  It  will  also  help 
protect  the  security  of  supply  in  Europe,  e.g.  the 
FSRUs in Lubmin could contribute to the supply in 
other  Member  States.  Germany  fulfilled  its  gas 
storage  obligations  last  winter,  reaching  99.21% 
by  1  November  2022  (almost  20  percentage 
points  above  its  legal  obligation),  and  ended  the 
heating season with a storage filled at 64.51% by 

replace  Russian  gas 

(78)  Eurostat (2021) 

(79)  BMWK (2022) 

(80)  This annex is complemented by Annex 6 as the European 

Green Deal focuses on the clean energy transition, by Annex 
8 on the actions taken to mitigate energy poverty and 
protect the most vulnerable ones, by Annex 9 as the 
transition to a circular economy will unlock significant energy 
and resource savings, further strengthening energy security 
and affordability, and by Annex 12 on industry and single 
market complementing ongoing efforts under the European 
Green Deal and REPowerEU. 

(81)  In line with the Green Deal Industrial Plan COM(2023) 62 
final, and the proposed Net-Zero Industry Act COM(2023) 
161 final 

Source: JRC calculation based on AGSI+ Transparency 
Platform, 2022 (Last update 2 May 2023) 

Germany  is  implementing  energy  efficiency 
measures  to  contribute  to  energy  security 
further, including on the demand side. Almost 
half of the electricity mix in Germany still relies on 
a combination of fossil fuels (46%), with the other 
half  coming  mainly  from  renewables  (see  Annex 
6).  The  German  government  initially  planned  to 
phase out nuclear energy by the end of 2022 but 
agreed  to  keep  its  three  active  nuclear  power 
plants  in  operation  until  April  2023  in  order  to 
secure  the  power  supply  for  winter  2022/2023. 
Germany  also  allowed 
temporary 
reactivation of hard coal and lignite power plans to 
save  gas.  Germany  adopted  several  energy 
two  energy 
efficiency  measures, 
conservation  ordinances (83)  which  contribute  to 

including 

the 

for 

(82)  Regulation of the European Parliament and of the Council 
amending Regulations (EU) 2017/1938 and (EC) No 
715/2009 on gas storage and Implementing Regulation (EU) 
2022/2301 of 23 November 2022 set the filling trajectory 
with intermediary targets for 2023 for each Member State 
with underground gas storage facilities on its territory and 
directly interconnected to its market area. 

(83)  EnsikuMaV: Energy savings in buildings in the public arena; 
EnsimiMaV: Optimisation of heating systems in buildings. 

42 

 
 
                                                 
 
                                                 
 
 
energy  security  and  are  targeted  to  industry  and 
households,  among  the  biggest  gas  consumers  in 
Germany  in  2021  (Graph  A7.2).  These  prescribe 
measures 
in  public  buildings  (valid  until  28 
February  2023,  with  an  extension  until  15  April 
2023,  in  preparation),  the  optimisation  of  heating 
in  buildings  and  an  obligation  for  companies  to 
implement energy efficiency measures (valid until 
30  September  2024).  At  the  same  time,  gas  and 
launched  awareness-raising 
heating  suppliers 
campaigns  for  customers.  Over  the  period  August 
2022 – March 2023, 16% of gas consumption has 
been saved in Germany compared to the previous 
5-year average. 

Graph A7.2: Share of gas consumption per sector, 
2021 

prepare  for  the  transition  to  smart  grids.  Storage 
plays  a  significant  role  in  the  electricity  system. 
Short-term  storage  helps  to  balance  the  grid.  A 
relevant  and  increasing  share  of  new  household 
PV  installations  comes  with  a  battery  storage. 
to  bridge  unfavourable 
Long-term 
meteorological conditions is also expected to play 
a  key  role  in  a  renewables-based  electricity 
system.  Hydrogen 
infrastructure  will  become 
increasingly important. 

storage 

Graph A7.3: Gas consumption per industrial sector, 
2021 (% of total gas consumption in industry) 

Source: Eurostat 

sector, 

including 

temporary 

‘protective  shield’  of  up 
to 

In  2022,  Germany  adopted  several  relief 
instruments  to  support  consumers,  suppliers 
and  small  and  medium  sized  companies  in 
financial  trouble.  In  addition  to  three  relief 
packages (from a total of EUR 95 billion), Germany 
to 
implemented  a 
EUR 200 billion 
relief 
finance 
instruments,  including  ‘price  brakes’,  for  natural 
gas,  heat  and  electricity  consumers,  small  and 
medium-sized  enterprises,  and  gas  suppliers.  The 
corporate 
energy-intensive 
industries (see Annex 12), was generally hit by the 
increase in energy prices before households. It has 
been introducing different measures to counteract 
the  high  energy  prices  while  trying  to  remain 
competitive.  This  includes  reducing  production 
(especially 
industry), 
energy-intensive 
implementing  energy  efficiency  measures  (e.g. 
efficient  lighting,  heating  and  cooling  technology 
or  behavioural  changes),  and  fuel  switching.  Still, 
energy prices stagnating at higher levels raises the 
question of how long German industry will remain 
competitive as it is experiencing growing pressure 
to  either  raise  prices  to  safeguard  margins  or 
reduce production due to the high share of energy 
consumption. 
and 
households benefit from the natural gas and heat 

consumers 

Large 

gas 

Source: Eurostat 

The  expansion  of  the  grid  infrastructure 
would  allow  to  further  accommodate  a 
higher  share  of  renewable  electricity  and 
interconnection  for  cross-border 
improve 
energy  flows.  Germany  adopted  a  series  of 
energy  action  investments  and  reforms  (formerly 
known as ‘Easter’, ‘Spring’ and ‘Summer’ packages) 
in  July  2022,  including  legislation  on  renewable 
energy  sources  and  specific  laws  on  on-  and 
offshore  wind  energy  and  grid  expansion 
acceleration.  These  measures  and  further  action 
are  expected  to  speed  up  and  simplify  planning 
and  permitting  (see  Annex  12)  procedures  for 
renewable  energy  generation  and  electricity 
networks. Germany plans to cover at least 80% of 
gross  electricity  consumption  with  renewable 
energy by 2030. It could accelerate the expansion 
of  high-voltage 
including 
through  the  swift  implementation  of  Projects  of 
Common  Interest.  In  addition,  distribution  grids 
could  be  upgraded 
to  accommodate  new 
producers  and  millions  of  owners  of  solar  panels, 
heat  pumps  and  electric  vehicles  as  well  as  to 

transmission  grids, 

43 

25.2%28.9%0.7%13.4%31.5%0.3%IndustryEnergyTransportServices and public sectorHouseholdsAgriculture, forestry andfishery0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%Iron and steelChemical and petrochemicalNon-ferrous metalsNon-metallic mineralsTransport equipmentMachineryMining and quarryingFood, beverages and tobaccoPaper, pulp and printingWood and wood productsConstructionTextile and leather 
       
       
price  brake  as  they  receive  support  based  on  the 
difference  between  the  price  agreed  in  their 
contracts  and  the  guaranteed  maximum  price  by 
the federal government.  

Graph A7.4: Germany´s retail energy prices for 
industry (top) and households (bottom) 

comprise 

undersubscribed, mainly due to an increase in the 
action value combined with low remunerations. For 
2023, the remunerations are expected to increase 
in  order  to  make  auctions  more  attractive.  The 
impact  of  the  energy  action  packages  adopted  in 
July 2022 are still to be seen. The national energy 
and climate plan contains a comprehensive set of 
measures  to  address  building  renovation.  These 
mainly 
support  measures, 
fiscal 
information  campaigns  and  support  mechanisms 
from  energy  service  companies.  The  recovery  and 
resilience plan includes EUR 2.5 billion for a large-
increase  the 
scale  renovation  programme  to 
energy efficiency of residential buildings. Germany 
is  carrying  out  a  number  of  checks  on  products 
covered  by  eco-design  and  energy  labelling  that 
may  be  too  low.  This  generates  concerns  with 
respect to the level playing field among economic 
operators  and  uncertainty  as  to  the  compliance 
levels  of  the  concerned  products,  and  therefore 
possible missed energy and CO2 savings (84). 

(1) For industry: the band consumption is ID for electricity and 
I4 for gas 
(2) For households, the band consumption is DC for electricity 
and D2 for gas  
Source: Eurostat 

accelerate 

Germany has high ambitions to transform its 
energy  system,  and  more  effective  policy 
the 
could 
implementation 
decarbonisation  of  the  economy.  Its  overall 
deployment  of  renewable  energy  reached  17%  in 
2021.  In  2022,  renewables  growth  was  fastest  in 
the  electricity  sector.  Most  of  this  growth  was  in 
solar  panels  (67  GW  in  total,  up  7  GW  in  2022) 
and  onshore  wind  (58  GW,  up  2  GW  in  2022). 
According  to  the  German  Ministry  of  Economic 
Affairs  and  Climate  Action,  there  was  an increase 
of  around  5% 
in  the 
electricity  mix  in  2022,  reaching  46.2%  in  the 
electricity mix. However, Germany needs to install 
at  least  10  GW  per  year  in  wind  and  22  GW  per 
year  in  solar  to  reach  at  least  80%  by  2030.  To 
including 
integrate 
Germany’s 
offshore 
renewables,  the  government  has  significantly 
increased  planned  auction  volumes  for  electricity 
from renewable sources, especially from wind and 
solar. However, recent auctions have been greatly 

electricity, 
for 
goals 

renewable 
ambitious 

in  renewable  energy 

a 
base 

traditionally 
of 

strong 
Germany 
has 
manufacturing 
low-carbon 
technologies  and  clean  energy  components. 
These  include  wind,  solar  thermal,  solar  PV, 
energy-efficient  appliances  and  energy-efficient 
construction  and  renovation.  The  competitiveness 
of  high-quality  products  is  sensitive  to  import 
prices  of  many  raw  materials  and  energy  costs. 
Circularity  of  critical  components  could  enhance 
the resilience of sensitive supply chains. In the last 
two years (Q4 2021 to Q1 2023), around 40% of 
businesses in clean energy-relevant manufacturing 
have  had 
limit  their 
labour  shortages  that 
production. In 2021, over 344 000 persons worked 
jobs (85). 
in  Germany 
Enhancing  workers’ 
skills  and  appropriate 
vocational  training  can  address  the  recruitment 
challenges.  In  order  provide  the  manufacturing 
capacity for the clean energy technologies, in line 
with  Net  Zero  Industry  Act,  the  acceleration  of 
planning and permitting processes is an important 
factor.   

renewable  energy 

in 

Germany  ranks  fifth  in  the  world  in  the 
patenting  of  high-value  inventions  in  solar 
PV.  In  connection  to  this,  the  EU  having  the 
highest  share  of  the  global  market  for  clean 
energy technologies is notably driven by Germany, 

(84)  The internet-supported information and communication 
system for the pan-European market surveillance 

(85)  Source: DIW/DLR/GWS (2022)  

44 

050100150200250300€/MWhGas GermanyGas EUElectricity GermanyElectricity EU050100150200250300350400€/MWhGas GermanyGas EUElectricity GermanyElectricity EU 
   
                                                 
which  accounted  for  10%  of  the  world  market  in 
2019. Public and private funding for research and 
innovation  (R&I)  activities  grew  in  parallel  to 
economic  growth  between  2010  and  2019.  In 
2019,  private  R&I  spending  exceeded  public 
funding  by  a  factor  of  14  (EUR 936.4  million  vs 
EUR 13 391.2 million; see Annex 11). The German 
federal government is providing EUR 10 billion for 
an  equity  fund  for  technologies  of  the  future,  the 
“future  fund” 
(Zukunftsfonds).  The  fund  will 
primarily  benefit  start-ups  in  the  growth  phase 
with  high  capital  requirements.  Together  with 
further  private  and  public  partners,  the  fund  is 
projected  to  mobilise  at  least  EUR  30  billion  in 
venture  capital  for  start-ups  in  Germany,  and 
combined with existing financial instruments, over 
EUR 50 billion in venture capital are expected to be 
mobilised  for  start-ups  in  energy  technologies  in 
the next few years, together with private investors. 
(Federal Ministry of Finance, 2021).  

innovation 

champions 

strongly  both 

Since  2014,  half  of  the  EU  Member  States 
have increased their patenting activity in line 
with  the  Energy  Union  R&I  priorities,  with 
such  as 
green 
Germany  performing 
in 
absolute  numbers  and  in  the  share  of  green 
patents in its overall innovation portfolio. On 
hydrogen technologies, in 2011-2020, patenting is 
led by the EU (28%) and Japan (24%), with the US 
(20%)  the  only  major  innovation  centre  to  lose 
ground  in  the  past  decade.  Germany  (11%)  ranks 
first 
hydrogen 
technologies,  and  Europe  is  gaining  an  edge  in 
electrolyser manufacturing capacity.  

patenting 

Europe 

for 

in 

Graph A7.5: Patent families in Energy Union R&I 
priorities 

Source: JRC SETIS (2022) 

45 

25%15%8%14%14%10%17%17%19%42%53%62%1%1%0%201020142019[% per priority]CCUSNuclear safetySustainable transportEfficient systemsSmart systemRenewables3,0404,0984,671Total 
   
 
Table A7.1: Key Energy Indicators 

(1) The ranking of the main suppliers is based on the latest available figures (for 2021) 
(2) FSRU included 
(3) Venture Capital investments include Venture Capital deals (all stages) and Private Equity Growth/Expansion deals (for 
companies that have previously been part of the portfolio of a VC investment firm). 
Source: Eurostat, Gas Infrastructure Europe (Storage and LNG Transparency Platform), JRC SETIS (2022), JRC elaboration based 
on PitchBook data (06/2022) 

46 

EU20182019202020212018201920202021Import Dependency [%] 63%67%64%63%58%61%57%56%of Solid fossil fuels 42%47%44%48%44%44%36%37%of Oil and petroleum products 95%97%97%96%95%97%97%92%of Natural Gas 96%100%89%90%83%90%84%83%Dependency from Russian Fossil Fuels [%]of Hard Coal42%47%48%53%40%44%49%47%of Crude Oil36%32%34%34%30%27%26%25%of Natural Gas 49%49%65%65%40%40%38%41%20152016201720182019202020212022Gross Electricity Production (GWh)648,309 650,449 653,723 640,468 606,917 575,462 588,343 -Combustible Fuels410,318 419,596 404,286 385,445 334,214 302,330 328,342 -Nuclear91,786 84,634 76,324 76,005 75,071 64,382 69,130 -Hydro24,898 26,134 26,155 23,863 25,671 25,275 24,973 -Wind80,624 79,924 105,693 109,951 125,894 132,102 114,647 -Solar 38,726 38,098 39,401 43,459 44,383 49,496 49,340 -Geothermal 133 175 163 178 197 231 244 -Other Sources1,824         1,888         1,701         1,567        1,487       1,646       1,667       -Net Imports of Electricity (GWh)48,282-       50,525-       52,459-       48,736-      32,667-     19,029-     18,575-     -   As a % of electricity available for final consumption -9.1%-9.5%-9.9%-9.3%-6.4%-3.9%-3.7%-Electricity Interconnection (%)8.9%10.5%10.9%11.4%11.0%11.5%20152016201720182019202020212022Gas Consumption (in bcm)81.389.192.585.391.889.393.679.3Gas Imports - by type (in bcm)102.597.4118.788.394.880.484.8n.a.Gas imports - pipeline102.597.4118.788.394.880.484.8n.a.Gas imports - LNG0.00.00.00.00.00.00.0n.a.Gas Imports - by main source supplier (in bcm) (1)Russia43.658.762.143.146.252.555.4n.a.Norway22.010.711.12.52.616.516.2n.a.Not specified3.028.045.542.845.91.313.2n.a.Netherlands33.90.00.00.00.010.20.0n.a.2019202020212022LNG TerminalsNumber of LNG Terminals (2)0001LNG Storage capacity (m3 LNG)000174,000Underground StorageNumber of storage facilities57576060Operational Storage Capacity (bcm)24.924.925.225.22019202020212022VC investments in climate tech start-ups and scale-ups (EUR Mln) (3)327.41120.01255.5n.a.as a % of total VC investments in Germany5.7%16.4%8.0%n.a.Research & Innovation spending in Energy Union R&i prioritesPublic R&I (EUR mln)946.5945.51027.9n.a.Public R&I (% GDP)0.027%0.028%0.029%n.a.Private R&I (EUR mln)13391.2n.a.n.a.n.a.Private R&I (% GDP)0.39%n.a.n.a.n.a.GERMANYENERGY DEPENDENCEDIVERSIFICATION OF GAS SUPPLIESCLEAN ENERGYELECTRICITY 
 
      
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

This  Annex  monitors  Germany’s  progress  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
notably  for  workers  and  households 
in 
vulnerable  situations.  In  Germany,  the  number 
of  jobs in  the  green  economy  has  quickly  risen  in 
recent  years.  To  ensure  a  fair  green  transition  in 
line  with  the  Council  Recommendation (86),  the 
European  Social  Fund  Plus  (ESF+),  Germany’s 
recovery and resilience plan (RRP) (87) and the Just 
Transition Mechanism (see Annex  4) are providing 
crucial  support  in  promoting  skills  for  the  green 
transition.  The  latter  notably  finances  measures 
for skills development meant to prevent job losses 
and  facilitate  job-to-job  transitions  as  part  of 
decarbonisation. 

Graph A8.1: Fair transition challenges in Germany 

Source: Eurostat, EMPL-JRC GD-AMEDI/AMEDI+ projects and 
World Inequality Database (see table A8.1) 

While  the  green  economy 
is  expanding, 
employment  in  Germany’s    energy-intensive 
industries  remains  stable,  but  workers  in 
declining  activities  need  active  support.  The 
greenhouse  gas  (GHG)  emissions  intensity  of 
Germany’s  workforce  declined  from  17.8  to  13.7 
tonnes per worker between 2015 and 2021 and is 
now  at  the  EU  average  (see  Graph A8.1  and 
Table A8.1).  Employment  in  Germany’s  energy-
intensive  industries  (EII)  represented  a  slightly 
declining  share  of  4.0%  of  total  employment  in 
2020  (EU  average:  3.0%).  Employment  in  mining 
and quarrying decreased by 30.5% since 2015 to 

(86)  Council Recommendation of 16 June 2022 on ensuring a fair 
transition towards climate neutrality, 2022/C 243/04 covers 
employment, skills, tax-benefit and social protection 
systems, essential services and housing. 

(87)  See 2022 Country Report (Annex 6) and Annex 3 for an 

overview. 

47 

around  41 000  workers  in  2021,  while  19 430 
people were directly employed in the lignite mining 
sector  alone  in  2020.  Along  with  the  decline  of 
coal and lignite mining, the number of jobs in the 
environmental  goods  and  services  sector  grew  by 
16.6%  (to  657 035)  in  2015-19  (EU-27:  +8.3%), 
reaching  1.5%  of  total  employment,  close  to  the 
EU  average  (2.2%)  (see  Annex  9  for  circular  jobs 
specifically).  A  significant  share  of  ESF+  funding 
contributes  to  fostering  green  skills.  The  federal 
programme 
nachhaltige 
Entwicklung  befördern” (88),  co-financed  by  the 
ESF,  provides  training  and  guidance  to  promote 
climate and resource-saving awareness and action 
in daily work. 

„Berufsbildung 

für 

Upskilling  and  reskilling  in  declining  and 
transforming  sectors  has  the  potential  for 
further improvement, while labour shortages 
are  prevalent.  In  energy-intensive  industries, 
workers’  participation  in  education  and  training 
declined from 9.8% in 2015 to 7.9% in 2022 and 
is  below  the  EU  average  (10.4%),  while  38%  of 
German  citizens  believe  they  do  not  have  the 
necessary  skills  to  contribute  to  the  green 
transition (89). Furthermore, the job vacancy rate is 
relatively  high,  including  in  construction  which  is 
key  for  the  green transition  (7.4%  vs  4.0%  in the 
EU-27,  2022) (90).  To  address  this  challenge,  the 
Just  Transition  Mechanism  provides  training  for 
workers  in  regions  affected  by  the  transition, 
together  with  a  broader  training  offer  at  national 
and Länder levels to encourage re- and upskilling. 
A  significant  share  of  the  ESF+  for  Germany  also 
aims to improve green skills. 

Energy  poverty 
indicators  have  overall 
declined  in  recent  years.  The  share  of  the 
population unable to keep their homes adequately 
warm  decreased  from  4.1%  in  2015  to  2.5%  in 
2019 (91). Between 2020 and 2021, it declined by 

(88)  Link to project by ESF Bund (2019-22): 

https://www.esf.de/portal/SharedDocs/PDFs/DE/Programme-
2014-
2020/BMU/bbne_rl_2017.pdf?__blob=publicationFile&v=6 

(89)  Special Eurobarometer 527. Fairness perceptions of the 

green transition (May – June 2022). 

(90)  Eurostat (JVS_A_RATE_R2)  

(91)  Energy poverty is a multi-dimensional concept. The indicator 
used focuses on an outcome of energy poverty. Further 
indicators are available at the Energy Poverty Advisory Hub.   

00.20.40.60.811.21.4GHG per workerEmployment EIIEducation &training EIIEnergy povertyTransportpoverty(proxy)CarboninequalityEU LatestDE Latest (vs EU Latest)DE 2015 (vs EU Latest) 
 
  
  
                                                 
                                                 
 
(AROP)  population 
lower-middle 

3.8  percentage  points  (pps),  reaching  3.2% (92).  In 
2021,  compared  to  the  EU  average,  only  7.7%  of 
(EU: 
the  at-risk-of-poverty 
16.4%)  and  3%  of 
income 
households  (in  deciles  4-5)  (EU:  8.2%)  were 
considered to be affected. Before the energy price 
hikes, 23.6% of the total population and 49.4% of 
the  (expenditure-based)  AROP  population  had 
on 
residential 
electricity,  gas,  and  other  fuels (93)  above  10%  of 
their  household  budget  (EU  average:  26.9%  and 
48.2%, respectively). 

expenditure 

budget 

shares 

Graph A8.2: Distributional impacts of energy prices 
due to rising energy expenditure (2021-2023) 

Mean change of energy expenditure as a percentage (%) of 
total expenditure per income decile (D) due to observed price 
changes (August 2021 – January 2023 relative to the 18 
months prior), excl. policy support and behavioural responses. 
Source: EMPL-JRC GD-AMEDI/AMEDI+ projects, based on 
Household Budget Survey 2015 and Eurostat inflation data 
for CP0451 and CP045 

The  increased  energy  prices  in  2021-2023 
negatively  affected  households’  budgets, 
with  a  particularly  hard  situation  for  low-
income  groups.  As  a  result  of  energy  price 
changes during the August 2021 to January 2023 
period  relative  to  the  18  months  prior  (cf.  Annex 
7), 
the  absence  of  policy  support  and 
behavioural  responses,  the  portion  of  individuals 
living  in  households  which  spend  more  than  10% 
of their budget on energy would have increased by 
14.7 pps for the whole population and by 14.9 pps 
among  the  (expenditure-based)  AROP  population, 
less  than  the  EU-level  increases  (16.4  pps  and 

in 

(92)  A break in the time series hinders comparison of the levels 
before 2019 (inclusive) with the levels from 2020 onwards. 

(93)  Products defined according to the European Classification of 
Individual Consumption according to Purpose (ECOICOP): 
CP045. 

19.1  pps,  respectively) (94).  Expenditure  shares  of 
low  and  lower-middle  income  groups  for  gas 
would  have  increased  the  most (95),  as  shown  in 
Graph A8.2.  Among  the  (expenditure-based)  AROP 
population,  the  share  of  individuals  living  in 
for  private 
households  with  budget  shares 
fuels  above  6% (96)  would  have 
transport 
increased more than the EU average (11.0 pps vs 
5.3  pps)  to  52.3%  in  January  2023  due  to  the 
increase in transport fuel prices. The RRP includes 
measures 
increase  energy  efficiency  via 
renovation of the building stock.  

to 

Access  to  public  transport  shows  an  urban-
rural divide, among the worst perceptions of 
affordability  in  the  EU.  Citizens  have  mixed 
perceptions  concerning  public  transport  being 
available  (51%  vs  55%  in  the  EU),  affordable 
(43% vs 54% in the EU) and of good quality (57% 
vs  60%  in  the  EU).  As  regards  these  perceptions, 
rural areas in Germany perform worse than urban 
areas, and worse when compared to rural areas in 
the EU overall (97). The average carbon footprint of 
the top  10% of emitters among the population in 
Germany  is  about  5.4  times  higher  than  that  of 
the  bottom  50%  (see  Graph  A8.1),  i.e.  slightly 
more pronounced than the EU average (5.0 times). 
Germany’s  RRP  includes  support  for  sustainable 
transport  as  well  as  a  tax  exemption  for  e-
vehicles.  In  Germany,  the  average  levels  of  air 
pollution in 2020 stood below the EU average (9.1 
vs 11.2 µg/m PM2.5), with 15% of the population 
living  in  regions  exposed  to  critical  levels  of  air 
pollution (98), leading to significant health impacts, 
in  particular  on  vulnerable  groups,  and  28 910 
premature deaths annually. (99)  

(94)  EMPL-JRC GD-AMEDI/AMEDI+ ; see details in the related 

technical brief. 

(95)  For Germany, the disaggregated expenditure data for 

CP0451, CP0453 and CP0455 are missing in the HBS-2015.  

(96)  ECOICOP: CP0722. 

(97)  EU (rural): 46%, 48%, 56% respectively. Special 

Eurobarometer 527. 

(98)  Two times higher than the recommendations in the WHO Air 

Quality Guidelines (annual exposure of 5µg/m3) 

(99)  EEA- Air Quality Health Risk Assessment 

48 

0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%2.0%GasGasGasGasGasGasGasGasGasGasD1D2D3D4D5D6D7D8D9D10DE GasEU Gas 
   
                                                 
                                                 
Table A8.1: Key indicators for a fair transition in Germany 

Source: Eurostat (env_ac_ainah_r2, nama_10_a64_e, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-
JRC GD-AMEDI/AMEDI+ projects and World Inequality Database (WID). 

49 

IndicatorDescriptionDE 2015DE LatestEU LatestGHG per workerGreenhouse gas emissions per worker - CO2 equivalent tonnes17.813.7 (2021)13.7 (2021)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24), automotive (C29) - %4.24 (2020)3 (2020)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries - %9.87.9 (2022)10.4 (2022)Energy povertyShare of the total population living in a household unable to keep its home adequately warm - %4.13.3 (2021)6.9 (2021)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport - %41.452.3 (2023)37.1 (2023)Carbon inequalityAverage emissions per capita of top 10% of emitters vs bottom 50% of emitters5.55.4 (2020)5 (2020) 
 
 
 
 
 
  
 
 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The  circular  economy  transition  is  key  to 
climate  and 
delivering  on 
the  EU’s 
environmental  goals  and  provides 
large 
socio-economic  benefits. It  spurs  job  growth, 
innovation  and  competitiveness  and 
fosters 
resilience  and  resource  security.  The  circularity 
transition  of  industry,  the  built  environment  and 
agri-food  can  generate  significant  environmental 
improvements (see Annex 6), as they rank among 
the most resource-intensive systems. 

unchanged,  as  has  the  amount  of  waste 
generated.  It  has  the  highest  recycling  rate 
across  the  EU.  In  2021 Germany  recycled  71.1  % 
of its municipal waste, which is well above the EU 
2020 recycling target of 50% of municipal waste. 
Given the overall high level of municipal waste of 
646  kg  per  head,  waste  prevention  measures 
taken  so  far  have  not  been  impactful  enough  or 
have yet to show their impact. 

Graph A9.1: Trend in material use 

Germany is on track to meet the EU’s circular 
economy goals, although there are still areas 
where  improvement  is  needed.  The  EU’s  2020 
circular  economy  action  plan  (CEAP)  aims  at 
doubling  the  circular  material  use  rate  between 
2020  and  2030.  Germany’s  use  of  circular 
materials  rose  from  11.8%  in  2017  to  12.7%  in 
2021, compared to the EU average of 11.7%. This 
shows  a  steady  increase  in  recent  years,  but 
Germany  needs  to  make  additional  efforts  to 
catch up with EU leaders, for example to promote 
not  only  circular  construction  materials,  but  also 
the 
built 
environment. The  CEAP  also  aims  to  significantly 
decrease  the  EU’s  material  footprint.  Although  on 
a  slight  downward  trend,  Germany’s  material 
footprint (15 tonnes per head) was above the EU-
27  average  (13.7  tonnes  per  head)  in  2020.  The 
reduction  path  is  not  constant,  and  the  footprint 
increased  in  2017.  The  labour  market  benefits  of 
the  circular  transition  remain  limited,  with  no 
growth in 2019.  

of  materials 

re-use 

the 

in 

Germany  recently  adopted  new  policies  to 
address  circular  economy  challenges,  and 
more  measures  are  planned.  For  example,  in 
2020, Germany  – as the first EU Member State  –
introduced  a  new  general  ’duty  of  care‘  in  its 
Circular  Economy  Act  (Kreislaufwirtschaftsgesetz), 
obliging  producers  and  distributors  to  prevent 
goods from becoming waste by introducing certain 
measures, for example selling goods at a reduced 
rate  or  donating  goods.  Germany  will  finally 
develop  a  comprehensive  circular  economy 
strategy, work on which began in December 2022. 
It  will  be  key  that  this  strategy  contains  concrete 
and measurable targets, including for the different 
sectors, and monitoring and control mechanisms.  

Germany  was  the  top  recycler  of  municipal 
waste in 2020, but the share of incineration, 
including with energy recovery, has remained 

50 

Source: Eurostat 

Graph A9.2: Treatment of municipal waste 

Source: Eurostat 

Further  accelerating  the  circular  economy 
transition  of  the 
is 
strategic 
important 

industrial  system 
Germany’s 

for 

0.020.040.060.080.0100.0120.00.02.04.06.08.010.012.014.016.018.0201620172018201920202021kg/capitatonnes/capitaMaterial footprint Germany (tonnes/capita)Material footprint EU-27 (tonnes/capita)Trade in recyclable raw materials Germany (imports extra EU, kg/capita)Trade in recyclable raw materials EU-27 (imports extra EU, kg/capita)6336276066096416460100200300400500600700201620172018201920202021Kg per capita Difference waste generated/treatmentLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27 
 
 
           
 
          
 
Table A9.1: Overall and systemic indicators on circularity 

(1) Persons employed in the circular economy only tracks direct jobs in selected sub-sectors of NACE codes E, C, G and S; (2) the 
circular material use rate measures the share of material recovered and fed back into the economy in overall material use; (3) the 
recovery rate of construction and demolition waste includes waste which is prepared for reuse, recycled or subject to material 
recovery, including through backfilling operations; (4) soil sealing: 2016 column refers to 2015 data; (5) food waste includes 
primary production, processing and manufacturing, retail and distribution, restaurants and food services, and households. 
Source: Eurostat, European Environment Agency 

and 

industry, 

resilience. 

Currently, 
independence 
Germany’s  material  import  dependency  stands  at 
40.6%  compared  to  22.9  %  for  the  EU,  however 
the  economy,  particularly 
is  more 
efficient at using materials to produce wealth than 
the EU average, with a resource productivity of 2.7 
purchasing power standard per kilogram vs. 2.3 for 
the  EU  average  (see  Annex  5).  Making  better  use 
including 
of 
of 
strengthening  secondary  raw  material  use 
in 
industry  will  help  reduce  resource  dependency,  in 
particular on fossil fuel-based raw materials.  

circularity, 

potential 

the 

The  built  environment  system  continues  to 
exacerbate 
resources 
the  depletion  of 
despite  recent  improvements.  At  94%,  the 
recovery rate of construction and demolition waste 
is well above the EU average of 89%. But the use 
of  re-used  and  recycled  building  materials  is  still 
hampered  by  building  regulations.  Germany  ranks 
above the EU average with a net land take (100) of 
119.9  m2/km2  (EU-27  average:  83.8  m2/km2) (101). 
Germany will need to take more measures to meet 
its national target of restricting daily land-take to 
under  30  ha  by  2030.  Daily  land  take  for  the 
period 2017-2020 was 54 ha.  

(100) The net land take concept combines land take with land 
return to non-artificial land categories (re-cultivation). 

(101) European Environment Agency, 2023, Land take in Europe.   

51 

to  exert  high  pressure  on 

The agri-food system needs to be adapted to 
reduce  pollution  and  food  waste,  but 
Germany is advanced as regards composting 
and  digestion.  In  2020,  food  waste  per  person 
was  131  kg  –  at  EU  average.  Intense  agriculture 
continues 
the 
environment:  groundwater  quality  improved  only 
marginally, and water pollution caused by nitrates 
remains  a  serious  concern.  There  are  continuing 
acute  problems  with  excess  plant  and  algae 
growth  due  to  high  concentrations  of  nutrients  in 
the  Baltic  and  North  Seas.  Still,  Germany  is  well 
above  the  EU  average  as  regards  anaerobic 
digestion: 150 kg per head compared to 100 kg in 
2021.  Anaerobic  digestion  can  help  Germany’s 
strategic  autonomy  by  generating  biomethane 
and/or  producing  organic  fertilisers.  Germany  is 
advanced  on  the  recovery  of  phosphorus  from 
sewage sludge.  

There remains a financing gap in the circular 
economy, 
including  waste  management. 
Additional investments will be required to address 
growing  needs.  The  financing  gap  was  estimated 
at EUR 6 billion per year between 2014 and 2020, 
while  investment  needs  were  estimated  to  be  at 
least  EUR  11.5  billion  per  year,  and  investment 
baselines were EUR 5.5 billion per year (see Annex 
6).  Additional 
to 
upgrade  plastic  recycling  and  digitalise  waste 
treatment infrastructure.  

investments  are  necessary 

AREA201620172018201920202021EU-27 Latest year EU-27Overall state of the circular economyMaterial footprint (tonnes/capita)15.716.116.015.715.0-13.72020YoY growth in persons employed in the circular economy (%)12.81.42.00.0--2.92019Water exploitation index plus (WEI+) (%)6.24.85.72.6--3.62019IndustryResource productivity (purchasing power standard (PPS) per kilogram)2.32.42.52.72.72.72.32021Circular material use rate (%)212.211.812.412.912.912.711.72021Recycling rate (% of municipal waste)67.167.267.166.770.371.149.62021Built environmentRecovery rate from construction and demolition waste (%)3--93.0-94.0-89.02020Soil sealing index (base year = 2006)4103.2-106.0---108.32018Agri-foodFood waste (kg per capita)5----131.0-131.02020Composting and digestion (kg per capita)116.0114.0109.0114.0143.0150.0100.02021 
                                                 
 
        
 
ANNEX 10: DIGITAL TRANSFORMATION 

transformation  by  2030, 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  Policy  Programme,  and  in 
particular  with  the  targets  in  that  Programme  for 
digital 
this  Annex 
describes Germany’s performance on digital skills, 
digital 
the 
digitalisation  of  businesses  and  public  services. 
Where relevant, it makes reference to progress on 
implementing  the  Recovery  and  Resilience  Plan 
(RRP).  As  of  May  2023,  Germany  allocates  more 
than  51%  of  its  total  RRP  budget  to  digital 
(EUR 13.5 billion) (102). 

infrastructure/connectivity 

and 

The  Digital  Decade  Policy  Programme  sets 
out a pathway for Europe’s successful digital 
transformation  by  2030.  The  Programme 
provides  a  framework  for  assessing  the  EU’s  and 
Member States’ digital transformation, notably via 
the  Digital  Economy  and  Society  Index  (DESI).  It 
also  provides  a  way  for  the  EU  and  its  Member 
States  to  work  together,  including  via  multi-
country  projects,  to  accelerate  progress  towards 
the  Digital  Decade  digital  targets  and  general 
objectives (103).  More  generally,  several  aspects  of 
digital  transformation  are  particularly  relevant  in 
the current context. In 2023, the European Year of 
Skills, building the appropriate skillset to make full 
use of the opportunities that digital transformation 
offers  is  a  priority.  A  digitally  skilled  population 
increases the development and adoption of digital 
technologies  and  leads  to  productivity  gains (104). 
Digital  technologies,  infrastructure  and  tools  all 
play  a  role  in  the  fundamental  transformation 
needed to adapt the energy system to the current 
structural challenges (105). 

Germany has a mixed performance on digital 
skills.  The  country  scores  below  the  EU  average 

(102) The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII of the RRF 
Regulation. 

(103) The Digital Decade targets as measured by DESI indicators 
and complementary data sources are integrated to the 
extent currently available and/or considered particularly 
relevant in the MS-specific context.  

(104) See for example OECD (2019): OECD Economic Outlook, 

Digitalisation and productivity: A story of complementarities, 
OECD Economic Outlook, Volume 2019 Issue 1 | OECD 
iLibrary (oecd-ilibrary.org). 

(105) The need and possible actions for a digitalisation of the 
energy system are laid out in the Communication 
‘Digitalisation the energy system – EU action plan’ 
(COM(2022)552. 

52 

on  basic  digital  skills,  but  above  average  for  the 
percentage of ICT specialists and matches the EU 
average  for  female  ICT  specialists.  The  German 
RRP includes several measures that support digital 
skills  and  notably  digital  education,  such  as 
investment in digital devices for teachers (as part 
of the broader infrastructure measure Digital Pact 
for  Schools  (DigitalPakt  Schule)),  an  education 
platform  and  educational  centres  of  excellence. 
some 
is 
Moreover,  Germany 
measures  to  support  the  up-  and  reskilling  of  its 
workforce,  including  in  the  context  of  measures 
that focus on the digitalisation of businesses (e.g. 
European  Digital  Innovation  Hubs  or  the  Digital 
Now (Digital Jetzt) investment support scheme).  

implementing 

Very high capacity network (VHCN) coverage 
in  rural  areas  and  fibre  coverage  in  general 
remain  a  key  challenge  for  Germany.  Despite 
recent  improvements,  Germany  is  still  below  the 
EU  average  for  VHCN  in  rural  areas  (30% (106) 
compared  to  45%  in  2022).  Fibre  coverage  and 
take-up, overall and in rural areas in particular, are 
increasing  very  slowly  and  remain  considerably 
below  the  EU  average  (19%  overall  and  17% 
rural).  However,  Germany  scores  above  the  EU 
average  in  overall  5G  coverage  in  2022  (93%  vs 
the EU average of 81%). 5G coverage on the 3.4-
3.8  GHz  spectrum  band,  which  is  essential  for 
enabling  advanced  applications  requiring  large 
spectrum  bandwidth,  is  36%  in  Germany,  below 
the EU average of 41%. The German RRP does not 
include  measures  to  support  the  deployment  of 
fibre  connections,  but  the  Federal  Government 
allocated  EUR 12 billion (107)  for  this  purpose.  In 
July  2022,  a  gigabit  strategy  was  adopted (108), 
which includes goals of 15 million new fibre to the 
premises  (FTTP)  connections  by  the  end  of  2025 
and on the availability of FTTP connections  for all 
German  households  by  2030.  A  revised  funding 
programme  came  into  effect  in  2023.  These 
measures  are  expected 
fibre 
deployment in Germany. 

to  accelerate 

The  country  has  a  mixed  performance  on 
digitalisation  of  businesses.  Germany  scores 
above  the  EU  average  for  most  indicators  in  this 
area,  e.g.  digital  intensity  for  SMEs  and  the 

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

(digital-agenda-data.eu) 

(107) BMDV - Die Gigabitförderung 2.0 (bund.de) 

(108) BMDV - Gigabitstrategie der Bundesregierung verabschiedet 

 
 
                                                 
                                                 
 
if  implemented  timely  and  effectively.  These 
measures  account  for  more  than  50%  of  digital 
investments under the plan. 

adoption  of  advanced  digital  technologies  like  big 
data and artificial intelligence, except for uptake of 
cloud  computing  services,  which  is  slightly  below 
the  EU  average.  The  performance  of  SMEs  is 
around the EU average for several indicators. The 
proportion  of  SMEs  selling  online  is  19%  (in  line 
with the EU average), their e-commerce turnover is 
12% (just above the EU average of 11%) 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  the 
Digital  Hub  initiative,  the  national  SME  strategy 
(Mittelstandsstrategie),  and 
‘Mittelstand-
Digital’  (SMEs  Digital)  programme  -  which  itself 
consists  of  the  three  pillars:  (i)  the  ‘Mittelstand 
Digital  Innovation  Hubs’  network;  (ii)  the  Digital 
Now  (Digital  Jetzt)  investment  support  scheme; 
and (iii) the ‘Cybersecurity for SMEs Initiative’, (IT-
Sicherheit-in-der-Wirtschaft).  The  German  RRP 
the 
includes  several  measures 
digitalisation  of  enterprises  and  the  development 
and  integration  of  advanced  digital  technologies. 
These  measures  include  the  Important  Project  for 
(IPCEI)  on  Next 
Common  European 
Generation  Cloud  Infrastructure  and  Services  and 
the  IPCEI  on  Microelectronics  and  Communication 
Technologies,  as  well  as  a  vehicle  manufacturer 
and supplier investment programme.  

to  support 

Interest 

the 

of 

Germany 

improve 

services, 

is  starting  to 
public 

in  the 
Germany 
digitalisation 
but 
implementation  remains  slow  and  a  crucial 
reform  issue  in  Germany  (see  Annex  13  for 
more  details  on  structural  challenges).  The 
country  scores  slightly  below  the  EU  average  on 
the  provision  of  digital  public  services  for 
businesses  and  slightly  above  the  EU  average  for 
citizens. 
electronic 
has 
identification  (eID)  schemes  at  level  of  assurance 
‘high’ that are notified under the eIDAS regulation. 
Regarding  access  to  electronic  health  records, 
Germany scores 71 out of 100, in line with the EU 
average.  The  National  Regulatory  Control  Council 
Germany’s  work 
acknowledges 
the 
digitalisation  of 
its  public  administration  but 
considers that the country is still lagging behind as 
regards  quantifiable  results (109). The  German  RRP 
includes  several  measures 
the 
implementation  of  digital  public  services,  which 
are expected to improve performance in this area 

to  support 

three 

on 

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

Administration, Number 6 

53 

 
                                                 
Table A10.1: Key Digital Decade targets monitored by DESI indicators 

(1) The 20 million target represents about 10% of total employment. 
(2) The Fibre to the Premises coverage indicator is included separately as its evaluation will also be monitored separately and 
taken into consideration when interpreting VHCN coverage data in the Digital Decade. 
(3) At least 75 % of Union enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence.  

Source: Digital Economy and Society Index 

54 

EUDigital Decade target by 2030 DESI 2021DESI 2022DESI 2023DESI 2023(EU)Digital skillsAt least basic digital skillsNA49%49%54%80%% individuals2021202120212030ICT specialists (1)4.7%4.9%4.9%4.5%20 million% individuals in employment aged 15-7420202021202120212030Digital infrastructure/connectivityFixed Very High Capacity Network (VHCN) coverage56%75%70%73%100%% households20202021202220222030Fibre to the Premises (FTTP) coverage (2)14%15%19%56%-% households20202021202220222030Overall 5G coverage18%87%93%81%100%% populated areas202020212022202220305G coverage on the 3.4-3.8 GHz spectrum bandNANA36%41%-% populated areas202220222030Digitalisation of businessesSMEs with at least a basic level of digital intensityNANA77%69%90%% SMEs202220222030Big data (3)18%18%18%14%75%% enterprises20202020202020202030Cloud (3)NA32%32%34%75%% enterprises2021202120212030Artificial Intelligence (3)NA11%11%8%75%% enterprises2021202120212030Digitalisation of public servicesDigital public services for citizensNA767877100Score (0 to 100)2021202220222030Digital public services for businessesNA808184100Score (0 to 100)2021202220222030Access to e-health recordsNANA7171100Score (0 to 100)202320232030Germany 
 
 
 
 
  
 
 
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
and 
performance 
innovation system, which is essential for delivering 
the twin green and digital transition. 

of  Germany’s 

research 

Innovation  Scoreboard (110) 

Germany  is  a  ‘strong  innovator’,  but  its 
performance  is  increasing  at  a  lower  rate 
than  the  EU’s.  According  to  the  2022  edition  of 
the 
the  European 
country’s performance stands at 117.5% of the EU 
average  and  is  above  the  average  of  the  strong 
innovators  (114.5%).  However,  its  performance 
lead  over  the  EU  is  shrinking.  Amongst  the  main 
reasons are weakness related to human resources, 
in  particular 
for  small  and  medium-sized 
enterprises  (SMEs),  and  the  relatively low  level  of 
venture and growth capital. 

Total  R&D  intensity (111)  was  3.13%  in  2021, 
above  the  EU  target  of  3%.  However,  it  is  still 
below Germany’s own target of 3.5% for 2025, set 
in  2018 (112),  and  it  has  been  declining  compared 
to its 2019 value (3.17%). The latest report by the 
Expert  Commission  on  Research  and  Innovation 
welcomed  the  pursuit  of  the  3.5%  target  and 
highlighted the need to allocate more resources to 
green  and  digital 
innovation, 
particularly in support of radical innovations (113). 

research  and 

sector 

the  private 

While 
contributes 
significantly  to  R&D  spending,  innovation 
activity  in  SMEs  continues  to  decline.  SMEs’ 
share of business R&D expenditure (as % of GDP) 
in Germany has stagnated at a low level over the 
last decade and remains significantly below the EU 
average  (Germany:  0.19%  in  2019,  EU:  0.34%). 
Innovation  expenditure  remains  concentrated  in 
relatively  few  and  mainly  large  businesses  (see 
Annex  12).  To  improve  the  situation,  Germany 
introduced  a  R&D  tax  incentive  system  in  2020, 

(110) 2022 European Innovation Scoreboard, Country profile: 

Germany https://ec.europa.eu/assets/rtd/eis/2022/ec_rtd_eis-
country-profile-de.pdf The EIS provides a comparative 
analysis of innovation performance in EU countries, including 
the relative strengths and weaknesses of their national 
innovation systems (also compared to the EU average). 

(111) defined as gross domestic expenditure on R&D as a 

percentage of GDP 

(112) The target was reiterated in the Coalition Agreement of the 

the  effect  of  which  has  still  to  materialise (114). 
Furthermore,  Germany’s  recovery  and  resilience 
plan  (RRP)  contains  various  measures  to  support 
SME innovation for green technologies, e.g., linked 
to 
renewable  hydrogen  and  climate-friendly 
construction and innovation. 

in 

remains  small 

Germany  accounts  for  the  largest  share  of 
unicorns  (privately  owned  company  reaching 
a  valuation  of  $  1  billion  or  more)  in  the 
EU (115),  but  the  available  venture  capital 
market 
international 
comparison.  While  the  country’s  venture  capital 
increased between 2020 and 2021 (from 0.054% 
to  0.076%  of  GDP),  it  remains  just  above  the  EU 
average 
in 
the  availability  of 
international  comparison, 
venture  capital  remains  low (116).  The  government 
has  put  in  place  support  programmes  for  start-
ups,  e.g.  the  Future  Fund (117),  but  the  majority  of 
the funds focus on start-ups at an early stage of 
their  development.  Therefore,  firms’  access  to 
growth  and  later-stage  capital  remains  a  major 
led  many  high-potential 
challenge  and  has 
German start-ups to turn to foreign investors (118). 

in  2021).  Particularly 

(0.074% 

Graph A11.1: Venture Capital in Germany (2022) as 
% of GDP 

Source: OECD (2022), ‘Venture capital investments’, 
Structural and Demographic Business Statistics (database), 
accessed on 10/01/2023 

The  lack  of  skilled  workers  is  hampering 
investment in innovation and digitalisation.  

(114) Bundesbericht Forschung und Innovation 2022 - Hauptband 

(bundesbericht-forschung-innovation.de) 

(115) SRIP report (europa.eu) 

(116) https://soet-pdf.s3.eu-west-

2.amazonaws.com/State_of_European_Tech_2021.pdf 

new German government in 2021. 

(117) BMWK - Future Fund 

(113) Gutachten zu Forschung, Innovation und Technologischer 

(118) OECD Innovation Review 2022, *50b32331-en.pdf (oecd-

Leistungsfähigkeit Deutschlands 2022, e-fi.de. 

ilibrary.org). 

55 

0.00%0.04%0.08%0.12%0.16%SeedStart-up and other early stageLater stage ventureNo breakdown available 
 
                                                 
  
                                                 
 
Table A11.1: Key innovation indicators 

(1) EU average for the latest available year or the year with the highest number of country data 
Source: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO's Patent Statistical database), Invest Europe 

High-growth firms in Germany account for a lower 
share  of  employment  than  the  EU  average 
(Germany:  13.54%,  EU:  15.90%  in  2019).  This  is 
underlined  by  a  recent  OECD  study  pointing  to 
shortages  of  highly  skilled  staff  in  7  out  of  10 
high-skilled  occupations,  one  of  the  highest  rates 
in the OECD (119) (see Annex 14). To overcome the 
shortage of skilled labour, the RRP includes various 
to  encourage  skills-upgrading  and 
measures 
address  labour  shortages,  such  as  the  Digital 
Education  Platform  and  Educational  Centres  of 
Excellence.  Furthermore,  the  Federal  Government 
is focusing more on skilled migration and, in 2020, 
introduced the Skilled Immigration Act, which aims 
to  ease  administrative  burdens  and  simplify 
requirements  for  the  recognition  of  qualifications 
in the information and communications technology 
sector,  where  skill  shortages  are  particularly 

(119) OECD Innovation Review 2022: *50b32331-en.pdf (oecd-

ilibrary.org). 

severe (120).  Reforms  under  the  Act  are  currently 
underway  and,  in  November 2022,  the  Federal 
government  decided  on  key  points  for  improving 
and  modernising 
law,  aimed  at 
immigration 
increasing the immigration of skilled  workers (121). 
In its 2023 report (122), the Commission of Experts 
for Research and Innovation, reiterated the need to 
secure  the  skilled  labour  base  and  underlined  the 
necessity to make better use of the existing skilled 
labour base and to attract foreign skilled workers. 

(120) https://www.deutschland.de/en/topic/business/the-skilled-

labour-immigration-act-working-in-germany. 

(121) https://www.bmi.bund.de/SharedDocs/pressemitteilungen 

/DE/2022/11/eckpunkte-fachkraefte.html. 

(122) https://www.e-

fi.de/fileadmin/Assets/Gutachten/2023/EFI_Summary_2023.
pdf 

56 

EUaverage (1)R&D intensity (GERD as % of GDP)2.732.933.173.133.132.26Public expenditure on R&D as % of GDP0.90.920.981.041.050.76Business enterprise expenditure on R&D (BERD) as % of GDP1.832.012.182.092.091.49Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 11.211.210.47::9.8Patent Cooperation Treaty patent applications per billion GDP (in PPS)7.76.55.9::3.3Public-private scientific co-publications as % of total publications9.49.910.810.910.87.1Public expenditure on R&D financed by business enterprise (national) as % of GDP0.1050.1170.117::0.054New graduates in science & engineering per thousand pop. aged 25-3415.117.119.717.6:16.0Total public sector support for BERD as % of GDP:0.0820.084::0.194Share of environment-related patents in total patent applications filed under Patent Cooperation Treaty (%)17.114.213.5: :13.3Venture capital (market statistics) as % of GDP0.0320.0260.0490.0540.0760.074Employment in fast-growing enterprises in 50% most innovative sectors5.94.66.1::5.52021Finance 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 2020Germany201020152019 
                                                 
 
                                                 
 
 
  
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

country-specific 

employment  levels  high. (124)  While  the  long-term 
slowdown in productivity is a global phenomenon, 
productivity  growth  in  Germany  is  also  hampered 
by 
structural  weaknesses, 
including  in  respect  to  digitalisation  (see  Annex 
10),  research  and  innovation  (see  Annex  11)  as 
well  as  skills  shortages  and  mismatches  (see 
Annex  14).  Entrepreneurship  can  also  further 
contribute to boosting innovation and productivity. 
In  July  2022,  the  German  government  adopted  a 
comprehensive  start-up  strategy (125)  aimed  at 
conditions, 
improving 
start-ups  and 
strengthening 
facilitating spin-offs from science and universities.  

framework 

regulatory 

financing 

for 

Graph A12.2: Productivity by sector 

remains 

subdued. 

Productivity  in  Germany  has  recovered  from 
the  disruptions  caused  by  the  pandemic  but 
The  World 
growth 
Competitiveness  Ranking  by  the 
International 
Institute  for  Management  Development  (IMD) 
places  Germany  as  the  15th  most  competitive 
economy  in  the  world,  partly  due  to  its  economic 
strength,  stable  and  predictable 
framework 
conditions,  skilled  workforce  and  effective  legal 
environment. (123)  At  122%  of  the  EU  average  in 
2022, labour productivity is high in Germany (GDP 
per  hour  worked).  Productivity  was  strongly 
affected  by  the  COVID-19  pandemic,  causing 
significant  fluctuations  in  2020  and  2021  (see 
Graph  A12.1).  Per  capita 
labour  productivity 
declined by 2.7% in 2020, but recovered the year 
after,  increasing  by  2.5%  in  2021.   In  2022,  the 
soaring  costs  for  energy  and  other  inputs  caused 
further  disruption,  but  productivity  is  expected  to 
recover in 2023-2024 in line with the EU average. 
Cumulated  total  factor  productivity  gains  remain 
above  the  EU  average,  driven  in  particular  by 
manufacturing and ICT, though growth has slowed 
over the last years. 

Graph A12.1: Total factor productivity 

Source: European Commission. 

its 

Germany  has  been  hit  particularly  hard  by 
large 
the  energy  crisis  because  of 
manufacturing base. The soaring prices imposed 
new  challenges  in  particular  for  energy-intensive 
sectors,  such  as  metals  processing,  chemicals, 
paper,  and  non-metal  mineral  products,  where 
production declined by 10% in 2022. (126) Industry 
contributed  noticeably  to  the  overall  gas  savings. 
In  the  last  quarter  of  2022,  its  gas  consumption 
was  23%  below  the  average  of  the  last  four 

(124) German Council of Economic Experts, Annual Report 2022/23 
"Managing the Energy Crisis in Solidarity and Shaping the 
New Reality", 9 November 2022, 
https://www.sachverstaendigenrat-wirtschaft.de 

(125) BMWK, 27.7.2022 BMWK - Startup roadmap ready: Federal 

Cabinet adopts first comprehensive startup strategy 

(126) Federal Statistical Office of Germany, 

Produktionsentwicklung in energieintensiven 
Industriezweigen, https://www.destatis.de/ 

Source: European Commission. 

The  German  National  Productivity  Board  sees  the 
future competitiveness of the German economy as 
depending largely on its ability to provide the right 
framework  conditions  for  using  innovations  and 
new technologies to increase productivity and keep 

(123) Institute for Management Development, World 

competitiveness ranking 2022. 

57 

-5-4-3-2-101234000204060810121416182022% changeActual TFP, GermanyTrend TFP, GermanyTrend TFP, EU7090110130150030507091113151719212003=100Market services (G_N)Manufacturing (C)Construction (F)Tradable (A_E, G_J)Non tradable (F, K_U) 
 
   
                                                 
        
                                                 
 
years. (127) Large firms which produce globally find 
it easier to balance out fluctuations in energy and 
raw  material  prices  and  to  pass  on  the  higher 
costs to their customers, while for many SMEs the 
recent cost increases pose a major. (128) Insolvency 
cases increased towards the end of 2022, though 
the  numbers  were  still  relatively  low  in  a  long-
term  comparison. (129)  The  German  government 
has  adopted  substantial measures  to  help  private 
households and firms cope with the soaring costs 
for  gas,  heat  and  electricity  (see  Annex  7).  In 
October  2022,  producer  prices  started  to  decline 
for the first time in two and a half years, but price 
levels are set to remain elevated. 

increasing 

industries,  which  are 

High  energy  costs  are 
the 
pressure  on  firms  to  reduce  their  energy 
intensity  and  accelerate  structural  change. 
The  soaring  energy  prices  strongly  affected  the 
business environment and bear the risk that firms 
in 
in  energy-intensive 
particularly  strong  competition  with  companies 
outside  the  EU,  may  shift  at  least  parts  of  their 
production  abroad. (130)  The  German  Council  of 
Economic  Experts  sees  the  following  sectors 
particularly  concerned,  as  they  have  the  highest 
gas  consumption  per  euro  of  sales:  the  metal 
production 
the 
processing 
manufacture  of  glass  and  glassware,  ceramics, 
processing of stone and earth, as well as energy-
intensive  products 
chemical 
in 
industry. (131)  

the  basic 

industries, 

and 

Germany's 
industry  would  benefit  from 
strengthening  the  resilience  of  strategic 
value  chains.  The  supply  disruptions  caused  by 
the  pandemic  and  Russia’s  war  against  Ukraine 
have affected large parts of the German economy 
and revealed its sensitivity to disruptions in global 
value  chains.  Studies  estimated  that  from  the 

(127) Bundesnetzagentur, 6.1.2023, Gasversorgung 2022, 

https://www.bundesnetzagentur.de/   

(128) DIHK Konjunkturumfrage, February 2023, 

https://www.dihk.de/  

(129) Statistisches Bundesamt, 11.1.20203, 

https://www.destatis.de/DE/Presse/Pressemitteilungen/  

(130) Leibniz-Institut für Wirtschaftsforschung Halle, 

Pressemitteilung 10 November 2022, https://www.iwh-
halle.de/presse/pressemitteilungen/  

(131) German Council of Economic Experts, Annual Report 2022/23 
"Managing the Energy Crisis in Solidarity and Shaping the 
New Reality", 9 November 2022, 
https://www.sachverstaendigenrat-wirtschaft.de 

58 

beginning  of  2021  to  mid-2022,  goods  worth 
almost  EUR  64  billion  could  not  be  manufactured 
due  to  supply  bottlenecks  and  that  German  GDP 
could  have  been  1.2%  higher  in  2021  and  1.5% 
higher  in  mid-2022  if  all  new  orders  had  been 
processed. (132)  Dependencies  exist  for  a  broad 
range of raw materials and components, including 
critical raw materials necessary for the green and 
digital  transition.  While  supply  disruptions  have 
started  to  ease,  in  the  last  quarter  of  2022  77% 
of  firms  were  still  affected  by  shortages  of 
important  materials  and  primary  products, 
considerably  above  the  EU  average  (48%).  The 
automotive and mechanical engineering industries 
have been particularly affected. 

Barriers  to  private  and  public  investment 
include skills shortages, capacity constraints, 
bureaucratic  burden  and  slow  progress  in 
digitalisation.  According  to  the  EIB  Investment 
important 
Survey  2022,  firms  cite  as  most 
impediments the availability of skilled staff (93%), 
energy  costs  (83%)  and  uncertainty  about  the 
future (74%). The lack of skills and workforce (see 
also  Annex  14)  has  become  a  major  bottleneck 
particularly for SMEs and risks delaying the digital 
and green transition. (133) However, other obstacles 
also hamper investment: Capacity constraints and 
lack  of  digitalisation  in  public  administration  (see 
also  Annex  13),  especially  at municipal  level,  also 
affect  private  investment.  Moreover,  innovation 
expenditure  is  increasingly  concentrated  in  large 
companies  and  few  sectors,  whereas  SMEs’ 
innovation activity is modest (see also Annex 11).  

burden 
planning 

Germany  still  has  scope  to  further  improve 
the  business  environment  by  reducing  the 
for  SMEs  and 
administrative 
streamlining 
permitting 
and 
procedures.  Germany  still  has  substantial  scope 
to  reduce  the  administrative  burden  for  SMEs, 
including by modernising registers and digitalising 
public services in the context of the Online Access 
Act and beyond. However, progress in this respect 
has  been  slow  and  the  related  measures  in  the 

(132) Institut für Makroökonomie und Konjunkturforschung (IMK),  
https://www.imk-boeckler.de/de/pressemitteilungen-15992-
lieferengpasse-kosteten-deutsche-industrie-bis-mitte-2022-
knapp-64-milliarden-euro-44984.htm 

(133) SME Performance Review 2021/2022 and country fact sheet 

for Germany, 20.6.2022, https://single-market-
economy.ec.europa.eu/smes/sme-strategy/sme-
performance-review_en  

 
                                                 
                                                 
for 

investment 

German  recovery  and  resilience  plan  do  not 
encompass the full scope of the Online Access Act 
(see  also  Annex  10).  Germany plays  an  important 
role  in  Europe’s  transition  to  climate  neutrality,  in 
line  with  the  Green  Deal  Industrial  Plan (134)  and 
Europe’s  ambitious  climate  targets,  in  respect  to 
both supply of and demand for clean technologies. 
lengthy  planning  and  permitting 
However, 
procedures 
risk 
compromising  progress  in  respect  to  the  green 
transition,  in  particular  regarding  wind  power, 
energy infrastructure and clean tech projects (see 
also  Annexes  6  and  7).  Federal  and  regional 
authorities have already taken a number of steps 
to 
permitting 
planning 
procedures (135),  including  in  the  context  of  an 
ongoing project by the Single Market Enforcement 
Taskforce.  However,  efficient  implementation  and 
adequate resources will be needed at all levels of 
administration.  

streamline 

projects 

and 

Germany has scope for further improvement 
in  enforcing  Single  Market  rules.  While 
Germany’s  trade  integration  in  the  Single  Market 
for goods is above the EU average, it is relatively 
low for services. The Single Market Scoreboard (136) 
indicates  scope  for  further 
improvement,  for 
example  with  respect  to  ongoing  infringement 
cases.  While  the  number  of  infringements  has 
decreased  slightly,  Germany  has  the  second 
highest  number  of  pending  cases  in  the  EU  (up 
from  the  4th  place  in  2020).  Problematic  areas 
include  taxation,  environment  and  transport,  as 
well  as 
the  Professional 
Qualifications  Directive (137)  and  Proportionality 
Test  Directive. (138)  Germany’s  SOLVIT  centre, 
designed to help citizens and businesses deal with 
potential  breaches  of  EU  rights  in  other  EU 
countries,  would  benefit  from  additional  human 
regards  public  procurement, 
resources.   As 
Germany’s  performance  is  in  line  with  the  EU 
for 
average,  but 

there  still  seems 

compliance  with 

room 

(134) Green Deal Industrial Plan for the Net-Zero Age. COM(2023) 

62 final 

(135) Übersicht über wichtige umgesetzte 

Beschleunigungsmaßnahmen des BMWK zum Erneuerbaren-
Ausbau und zum Stromnetzausbau, 8.2.2023  
beschleunigungsmassnahmen-des-bmwk-zum-
erneuerbaren-ausbau.pdf  

(136) Single Market Scoreboard, https://single-market-

scoreboard.ec.europa.eu/performance-overview_en 

(137) 2005/36/EC 

(138) 2018/935/EU 

(TED)  and  the  quality  of 

improvement,  for  example  regarding  the  number 
of  procurements  advertised  on  Tenders  Electronic 
Daily 
information 
provided.  Reducing  administrative  burden  could 
also  promote  competition  in  public  procurement, 
where the percentage of single bids has increased 
from 19% to 25% in the last two years. (139) 

Graph A12.3: Business environment and 
productivity drivers 

Source: 1) % of GDP, 2021 Eurostat;  
2) composite indicator, 2021 European Investment Fund 
access to finance index;  
3) average payment delay in number of days, 2022 Intrum;  
4) % of firms in manufacturing facing constraints, 2022 
European Commission business consumer survey;  
5) proportion of contracts awarded with a single bidder, 2022 
Single Market Scoreboard. 

on 

recent 

engineers, 

accountants/tax 

reforms,  mostly 

Reducing  restrictive  regulation  in  services 
could  boost  competition  and  productivity. 
Restrictions  on  regulated  professions  remain  high 
in  comparison  to  the  EU  average  for  architects, 
civil 
advisers, 
patent/trademark  agents  and  lawyers,  despite 
concerning 
some 
restrictions 
and 
company 
multidisciplinary  partnerships  in  2021  in  tax  and 
legal  professions.  Exclusive  rights  to  exercise  tax 
advice  and  legal  services  remain  very  broad, 
preventing development of innovative services and 
the up-take of modern IT solutions (“LegalTech” in 
legal services). Significant requirements remain for 
accountants on shareholding and joint exercise of 
activities,  and  for  architects 
to 
company 
restrictions  on 

shareholding  and 

ownership 

relation 

in 

(139) https://single-market-scoreboard.ec.europa.eu/business-

framework-conditions/public-procurement_en  

59 

1) Businessinvestments2) EIF access tofinance index3) Payment gap -G2B3) Payment gap -B2B4) Materialshortage4) Labourshortage5) Single bidsEuropean UnionGermany 
                                                 
          
                                                 
Table A12.1: Industry and the Single Market 

(*) Last available year  
Source: (1) AMECO, (2) Eurostat: NAMA_10_LP_A21, (3) ECFIN BCS, (4) Eurostat: jvs_a_rate_r2, (5) COMEXT, (6) Eurostat: 
nrg_inf_epc, (7) Eurostat: BOP_C6_A, (8) OECD, (9) Single Market Scoreboard, (10) EIB survey, (11) Eurostat: sts_rb_a, (12) Intrum, 
(13) SAFE Survey, (14) EIF SME Access to Finance Index. 

standards  and  consumer  interests,  could  boost 
competition and productivity.   

also 

Restrictiveness 

form. (140) 
remains 
comparatively  high  in  retail,  in  particular  for 
establishment  of  shops,  where  Germanys 
is 
among  the  most  restrictive  Member  States. (141) 
Reducing 
regulated 
professions  and  retail,  while  safeguarding  quality 

regulation 

restrictive 

in 

(140) European Commission, Communication on updating the 
reform recommendations for regulation in professional 
services, COM(2021)385.  

(141) European Commission, Retail Restrictiveness Indicator (2022 

update), forthcoming. 

60 

POLICY AREAINDICATOR NAME20182019202020212022EU27 average (*)Net private investment, level of private capital stock, net of depreciation, % GDP (1)2.82.81.9223.7Net public investment, level of public capital stock, net of depreciation, % GDP (1)0.10.10.30.200.4Real labour productivity per person in industry (% yoy)(2)-0.9-1.8-55.7-0.41.4Cost competitive-nessNominal unit labour cost in industry (% yoy)(2)34.23.1-2.53.92.9Material shortage (industry), firms facing constraints, % (3)211513567747Labour shortage using survey data (industry), firms facing constraints, % (3)251910233928Vacancy rate (business economy)(4)3.33.52.63.54.83.1Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials (5)0.210.180.150.170.190.18Installed renewables electricity capacity, % of total electricity produced (6)52.854.656.958.1n.a.50.9Single Market integrationEU trade integration, % (7)22.923.021.023.425.645.8RestrictionsEEA Services Trade Restrictiveness Index (8)0.050.050.050.050.050.05Public procurement Single bids, % of total contractors (9)202219202529Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle (10)37.129.431.529.131.829.6Bankruptcies, Index (2015=100)(11)83.581.168.660.563.286.8Business registrations, Index (2015=100) (11)9088.577.57978.1121.2Payment gap - corporates B2B, difference in days between offered and actual payment (12)-5120121213Payment gap - public sector, difference in days between offered and actual payment (12)4224111315Share of SMEs experiencing late payments in past 6 months, % (13)n.a.33.53533.433.243EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1 (14)0.630.720.71n.a.n.a.0.46EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 1 (14)0.40.30.2n.a.n.a.0.23BUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to financeHEADLINE INDICATORSEconomic StructureRESILIENCEShortagesStrategic dependenciesSINGLE MARKET 
                                                 
 
          
 
ANNEX 13: PUBLIC ADMINISTRATION 

This  Annex  outlines  the  performance  of 
Germany’s  public  administration,  which  is 
essential for providing services and carrying 
out  reforms.  Overall,  Germany’s  government 
effectiveness  ranks  above  the  EU  average (142). 
The  country  has  a  long-standing  tradition  of  high 
quality and professional public administration, with 
a strong commitment to delivering services well.   

the  public  administration  was  the  sixth  lowest  in 
the EU-27 in 2022 (Graph A13.2). 

Graph A13.1: Germany. E-government maturity and 
e-government users 

of 

of 

the 

the 

(RRP) 

e-Government 

digitalisation 

The 
public 
administration  remains  a  crucial  reform 
issue  in  Germany.  Digital  public  services  can 
reduce  burdens  for  businesses  and  citizens.  The 
recovery  and 
includes 
resilience  plan 
significant measures on the digital transformation 
of  the  public  administration.  Germany  still  scores 
below the EU average in terms of the proportion of 
people using e-Government services and in various 
aspects 
benchmark 
indicators,  such  as  transparency,  the  existence  of 
key enablers and the accessibility of digital public 
services to citizens from abroad (Graph A13.1 and 
Annex  10).  The  benchmark  also  shows  that 
Germany is  behind  the  EU  average  on  digitalising 
both  front  and  back  offices  of  public  service 
providers.  Moreover,  the  objectives  of  the  Online 
Access  Act  were  only  partially  achieved  by  the 
target  date  of  end-2022.  Due  to  Germany's 
federal  system,  many  public  administration  tasks 
and  their  digitalisation  are  handled  at  the  Länder 
and  municipal  levels.  Against  this  backdrop,  the 
Federal  Government  and  the  Länder  are  stepping 
up  their  collaboration  and  have  prioritised  the 
nationwide delivery of digital public services.   

The ageing of public sector staff in Germany 
presents a risk. The ratio of 25- to 49-year-olds 
to  50-  to  64-year-olds  is  lower  than  the  EU 
average,  which  could  have  a  potential  negative 
effect  on  the  delivery  of  public  services  (Table 
A13.1).  The  reduced  attractiveness  of  the  civil 
service  as  a  place  to  work  is  reflected  in  a 
decreasing proportion of young employees.  

The  participation  of  public  administration 
employees  in  adult  learning  is  below  the  EU 
average,  as  is  the  share  of  employees  with 
higher  education  (Graph  A13.2a).  Germany  has 
launched  upskilling  and  reskilling  programmes. 
Gender  parity  in  senior  management  positions  in 

(1) 2022 data for the e-government maturity indicator and 
2021 data for the e-government users’ indicator. 
Source: E-government benchmark report and Eurostat 

the 

reform  for 

The 
justice  system  performs  efficiently 
overall.  The  new  Federal  Government’s  agenda 
includes 
improvement  of  planning  and 
the 
approval  processes,  and  a 
acceleration  of  administrative  court  procedures. 
However,  challenges  remain 
in  administrative 
cases,  with  the  time  it  takes  to  hand  down  a 
decision  (422  days  in  first  instance  in  2021)  and 
the  high  number  of  pending  cases  (0.9  per  100 
inhabitants in 2021). The clearance rate, however, 
has  also  remained  high  (110%  in  2021).  The 
overall  quality  of  the  justice  system  is  good.  The 
level of digitalisation is advancing and digital tools 
are widely used in courts and prosecution services, 
including  an  electronic  case  management  system, 
technology  for  secure  remote  working  by  judges 
and  staff  and  for  remote  communication,  and  an 
electronic  case  allocation  system.  However,  there 
are some challenges concerning human resources 
in  the  justice  system.  For  example,  the  effects  of 
the  ageing  of  the  work  population  and  the 
declining  attractiveness  of  the  government  as 
employer.  No  systemic  deficiencies  in  judicial 
independence have been reported (143). 

(142) Worldwide Governance Indicators, 2021 data 

(143) For a more detailed analysis of the performance of the 
justice system in Germany, see the 2023 EU Justice 
Scoreboard (forthcoming) and the country chapter for 
Germany in the 2023 Rule of Law Report (forthcoming). 

61 

0102030405060708090100UsercentricityTransparencyKey enablersCross-border servicesTotalE-government maturityE-govt.usersDEEU-27 
 
                                                 
      
                                                 
 
Table A13.1: Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2022 value. If not available, the 2021 value is shown. 
(3) 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. (4) Defined as the absolute value of the difference between the 
percentage of men and women in senior civil service positions. 
Flags: (b) break in time series; (d) definition differs; (u) low reliability. 
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Labour Force 
Survey, Eurostat (# 4, 5, 7), European Institute for Gender Equality (# 6); Fiscal Governance Database (# 8, 9); OECD Indicators of 
Regulatory Policy and Governance (# 10). 

is 

accrual 

less  advanced 
accounting 

Overall,  Germany 
in 
for 
implementing 
government  government  relative  to  the  EU 
average (Graph A13.2c). This applies in particular 
at  the  federal  and  state  levels  of  government. 
Accrual  accounting  as  a  public  accounting 
and 
a 
standard 

comprehensive 

provides 

transparent  overview  of  a  public  body’s  financial 
position  and  performance  and  can  support 
sustainability and intergenerational equity. 

Graph A13.2: Germany. a) Participation rate of 25-64 year olds in adult learning (%) by sector and 
occupation; b) Share of women and men in senior positions and c) Accounting maturity by government 
sector 

Source: Source: a) Eurostat; b) European Institute for Gender Equality; c) table 3 at Updated accounting maturities of EU 
governments and EPSAS implementation cost 

62 

DE201720182019202020212022EU-27(2)158.560.862.969.354.5 (b)n/a64.82n/an/an/a62.163.265.172.93n/a0.60.70.90.90.80.8441.041.541.942.7 (b)44.2 (b)45.152.059.69.49.38.0 (b)8.2 (b)9.516.9647.245.036.639.039.638.211.071.31.21.21.3 (b)1.4 (b)1.31.580.50.60.60.60.7n/a0.791.41.41.41.41.5n/a1.5102.31n/an/an/a2.27n/a1.7Medium term budgetary framework indexIndicator (1)E-government and open government dataShare of individuals who used the internet within the last year to interact with public authorities (%)E-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with tertiary education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance0510152025DEEU-27DEEU-27DEEU-27DEEU-27Public admin.,defence andsocial securityEducationHealthcareTotal economya) Adult learningHigh-skilled occupationsMedium-skilled occupationsUnskilled occupationsArmed forces0102030405060708090100DEEU-27b) Gender bal;ance in senior posittionsMenWomen00.10.20.30.40.50.60.70.8Centralgov.Stategov.Localgov.Social sec.FundsGeneralgov.SubcomponentsTotalc) Public accounting maturityDEEU-27 
 
 
   
 
   
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU. This Annex provides an overview of Germany’s 
progress in implementing the Pillar’s 20 principles 
and EU headline and national targets for 2030 on 
employment, skills, and poverty reduction. 

Table A14.1: Social Scoreboard for Germany 

Update of 27 April 2023. 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 2023. 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 

The  German  economy  and  labour  market 
made a robust recovery in 2022, despite the 
uncertainties over the impact of Russia’s war 
of  aggression  against  Ukraine.  Employment 
remained  robust  at  80.9%  in  Q4-2022.  The 
unemployment rate remained low at 3% (January 
2023).  By  Q4-2022,  the  growth 
in  nominal 
compensation  per  employee  reached  5%  on  an 

63 

annual basis, in line with the growth rate in 2022. 
However,  according  to  the  Commission’s  2022 
Autumn Economic Forecast, wage growth is set to 
increase,  reaching  5%  in  2022  reflecting  also  a 
tight  labour  market  and  sizeable  increases  in  the 
minimum wage. Real  wages were set to decrease 
by  2%  and  1.2%  in  2022  and  2023  respectively. 
Recently 
have 
confirmed these trends. 

reached  wage 

agreements 

The  overall  labour  market  situation  is  good, 
but  some  groups  still  face  challenges. 
Germany has one of the highest employment rates 
of  women  in  the  EU,  with  76.8%  in  2022  (vs  the 
EU average of 69.3%). However, the gender gap in 
part-time employment remains one of the highest 
in  the  EU  at  36.7  percentage  points  (pps).  The 
unadjusted  gender  pay  gap  is  wide  at  17.6pps 
compared to  the  EU  average  of  12.7pps  in  2021, 
which  also  reflects  the  lower  number  of  hours 
worked by women. In 2022, the employment rate 
of  women  aged  25-49  with  children  aged  less 
than  6  years  was  18.6pps  lower  than  the  rate  of 
those  of the  same  age  without  children.  Although 
taxation  opportunities  for  couples  have  been 
adjusted  within  the  Faktorverfahren (144),  there  is 
still  a  significant  disincentive  for  second  earners, 
many  of  whom  are  women,  to  work  more  hours. 
This,  together  with  high  taxes  on  labour  and 
insufficient  availability  of  childcare  and  all-day 
school  facilities,  is  a  major  factor  in  women’s 
lower participation in the labour market. Access to 
childcare  for  children  aged  less  than  3  years  is 
steadily  increasing  and  was  31.4%  in  2021  (vs 
36.2% for the EU,  see also Annex  15).  Germany’s 
RRP  contributes  to  addressing  this  challenge  by 
providing  for  90 000  additional  childcare  places. 
However,  this  is  still  below  the  supply  gap  of 
347 600  estimated 
in  2020.  Furthermore, 
Germany’s  employment  gap  of  persons  with 
disabilities  was  one  of  the  highest  in  2021  at 
30.5pps vs 23.1pps in the EU. More than 300 000 
persons with disabilities are employed in sheltered 
workshops,  and there is a very low transition rate 
to  the  primary  labour  market.  Addressing  those 
challenges  would  help  Germany  reach  its  2030 
employment target of 83%. 

(144) The Faktorverfahren is a tax deduction feature within the 
joint income tax method for spouses or life partners 
(Ehegattensplitting). 

12.248.928.67.84.9880.73.11113.412123.740.330.51131.40.1Critical situationTo watchWeak but improvingGood but to monitorOn averagePolicy areaHeadline indicatorLong term unemployment(% of active population aged 15-74, 2022)GDHI per capita growth                                                              (2008=100, 2021)Best performersImpact of social transfers (other than pensions) on poverty reduction (% reduction of AROP, 2021)Children aged less than 3 years in formal childcare(% of population under 3-years-old, 2021)Self-reported unmet need for medical care(% of population 16+, 2021)Housing cost overburden(% of total population, 2021)Equal opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24, 2022)Youth NEET rate(% of population aged 15-29, 2022)Gender employment gap(percentage points, 2022)Income quintile ratio(S80/S20, 2021)Share of individuals who have basic or above basic overall digital skills (% of population aged 16-74, 2021)Dynamic labour markets and fair working conditionsSocial protection and inclusionAt risk of poverty or social exclusion rate for children                       (% of population aged 0-17, 2021)Disability employment gap(percentage points, 2021)Better than averageAt risk of poverty or social exclusion rate                                            (% of total population, 2021)Employment rate(% of population aged 20-64, 2022)Unemployment rate(% of active population aged 15-74, 2022) 
 
 
 
   
 
                                                 
 
on 

on 

educational 

The  impact  of  socio-economic  and  migrant 
outcomes 
backgrounds 
remains  a  challenge.  Early  school  leaving  has 
deteriorated  significantly  in  the  past  decade  and 
was  significantly  above  the  EU  average  in  2022 
(12.2% vs 9.6%); for non-EU born people, the rate 
is as high as 28.8%. The impact of socio-economic 
background 
has 
educational 
increased, and about one fifth of 10-year-olds do 
not  meet  basic  standards 
in  German  and 
mathematics (see Annex 15). Moreover, at 49% in 
2021,  Germany  is  below  the  EU  average  of  54% 
of  individuals  aged  16-74  with  at  least  basic 
(see  Annex  10).  The  Work  of 
digital  skills 
Tomorrow  Act 
funding  of 
the 
qualifications in continuing education and training 
to respond to the digital transformation, while the 
Training  Assistance  Act  (BAföG)  was  amended  to 
provide more financial help to students.  

expanded 

outcome 

crafts, 

science, 

It is crucial to boost the availability of adult 
learning  and  provide  stronger  incentives  for 
up-  and  reskilling  to  tackle  skills  shortages. 
Skills  shortages  increased,  during  the  recovery 
from  the  pandemic,  particularly  for  engineers  or 
programmers, 
technology, 
engineering and mathematics specialists, logistics, 
care  and  health  professions,  as  well  as  social 
workers. At the same time the employment rate of 
low-educated  adults  was  15.4pps  lower  than  the 
overall employment rate (of the 20-64 age group). 
Population ageing and an increasing need for skills 
related  to  the  digital  and  green  transitions  are 
expected to exacerbate labour and skills shortages. 
The Public Employment Service (Bundesagentur für 
Arbeit)  estimates  that  the  country  needs  a  net 
migration  balance  at  around  400 000  per  year  in 
order to offset the decreasing level in the potential 
labour force. Although upskilling and reskilling are 
essential  in  this  context,  adult  participation  in 
learning  activities  (over  the  past  4  weeks)  has 
remained stable in Germany for the last 10 years 
and  below  the  EU  average  (8.1%  vs  11.9%  in 
2022). The rate is as low as 4% for low qualified 
people  (vs  4.7%  for  the  EU).  The  funding  of  the 
Upgrading  Training  Assistance  Act  (AFBG)  was 
increased  in  2022.  EU  cohesion  policy  funds 
support  upskilling  and  reskilling  to  address  labour 
shortages and skills gaps and help meet the needs 
of  the  labour  market.  They  are  key  to  reaching 
Germany’s  2030  national  target  of  at  least  65% 
of adults in training per year. 

Social  indicators  still  point  to  challenges  in 
Germany. In 2021, the share of people at risk of 

64 

poverty  or  social  exclusion  remained  broadly 
stable at 21%, compared to 20.4% in 2020, below 
the  EU  average  (21.7%).  The  share  of  children  at 
risk of poverty and social exclusion increased from 
22.3%  in  2020  to  23.7%  in  2021,  although  this 
remained  below  the  EU  average  (24.4%).  The 
share  of  persons  with  disabilities  in  the  same 
situation (30.1%)  continued  to  be  higher  than  the 
EU average (28.8%). To address these challenges, 
Germany  is  allocating  a  considerable  share  of 
funding  under  the  European  Social  Fund  Plus 
(ESF+)  to  programmes  that  foster  social  inclusion 
in  general  (32.8%)  and  for  children  specifically 
(5.9%).  Moreover,  the  percentage  of  people  living 
in  households  with  housing  costs  above  40%  of 
their  total  income  is  higher  than  the  EU  average 
(11%  vs  8.3%).  According  to  a  recent  study (145), 
the  estimated  housing  shortage,  including  social 
and affordable housing, has increased to 700 000 
dwellings.  In  2021,  21  000  new  social  rental 
apartments were built with government subsidies. 
More  efforts  are  therefore  needed  to  meet  the 
federal  government’s  revised  annual  targets  for 
the 2021-2025 legislative period of 400 000 new 
housing  units,  including  100 000  social  housing 
units.  Overall,  a  more  targeted  approach  could 
better  reach  the  different  groups  concerned  and 
help  achieve  Germany’s 
target  on  poverty 
reduction. 

Table A14.2: 2030 National targets for Germany 

(1) Adult Education Survey, adults in learning in the past 12 
months. (2) The EU target is expressed in terms of number of 
persons at risk of poverty or social exclusion (AROPE), 
reference year 2019. (3) Germany expresses its national 
target as a reduction in the number of persons living in 
households with very low work intensity (VLWI), reference 
year 2020. Break in series in 2020 for AROPE and VLWI. 
Source: Eurostat, DG EMPL 

(145) Pestel Institut, Arbeitsgemeinschaft fuer zeitgemaesses 
Bauen e.V. Kiel (2023). https://bauen-und-wohnen-in-
deutschland.de/wp-content/uploads/2023/01/Studie-Bauen-
und-Wohnen-in-der-Krise.pdf. 

IndicatorsLatest dataTrend            (2015-2022)National target by 2030EU target by 203081.0(2022)46.4(2016)+623(2021)Poverty reduction2,3  (thousands)-1 200-15 000Employment (%)8378Adult learning1 (%)6560 
 
   
 
                                                 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  for 
Germany’s  education  and  training  system  in  light 
of  the  EU-level  targets  and  other  contextual 
indicators  under  the  European  Education  Area 
strategic framework, based on the 2022 Education 
and Training Monitor. 

Attracting,  training  and  recruiting  enough 
teachers  will  remain  a  challenge  in  the 
coming  years.  At  the  start  of  school  year 
2022/23,  between  32 000  and  40 000  teachers 
were  lacking (146).  Several  factors  -  such  as  more 
pupils,  expanding  all-day  school  places,  and 
replacing  retiring  teachers  -  could  aggravate 
teacher  shortages,  to  varying  degrees  depending 
on  the  Laender  and  school  level.  Around  39%  of 
in  primary  and  secondary 
German 
education (ISCED 1-3) are aged 50 or older. Lower 
secondary  schools  are  especially  affected,  being 
able  to  recruit  only  72%  of  required  staff (147). 
in  science, 
Shortages  emerge  predominantly 
technology,  engineering  and  mathematics  (STEM) 
subjects.  Comparing  the  number  of  teachers 
needed  in  the  future  with  the  expected  supply  of 
teachers  points  at  a  gap  of  over  150 000  by 
2035 (148). 

teachers 

Early childhood education and care (ECEC) in 
Germany  continues  to  lack  available  places 
and  qualified  staff,  but  there  is  potential  to 
improve  quality.  In  2022,  93.7%  of  children 
between 3 and school age attended ECEC – around 
the EU average (93%), but still below the EU-level 
target  of  96%.  In  2021,  even  though  Germany 
expanded  capacity  by  84 000  places  compared 
with the previous year, 13% of demand for under-
3-year-olds  could  not  be  satisfied  in  the  west  of 
the  country,  and  8%  in  the  east.  Municipalities 
have  a  legal  obligation  to  provide  an  ECEC  place 
for children above the age of one, which they are 
expected to fulfil only by 2025 in the east and by 
2028  in the  west (149).  An  acute  shortage  of  staff 
triggered lowering the requirements to enter ECEC 
professions.  According  to  forecasts  (Good  Kita 
report  2021),  up  to  266  300  additional  qualified 
in  early  childhood 
educators  will  be  needed 

education and care by 2030 (150). Lack of qualified 
staff is a key obstacle to improving the quality of 
services. The ECEC quality law 2022 continues (151) 
to  provide  federal  funding  of  EUR 4  billion  for 
quality and participation improvement.  

Graph A15.1: Low-achieving 15-year-olds in 
reading in 2015 and 2018 (PISA) 

Source: OECD (PISA 2018). 

for 

International 

Educational  outcomes  and  choices  remain 
heavily  influenced  by  socio-economic  and 
migrant background. According to the 2018 PISA 
(Programme 
Student 
Assessment), overall performance is above the EU 
average,  but  has  weakened  over  time  (see  Graph 
A15.1).  The  share  of  young  people  not  reaching 
level 2 in PISA increased between 2015 and 2018 
to about 20% in all three areas tested. In 2018, it 
remained just below the EU average, but far above 
the  EU-level  target  (15%).  Socio-economically 
(often  but  not  only 
disadvantaged  students 
students  with  a  migrant  background)  lag  behind: 
by 1 year in mathematics and even up to 2 years 
in science (152). This is reflected in a slightly higher 
equity indicator value in Germany compared to the 
EU  average.  National  testing  in  2021  shows 
declining  outcomes  for  fourth  grade  pupils  in 

(146) Schuljahr 2022/23 - Lehrermangel verschärft sich weiter 

(deutsches-schulportal.de) 

(147) Autor:innengruppe Bildungsberichterstattung, (2022).  

(150) BMFSFJ - Gute-KiTa-Bericht 2021 

(151) The Good ECEC law (2019) provided funding of EUR 5.5 

(148) Expertise Lehrkräftebedarf & Angebot bis 2035 

billion. 

(149) Autor:innengruppe Bildungsberichterstattung, (2022). 

(152) European Commission, Education and Training Monitor 2021. 

65 

5%10%15%20%25%GermanyEU average20152018EU target 
 
                                                 
  
                                                 
 
Tertiary  education  attainment  is  increasing, 
but  remains  low.  Tertiary  education  attainment 
continues  to  increase  but,  at  37.1%  in  2022  lags 
behind  the  45%  EU-level  target  and  the  42%  EU 
average. While 29% of men choose STEM subjects 
at bachelor’s level, only 9% of women do so. The 
share  at  master’s 
is  24%  and  12% 
level 
respectively, an imbalance also identified by OECD 
(2021). 

While  overall  participation  in  vocational  education 
and  training  (VET)  is  significant,  participation  in 
adult learning remains weak (see Annex 14). 

German  and  mathematics (153).  In  addition,  about 
one  fifth  of  these  10-year-olds  do  not  reach 
minimum  standards  in  German  and  mathematics. 
Education policy is the responsibility of the federal 
states;  however,  a  federal  programme  provides 
EUR 3.5  billion  for  the  expansion  of  all-day 
schooling  and  care  services  at  primary  school 
level (154). 

Germany is promoting digital education. Of all 
16-19-year-olds,  only  50%  had  at  least  basic 
digital  skills  in  2021,  19  pps  below  the  EU 
average.  The  Digital  Pact  for  Schools  provides 
EUR 6.5 billion in federal support to a programme 
to digitise schools. Just under 80% of the original 
EUR 5  billion  had  been  allocated  by  end-2022. 
EUR 1.5  billion  was  added  due  to  the  pandemic, 
with  one 
IT 
administrators  in  schools  and  to  provide  laptops 
both  to  students  and  to  teachers.  The  latter  is 
supported  by  the  Recovery  and  Resilience  Facility 
in  addition  to  a meta  platform  on  digital  learning 
that  encompasses  existing  platforms  in  Germany 
and  a  quality  training  programme  for  teacher 
education. 

third  earmarked 

to  support 

(153) Testing shows an overall decline in average skills compared 
with 2011 and 2016 and an increased impact of socio-
economic and migrant background (Stanat, P. et al (2022). 

(154) German National Reform Programme 2022. 

66 

 
                                                 
Table A15.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Source: (1,3,4,5,7,8,9,10,11) = Eurostat; 2 = OECD (PISA); 6 = European Commission (Joint Research Centre). Notes: Data are not 
yet available for the remaining EU-level targets under the European Education Area strategic framework, covering 
underachievement in digital skills and participation of adults in learning. The equity indicator shows the gap in the share of 
underachievement in reading, mathematics and science (combined) among 15-year-olds between the lowest and highest quarters 
of socio-economic status. 

67 

96%96.0%91.9%93.7%202093.0%2020Reading< 15%16.2% 20.0%20.7%201822.5%2018Mathematics< 15%17.2% 22.3%21.1%201822.9%2018Science< 15%17.0% 21.1%19.6%201822.3%2018< 9 %10.1%11.0%12.2% 9.6%Men10.4%12.5%13.7%11.1%Women9.8%9.4%10.7%8.0%Cities10.3%9.6%12.3%8.6%Rural areas8.3%12.2%9.8%10.0%Native8.6%10.0%9.4%8.3%EU-born:20.7%30.7%20.3%Non EU-born:23.4%28.0%22.1%6Equity indicator (percentage points)::20.1201819.320187Exposure of VET graduates to work based learningTotal ≥ 60% (2025) : :94.9%u60.1%45%29.6%36.5%37.1%42.0%Men28.6%31.2%34.9%36.5%Women30.6% 41.8%39.5%47.6%Cities37.5%46.2%44.5%52.2%Rural areas21.7%26.9%28.9%30.2%Native29.9%37.7%38.2%43.0%EU-born:32.7%32.5%39.5%Non EU-born:27.0%34.5%35.7%44.6% 38.3%38.8%202039.2%2020Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth11Share of school teachers (ISCED 1-3) who are 50 years or over1Participation in early childhood education (age 3+)2Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)3Total3By gender4By degree of urbanisation5By country of birth20152022IndicatorTargetGermanyEU27GermanyEU27 
 
  
 
ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
in 
population  health  and  the  health  system 
Germany.  

Life  expectancy  in  Germany  is  above  the  EU 
average, but  started  to  fall  in  the  first  year 
of  the  COVID-19  pandemic.  The 
further 
decrease in life expectancy in 2021 is linked to an 
increased  number  of  COVID-19  deaths (155). 
Germany  fares  comparatively  well  in  avoiding 
deaths from treatable causes. The main mortality 
causes are cardiovascular diseases and cancer.  

Graph A16.1: Life expectancy at birth, years 

The high number of beds is coupled, however, with 
a  low  staff-to-bed  ratio.  In  response,  the  current 
government  set  up  a  commission  of  experts  to 
develop recommendations to reform the financing 
of  the  German  hospital  sector.  The  government 
aims  to  develop  a  draft  proposal  taking  into 
account 
recommendations  by  summer 
2023 (156). 

these 

Spending on preventive care remained quite stable 
during  the  pandemic,  while  most  other  countries 
raised  this  expenditure  drastically.  Spending  on 
prevention  in  Germany  amounts  to  3.2%  of  total 
spending on healthcare (compared to 3.4% for the 
EU overall in 2020). Public expenditure on health is 
projected  to  increase  by  0.4  percentage  points 
(pps) of GDP by 2070 (compared to 0.9 pps for the 
EU overall). 

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2019-2070 

Source: Eurostat 

Germany  has  the  highest  spending  on 
healthcare  in  relation  to  GDP  in  the  EU. 
Spending  on  healthcare  increased  from  2019  to 
2020  (in  relative  and  in  absolute  terms).  Most 
health  spending  is  publicly  funded;  out-of-pocket 
payments  are  comparatively  low  (12.4%  of  total 
health expenditure, compared to an EU average of 
14.4%  in  2020).  Next  to  the  statutory  health 
insurance  system,  there  is  a  substitutive  private 
health  insurance  scheme  for  certain  population 
groups,  such  as  civil  servants,  self-employed  and 
people  with  earnings  above  a  certain  threshold, 
meaning  they  can  opt  out  from  the  solidarity-
based statutory health insurance.  

Spending  on  outpatient  care  (in  relation  to  total 
healthcare  spending)  is  below  the  EU  average, 
while  spending  on  inpatient  care  is  slightly  above 
the EU average, with an ongoing separation / lack 
of coordination between these sectors. This tallies 
with the fact that Germany has one of the highest 
numbers of hospital beds per population in the EU. 

AWG reference scenario 
Source: European Commission / EPC (2021) 

Numbers  of  doctors  and  nurses  per 
population  are  well  above  the  EU  average. 
in 
However,  workforce  and  skills  shortages 
combination  with  demographic  change  are  a 
concern, also in terms of long-term accessibility of 
than  44%  of  active 
health  services.  More 
physicians  in  Germany  were  over  55  years  old  in 
2020.  Several  reforms  and  laws  have  aimed  to 
increase the number of nurses in hospitals and the 
attractiveness of the profession. This concerns for 
instance  higher  salary  levels,  improved  working 
conditions  and  the  planned  implementation  of  a 
staffing  measurement  tool.  Since  2020, the  costs 
of  nursing  personnel  are  excluded  from  the 
hospital  payment  system  based  on  diagnosis- 

(155) Based on data provided directly by Member States to ECDC 
under the European Surveillance System (data current as of 
13 April 2023) 

(156) See: 

https://www.bundesgesundheitsministerium.de/themen/gesun
dheitswesen/krankenhausreform.html 

68 

81.081.181.081.381.180.880.980.981.081.380.480.1201620172018201920202021GermanyEU6.67.40.90.4468EUGermany% of GDP20192070increase 
 
        
                                                 
 
        
                                                 
 
Table A16.1: Key health indicators 

Note: The EU average is weighted for all indicators, except for (*) and (**), for which the EU simple average is used. The simple 
average for (*) uses data for 2020 or most recent year if former not available. Doctors' density data refer to practising doctors in 
all countries except EL, PT (licensed to practice) and SK (professionally active). Nurses' density data refer to practising nurses in all 
countries except FR, PT, SK (professionally active) and EL (nurses working in hospitals only). 
Source: Eurostat; except: ** ECDC 

related  groups.  This  is  expected  to  remediate  the 
current low staff-to-bed ratio over time.  

Through  its  recovery  and  resilience  plan, 
Germany  plans  to  invest  EUR  4.3  billion 
(16.2%  of  the  plan’s  total  value) 
in 
healthcare.  Investments  mainly  focus  on  the 
digital  transition  of  the  healthcare  system  (IT-
related investments in hospitals and public health 
services,  including  the  related  construction  and 
refurbishment  of  buildings).  Most  of 
the 
milestones  and  targets  have  not  been  completed 
yet. The digital transition of the healthcare system 
is an ongoing challenge in Germany.  

69 

20172018201920202021EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)85.585.381.780.8NA91.7 (2020)Cancer mortality per 100 000 population246.6245.9243.7240.3NA242.2 (2020)Current expenditure on health, % GDP 11.311.511.712.8NA10.9 (2020)Public share of health expenditure, % of current health expenditure84.484.184.085.1NA81.2 (2020)Spending on prevention, % of current health expenditure 3.23.23.33.2NA3.4 (2020)Acute care beds per 100 000 population602601595587NA387.4 (2019)Doctors per 1 000 population *4.24.34.44.54.53.9 (2020)Nurses per 1 000 population *11.111.511.812.1NA8.3 (2020)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day (total consumption for CY and CZ) **12.611.711.48.98.114.5 (2021) 
 
 
   
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

regional  dynamics 

This  Annex  showcases  the  economic  and 
in  Germany, 
social 
providing  an  update  on  economic,  social  and 
territorial  cohesion  in  and  among  the  German 
regions compared with the rest of the EU and the 
main regional economic recovery challenges.  

Regional  disparities  have  steadily  decreased 
since reunification, in 1990, but remain high. 
In 2021, Hamburg's GDP per capita (in purchasing 
power  standard,  PPS)  was  191%  of  the  EU 
average,  followed  by  Oberbayern  (174%)  and 
Stuttgart (153%). Some regions continued to score 
below  the  EU  average,  however,  with  GDP  per 
capita  at  86%  or  lower  in  the  eastern  regions  of 
Brandenburg,  Chemnitz,  Sachsen-Anhalt  and 
Mecklenburg-Vorpommern, as well as in Lüneburg. 
Gaps between urban and rural areas also persist. 

Convergence was relatively modest in 2011-
2020  due  to  uneven  regional  growth  (Graph 
A17.1). However, annual GDP per capita growth in 
Germany’s  less  developed  regions (157)  slightly 
exceeded  both  the  national  (0.7%)  and  EU  (0.6%) 
averages. 

Graph A17.1: GDP per capita (2010) and real GDP 
growth (2011-2020) in Germany 

(1) Bubble sizes correspond to population size. 
Source: EUROSTAT 

The  COVID-19  pandemic  caused  the  first 
economic decline  since the  financial crisis  in 
2007.  In  2020, GDP  per capita  fell in  all  regions, 
though  with  varying  degrees.  The  impact  of  the 
pandemic  and  ensuing  supply  chain  disruptions 
was  particularly  severe  in  the  most  populated, 
prosperous  and  southern  regions  –  such  as 
Braunschweig (-6.9%) and Schwaben (-6.0%) – as 

well  as  in  Bremen  (-6.7%)  but  milder  in  less 
developed  eastern  regions  and  Berlin,  where  the 
fall in GDP per capita ranged from -3.0% to -3.7%.  

Disparities  in  GDP  per  capita  are  strongly 
driven  by  labour  productivity  gaps  between 
the more and less developed regions. Average 
labour  productivity,  measured  as  gross  value 
added per person employed, stood at 105% of the 
EU average (in PPS) in 2021. It ranged from 126% 
or  more 
and 
Braunschweig  to  87%  or  less  in  Mecklenburg-
Vorpommern, Chemnitz and Thüringen. 

in  Oberbayern,  Hamburg 

gaps 

have 

productivity 

Labour 
been 
decreasing,  contributing  to  the  convergence 
of  economic  output.  Annual  real  productivity 
growth was highest in the least developed regions 
in  2011-2020,  ranging  from  a  moderate  0.4%  in 
Dresden  and  Lüneburg  to  0.9%  in  Leipzig  and 
Mecklenburg-Vorpommern and 1.0% in Thüringen. 
Annual  real  productivity  fell  in  some  regions, 
notably Darmstadt, Bremen and Saarland (-0.5%). 

Graph A17.2: Evolution of labour productivity in 
Germany (2000-2020) 

(1) Unit: real gross value added (GVA) in million EUR (2015 
prices) by employment in thousands of persons. 
Source: EUROSTAT 

is 

the  case, 

All  regions  rank  above  the  EU  average  for 
competitiveness (158).  This 
in 
particular,  for  the  western  and  southern  regions, 
Hamburg and Berlin. However, there are significant 
differences  in  regional  innovation  performance. 
regions  are 
Many  of 
innovation 
less  developed 
regions  are  mostly  classified  as  moderate 

the  most  developed 
leaders (159),  while 

(157) For this Annex, ‘less/least developed regions' are defined as 
having a GDP per capita (PPS) in 2020 lower than the EU 
average (100); ‘developed regions’: 101 to 125; ‘more/most 
developed’ regions: 126 or higher. These terms should not be 
confused with the classification used for EU cohesion policy. 

(158) 2022 regional competitiveness index. 

(159) The 2021 regional innovation scoreboard methodology 
defines innovation leaders as regions with a relative 
performance of more than 125% of the EU average (strong 
innovators: 100-125%; moderate innovators (70-100%). 

70 

-0,6-0,30,00,30,60,91,21,51,87090110130150170190210Annual real GDP per head growth2011-2020 in %GDP (PPS) per head in 2010 (EU = 100)Capital regionOther NUTS2 regionsNational averageEU2735455565758595000102030405060708091011121314151617181920thousands of EUR per  personCapital regionOther NUTS2 regionsEU27National average 
 
  
                                                 
  
                                                 
 
 
Table A17.1: Selected indicators at regional level 

Source: EUROSTAT 

innovators  (except  Dresden,  Thüringen,  Trier  and 
Chemnitz, which are strong innovators). 

the 

There  are  considerable  differences  in  R&D 
expenditure  between 
regions.  R&D 
expenditure was particularly high in Braunschweig 
(representing  7.8%  of  2019  GDP,  largely  because 
it hosts the Volkswagen Group's headquarters) and 
Stuttgart  (7.3%)  and  was  overall  above  3.2%  in 
many  southern  regions,  Dresden  and  Berlin.  R&D 
expenditure was lowest (less than 1.5% of GDP) in 
many  western  regions  and  was  below  1%  in  the 
less  developed  western  regions  of  Weser-Ems, 
Lüneburg, Trier and Koblenz. 

Labour  market  conditions  are  among  the 
strongest in the EU, but disparities remain. In 
2021, the unemployment rate fell to 1.8 and 2.0% 
in  Niederbayern  and  Trier  and  reached  5.7  and 
6.8% in Berlin and Bremen (3.6% for Germany as 
a whole and 7.0% for the EU-27). The employment 
in  Chemnitz  and  several 
rate  reached  83% 
southern  regions  but  was  as  low  as  75%  in  the 
western 
regions  of  Bremen  and  Düsseldorf 
(Germany as a whole: 79.6%; EU-27: 73.1%).  

The labour market’s initial recovery from the 
pandemic  was  quicker  in  eastern  regions 
than  in  more  developed  ones.  By  2021, 
unemployment  returned  to  below  2019  levels  in 
10 eastern regions out  of the 38 NUTS 2 regions, 
while  the  rate  was  still  higher  elsewhere,  notably 
in  Mittelfranken  and  Bremen  (1.5-1.8  percentage 
points  above  pre-COVID-19  levels).  The  employ-
ment  rate  declined  severely  in  some  of  the  less 
developed  western  regions  (Trier,  Gießen  and 
Lüneburg).  Employment  in  the  eastern  regions  of 

Mecklenburg-Vorpommern,  Sachsen-Anhalt  and 
Chemnitz  actually  increased,  even  if  at  a  slower 
pace than in the previous decade.  

Major  demographic  changes  may  reinforce 
existing  regional  differences.  Nationally,  the 
population  grew  by  3.6%  in  2011-2020,  with 
significant  increases  in  the  western  regions  of 
Hamburg (8.3%) and Oberbayern (9.0%) as well as 
in  the  metropolitan  areas  of  Leipzig  (8.6%)  and 
Berlin  (11.1%).  Certain  regions,  especially  less 
developed  eastern  regions  Thüringen  (-3.5%), 
Sachsen-Anhalt  (-5.2%)  and  Chemnitz  (‑6.3%), 
experienced  a  demographic  decline.  This  change 
reflects  rural-urban  shifts  across  Germany,  which 
result  in  rising  urban  populations  and  in  declining 
rural areas.  

The population expanded primarily due to the 
impact  of  positive  net  migration  (+5.7%  in 
2011-2020).  Increases  in  net  migration  were 
significant in most western regions and especially 
strong  in  Leipzig  (11%)  and  Berlin  (10%).  Other 
regions,  especially  the  less  developed  eastern 
regions  Chemnitz,  Sachsen-Anhalt  and  Thüringen, 
registered little net migration. 

Population  ageing  is  a  challenge  with  clear 
regional  disparities  and  contributing  to 
increasing  labour  shortages.  The  number  of 
people above 65 increased by 9.7% in 2011-2020 
and  their  share  of  the  population  rose  to  22%, 
slightly above the EU-27 average (21%). Increases 
in  the  population  aged  over  65  amounted  to  less 
than  5.5%  in  Hamburg,  Bremen,  Düsseldorf  and 
Braunschweig,  around  6%  in  Dresden,  Chemnitz 
and Sachsen-Anhalt, but more than 12% in many 

71 

NUTS 1 RegionGDP per head (PPS)GDP per head growthProductivity (GVA, PPS) per person employedPopulation growthTotal population aged >65Unemployment rateR&D expenditureEU-27 = 100, 2021⌀ change p.a. in %, 2011-20EU-27=100, 2020⌀ change p.a. in ‰, 2011-20Increase in %, 2011-19% of active population, 2021% of GDP, 2019European Union1000,61001,717.67,02,3Germany1200,71063,69.73,63,2Baden-Württemberg1360,61135,811.53,15,7Bayern1410,81135,911.92,73,4Berlin1241,110611,19.95,73,3Brandenburg860,8942,813.33,01,8Bremen141-0,21044,34.36,83,0Hamburg1910,01308,33.14,42,2Hessen1350,11145,310.83,83,1Mecklenburg-Vorpommern851,187-0,314.83,81,8Niedersachsen1100,91032,89.93,23,1Nordrhein-Westfalen1150,51032,17.24,12,1Rheinland-Pfalz1110,51002,611.33,72,6Saarland102-0,391-1,88.32,91,9Sachsen931,187-0,26.53,33,0Sachsen-Anhalt860,890-5,26.54,41,5Schleswig-Holstein1000,9973,911.43,41,7Thüringen871,285-3,510.43,22,3 
 
  
 
southern 
regions  and  13-14% 
Brandenburg and Mecklenburg-Vorpommern.  

in  Lüneburg, 

72 

 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

Germany  hosts  the  second  largest  banking 
sector  by  assets  in  the  EU.  A  distinguishing 
feature of this banking sector is the large number 
of  institutions.  These  institutions  are  organised 
along  three  “pillars”:  In  October  2022  (i)  the  first 
pillar  comprised  244  commercial  banks  (47%  of 
assets);  (ii)  the  second  pillar  comprised  public-
sector banks, among which were 362 saving banks 
(Sparkassen) and 5 regional banks (Landesbanken) 
(22% of assets); and (iii) the third pillar comprised 
738  cooperative  banks  (10%  of  assets).  Mergers 
and  acquisitions  reduced  the  number  of  banks  in 
Germany from more than 3 000 in 1999 to 1 386 
in  December  2022.  These  mergers  typically 
occurred  within  and  not  across  pillars  because  of 
the  quite  different  ownership  structure.  With 
banking-sector  assets  equivalent  to  258%  of 
Germany’s  GDP,  the  size  of  the  banking  sector  is 
below  the  EU  average  of  277%.  German  banks’ 
international  presence  is  also  relatively  modest 
and  largely  confined  to  other  EU  Member  States, 
although  an  increasing  number  of  foreign  banks 
has  entered  the  German  market  in  recent  years, 
especially in the investment-banking sector. 

German  banks  have 
loan  books  of 
outstanding  quality  and  are  well capitalised. 
Despite  some  deterioration  in  asset  quality  as  a 
result  of  the  pandemic  and  the  energy  crisis (160), 
German  banks  still  have  one  of  the  lowest  ratios 
of non-performing exposures in the EU at 1.0% in 
Q3-2022,  even  slightly  down  from  pre-pandemic 
times  (1.2%  in  2019).  Moreover,  German  banks 
have maintained stable capital ratios. The average 
Common Equity Tier 1 (CET1) ratio stood at 15.3% 
in Q3-2022. 

in 

underperformed 

On  the  other  hand,  German  banks  have 
continuously 
their 
profitability. The banks’ return-on-equity of 1.9% 
is considerably below the EU average of 6.1% and 
barely sufficient to cover their cost of capital. This 
has  been  compounded  by  heavy  reliance  on 
interest  income  in  what  was  until  recently  a  low-
interest-rate  environment.  Furthermore,  banks 
face  high  administrative  costs  and  net  interest 
expenses compared to income. The cost-to-income 

(160) The deterioration in asset quality is visible in the rise of the 
share of loans that are classified as increased risk (stage 2) 
according to International Financial Reporting Standards, 
10.% in Q3-2022, up from 5.6% in Q1-2020, (EBA Risk 
Dashboard).  

73 

ratio stands at 77.3% in 2022 compared to the EU 
average of 60.6%.  

interest  rates  will 

improve  net 
Rising 
interest  margins  and  boost  banks’  profits, 
but  the  swift  increase  in  rates  may  create 
temporary  challenges.  As  in  other  countries, 
rising  interest  rates  create  valuation  losses  in  the 
short  term  on  the  security  portfolios  held  in 
German  banks’  trading  books.  Loans  with  a  long 
interest fixation period are subject to interest rate 
risk  as  refinancing  costs  on  short  duration 
liabilities  increase.  The  share  of  mortgage  loans 
with a fixation period of 5 years or more increased 
in recent years to more than 80% of new lending 
business. Still the banks’ susceptibility to interest-
rate  risk  related  to 
‘maturity  transformation 
appears manageable.  

As in other countries, risks in the banks’ loan 
increasing  as  businesses  are 
books  are 
impacted  by  higher 
interest  rates  and 
inflation.  Falling  corporate  income  in  a  low-
growth  environment 
interlocking  with  greater 
expenditure  on  interest  could  increase  the  risk  of 
default in the business sector. At the end of 2021, 
73% of business loans were to companies with an 
above-average debt-overhang ratio, while 70% of 
loans had a below-average interest-coverage ratio. 
Insolvencies began to increase towards the end of 
2022  but  are  still  below  their  long-term  average. 
Although  experts  expect  insolvencies  to  continue 
rising  further  in  the  coming  months,  they  don’t 
expect them to go above long-term averages. The 
banks  themselves  consider  the  risks  of  company 
defaults  to  be  low.  The  energy-intensive  sector 
could  be  especially  at  risk  of  default,  but  this 
sector  accounts  for  only  6%  of  total  corporate 
loans.  

Even  though  the  household  sector  remains 
largely  resilient,  risks  have  increased.  With 
the cost of living going up and real incomes being 
squeezed,  the  most  vulnerable  households  may 
struggle  to  service  their  debt.  In  this  context,  the 
overvalued  housing  market  is  of  concern.  House 
prices declined by 3.6% y-o-y  in Q4-2022 for the 
first  time  since  2010,  Still,  the  Bundesbank 
reckons  that  home  prices  in  urban  areas  are 
to  what 
overvalued  by  25%-40% 
economic fundamentals would historically warrant. 
Commission  calculations  also  show  that  house 
prices appear overvalued by 20-40%. The buoyant 

relative 

 
 
 
                                                 
 
Table A18.1: Financial Soundness Indicators 

(1) Last data: Q3 2022. 
(2) Data is annualized. 
Source: ECB, Eurostat, S&P Global Capital IQ Pro. 

housing  market  has  supported  mortgage  lending, 
which  expanded  to  40.7%  of  GDP  in  September 
2022 from 36.4% of GDP in December 2011. As a 
result, loan-to-value ratios declined while debt-to-
income  and  debt-service-to-income  (DSTI)  ratios 
went up. The aggregate DSTI ratio climbed to 31% 
in the first half of 2022 from 28% a year earlier, 
while the share of new loans with a high DSTI ratio 
(i.e.  above  40%)  increased.  There  are  no  loan-to-
value  limits  in  place,  even  though  the  Federal 
Financial  Supervisory  Authority  (BaFin)  has  the 
limits,  and  the  ESRB 
authority  to  set  such 
recommended  authorities  to  limit  the  loan-to-
value  ratio (161).  To  contain  the  risks  from  the 
housing market, BaFin introduced a countercyclical 
capital  buffer  of  0.75%  and  a  sectoral-systemic 
risk  buffer  specifically  for  the  housing  market  of 
2%  on  German  mortgages.  These  measures  were 
announced  in  January  2022,  and  banks  must 
comply with them as of 1 February 2023.  

Immediate financial risks stemming from the 
Russian  military  aggression  against  Ukraine 
appear  manageable.  German  banks  have  a 
relatively  small  exposure  to  Russian  clients.  Their 
credit  exposure  to  Russian  counterparts  was 
EUR 6.0 bn in September 2022. 

In addition to banks, German companies also 
turn  to  financial  markets  for  funding.  The 

(161) Recommendation of the European Systemic Risk Board of 2 
December 2021 on medium-term vulnerabilities in the 
residential real estate sector in Germany (ESRB/2021/10). 

74 

for 

ratio 

non-financial 
market-funding 
corporations  is  51%,  in  line  with  the  EU  average. 
Germany  has  10  regulated  stock  markets,  the 
largest  of  which  is  the  Frankfurt  stock  exchange, 
operated  by  Deutsche  Börse.  Nevertheless,  the 
market  capitalisation  of  all  companies  listed  on 
the  Frankfurt  stock  exchange  is  quite  modest 
relative to Germany’s GDP.  

income.  German 

Germany  has  the  second  largest  insurance 
market  in  the  EU.  Life  and  non-life  insurers 
wrote  premiums  of  EUR 252 bn  in  2021.  The 
market  exhibits  low  concentration  and  is  highly 
competitive, with the three biggest insurers taking 
a share of only 27% of premium income, and the 
top  10  insurance  groups  generating  just  65%  of 
insurers  have  the 
premium 
highest  solvency  ratios 
in  the  EU.  Solvency 
improved further to 325% in September 2022, up 
from  312%  at  the  end  of  2021,  as  Solvency  II 
total  assets  declined.  Meanwhile  the  rise 
in 
interest  rates  caused  a  decline  in  the  value  of 
liabilities and would have further strengthened the 
own-funds of German insurers, but this was offset 
by  higher  risk  premiums.  However,  rising  rates 
may  entail 
life 
insurers.  The  Bundesbank  reckons  that  a  wave  of 
policy  lapses  could  occur  should  ten-year  bund 
yields  rise  to  exceed  3%.  In  such  a  scenario, 
insurers  would  also  need  additional  liquidity  to 
meet  margin  calls  on  the  hedges  that  they  often 
use  to  protect  themselves  from  interest-rate  and 
exchange-rate risks. 

liquidity  risks  especially  for 

201720182019202020212022EUMedianTotal assets of the banking sector (% of GDP)236.0231.1239.3262.6254.7273.0276.8207.9Share (total assets) of the five largest banks (%)29.729.131.234.031.8--68.7Share (total assets) of domestic credit institutions (%)193.189.087.183.781.878.1-60.2NFC credit growth (year-on-year % change)4.26.55.84.26.110.2-9.1HH credit growth (year-on-year % change)3.23.94.44.85.14.3-5.4Financial soundness indicators:1        - non-performing loans (% of total loans)1.81.41.21.21.11.01.81.8- capital adequacy ratio (%)18.818.418.118.818.518.118.619.8- return on equity (%)22.92.42.12.24.01.96.16.6Cost-to-income ratio (%)174.076.875.570.768.877.360.651.8Loan-to-deposit ratio (%)189.490.287.780.881.083.188.678.0Central bank liquidity as % of liabilities1.61.41.24.75.53.1-2.9Private sector debt (% of GDP)107.1109.6112.7121.2120.4--120.7Long-term interest rate spread versus Bund (basis points)0.00.00.00.00.00.0-93.3Market funding ratio (%)54.153.652.050.751.0-50.840.0Green bonds issued to all bonds (%)0.30.51.01.93.54.93.92.31-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States. 
                                                 
 
   
 
ANNEX 19: TAXATION  

This  Annex  provides  an 
indicator-based 
overview of Germany’s tax system. It includes 
information  on  the  tax  structure  (the  types  of 
taxes  that  Germany  derives  most  of  its  revenue 
from),  the  tax  burden  on  workers,  and  the 
progressivity  and  redistributive  effect  of  the  tax 
system. 
information  on  tax 
collection and compliance. 

It  also  provides 

tax 

that  Germany’s 

Germany’s  tax  revenues  in  relation  to  GDP 
are  almost  the  same  as  for  the  EU 
aggregate,  with  the  highest  contribution 
coming  from  labour  taxation.  Table  A19.1 
shows 
revenues  as  a 
percentage of GDP remained fairly stable between 
2020 and 2021. The share of labour taxes of total 
tax  revenues  was  substantially  above  the  EU 
aggregate  (by  4.7  percentage  points  (pps)  in 
2021), but revenues from consumption and capital 
taxes as share of total taxation were considerably 
lower than the EU aggregate. Property taxes were 
significantly below the EU aggregate, in particular 
property 
taxes  were 
because 
in  Germany 
(see  Graph 
considerably 
from  selling  or 
real 
renting 
A19.1). Income 
estate remains 
tax 
far-reaching 
subject 
exemptions in Germany.  

recurrent 
lower 

to 

In  addition,  environmental  taxes  have  been 
consistently  below  the  EU  aggregate 
in 
recent  years. Germany’s  share  of  environmental 

Table A19.1: Taxation indicators 

taxes is below the EU  aggregate, both as a share 
of  GDP  and  as  a  share  of  total  tax  revenues.  As 
the  right-hand  panel  of  Graph  A19.1  illustrates, 
the low rate of environmental taxation in Germany 
relative to the EU aggregate is driven by all types 
of environmental taxes: both energy and transport 
taxation  are  below  the  EU  average  in  Germany. 
Germany  applies  carbon  prices  in  the  transport 
and  heating  sectors  through  a  national  emissions 
trading system. Unlike many other Member States, 
Germany does not levy resource or pollution taxes. 
Furthermore,  Germany  has  some  environmentally 
harmful  subsidies,  such  as  fossil  fuel  subsidies 
and the company car privilege (see also Annex 6). 
Phasing  out  these  subsidies  could  –  along  with 
addressing 
low  environmental 
taxation – improve the tax mix and promote more 
sustainable  and  inclusive  growth.  Concerning  its 
national  emissions 
trading  system,  Germany 
agreed in 2022 to postpone the increase of target 
prices  by  one  year  in  the  context  of  the  energy 
crisis.  Also,  a  broadening  of  the  scope  of  the 
system  to  include  coals-  and  waste-derived  fuels 
was  adopted.  Overall,  tax  bases  that  are  less 
inclusive  and  sustainable  growth 
harmful  to 
remain underused. 

issue  of 

the 

Germany  has  introduced  a  variety  of  tax-
related  measures  to  address  the  effects  of 
the  energy  crisis.  The  performance  of  the  tax 
system  should  be  viewed  in  the  context  of  high 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average  
For more data on tax revenues as well as the methodology applied, see European Commission, Directorate-General for Taxation 
and Customs Union, Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United Kingdom: 
2021 edition, Publications Office of the European Union, 2021, https://data.europa.eu/doi/10.2778/843047 and the ‘Data on 
Taxation’ webpage (data https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en). 
For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in the 
EU: report 2022, Publications Office of the European Union, 2022, https://data.europa.eu/doi/10.2778/109823. 
Source: European Commission, OECD.  

75 

2010201920202021202220102019202020212022Total taxes (including compulsory actual social contributions) (% of GDP)37.340.139.641.137.939.940.040.6Labour taxes (as % of GDP)21.023.023.323.020.020.721.320.9Consumption taxes (as % of GDP)10.710.29.610.310.811.110.711.2Capital taxes (as % of GDP)5.66.96.77.77.18.18.08.5Total property taxes (as % of GDP)0.81.21.31.31.92.22.22.2Recurrent taxes on immovable property (as % of GDP)0.40.40.40.41.11.21.21.1Environmental taxes as % of GDP2.21.81.71.82.42.42.22.2Tax wedge at 50% of average wage (Single person) (*)41.742.141.641.340.533.932.331.932.131.7Tax wedge at 100% of average wage (Single person) (*)49.049.348.848.147.841.040.139.939.639.7Corporate income tax - effective average tax rates (1) (*)28.328.026.619.519.419.1Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)9.57.910.310.08.67.78.17.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)1.01.631.640.7VAT Gap (% of VAT total tax liability, VTTL)9.04.811.09.1GermanyEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
 
        
 
 
 
 
 
 
Graph A19.1: Tax revenues from different tax types as % of total taxation 

Note: Values for EU are GDP-weighted EU averages (EU aggregates) 
Source: European Commission 

include  a 

the  surcharge 

levels  of  uncertainty  due  to  fluctuating  energy 
prices. The German government has introduced tax 
measures to alleviate the burden on business and 
households  caused  by  energy  price  increases. 
These  new  measures 
temporary 
reduction  of  the  VAT  rate  on  gas,  the  temporary 
reduction to the EU minimum of the energy tax on 
fuels and additional expenditure (e.g. one-off lump 
sum payments, including an energy bonus, and the 
accelerated  abolition  of 
for 
renewable  energy).  Most  of  these  measures, 
however, do not appear to be targeted to the most 
vulnerable  households  and  firms.  In  2023  the 
main energy measures are a natural gas and heat 
price brake and an electricity price brake that cap 
energy  prices  for  households,  small  and  medium-
sized enterprises and for industrial companies, set 
to  last  until  April  2024.  The  price  caps  are  based 
on consumption levels over the previous year and 
cover  80%  of  past  consumption  by  households 
and  small  and  medium  enterprises  and  70%  for 
industrial  companies.  Any  amount  beyond  this 
share will be subject to the market prices.  

Germany’s labour tax burden  is  considerably 
higher  and  less  progressive  than  the  EU 
average.  Graph  A19.2  shows  that  the  labour  tax 
wedge  for  Germany  in  2022  was  much  higher 
than the EU average not only for single people at 
the average wage level, but also for those earning 
low wages at 50% and 67% of the average wage 
and  high  wages  at  167%  of  the  average  wage. 
Also the tax wedge for second earners at 67% of 
the  average  wage  was  clearly  above  the  EU 
average.  It  was  also  substantially  higher  than the 
tax  wedge  for  single  persons  at  the  same  wage 
level,  which  indicates  that  work  disincentives  for 
second earners moving into employment are even 

76 

more pronounced than those for single persons at 
67% of the average wage. The difference between 
the  tax  wedge  for  high  and  low  wage  earners 
(167% and 50% of the average wage), which is an 
indicator  of  the  progressivity  of  the  labour  tax 
system,  is  considerably  lower  for  Germany  than 
for the EU average. The tax-benefit system helped 
inequality,  as  measured  by  the  Gini 
reduce 
coefficient, by slightly less than the EU average in 
2021 (Table A19.1). 

Graph A19.2: Tax wedge for single and second 
earners as  % of total labour costs, 2022 

Note: Second earners are members of a family with the 
primary earner earning 100% of the average wage and no 
children. For the methodology of the tax wedge for second 
earners see OECD (2016) “Taxing Wages 2014-2015” 
Source: European Commission 

While  Germany  performs  relatively  well  on 
tax compliance and tax administration, there 
remains  room  for  improvement.  Germany’s 
recovery  and  resilience  plan  (RRP)  contributes  to 
digitalising 
including 
potentially  also  aspects  of  the  tax  administration. 
Outstanding  tax  arrears  have  increased  slightly 
from  1.0%  to  1.6%  of  total  net  tax  revenue 

administration, 

public 

40.543.747.850.052.9202530354045505550100150Tax wedge, % of total labour costsEarnings in % of the average wageSingle earner - DESingle earner - EU averageSecond earner -  DESecond earner -  EU average51.4327.5421.0156.0825.1918.73Tax revenue shares in 2021, Germany (outside) and EU (inside)Taxes on labourTaxes on consumptionTaxes on capital3.694.320.681.000.000.191.012.642.192.750123456Germany -environmentaltaxationEU -environmentaltaxationGermany -property taxationEU - propertytaxationEnvironmental and property taxation as % of total tax revenue, Germany and the EUEnergy taxesTransport taxesResource/pollution taxesRecurrent property taxesOther property taxes 
       
       
scope 

highlights 

Taxation  2022 

between  2019  and  2020  but  still  remain  well 
below  the  EU  average  (Table  A19.1).  This  is 
significantly below the EU-27 average of 40.7% in 
2020,  but  the  average  is  inflated  by  very  large 
values in a few Member States. The Annual Report 
for 
on 
improvement  in  the  rate  of  electronic  filing  of 
personal  and  corporate  income  tax  returns. (162) 
Tax compliance has improved in Germany; the VAT 
gap  (an  indicator  of  the  effectiveness  of  VAT 
enforcement  and  compliance  where  a  low  gap 
indicates high effectiveness) fell from 9% to 4.8% 
between  2019  and  2020,  which  is  considerably 
below  the  EU-wide  gap  of  9.1%  in  2020  (Table 
A19.1).  These  results  should  be  interpreted  with 
some  caution  though,  given  that  Germany’s  VAT 
burden  was  lowered  by  way  of  a  significant 
reduction  of  its  standard  and  in  particular  its 
reduced  VAT  rates  and  also  that  the  year  2020 
was influenced by the COVID-pandemic. 

(162) European Commission, Directorate-General for Taxation and 
Customs Union, Annual report on taxation 2022: review of 
taxation policies in the EU Member States, Publications 
Office of the European Union, 2022. 

77 

 
 
 
                                                 
 
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1: Key economic and financial indicators 

(1) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) Net international investment position (NIIP) excluding direct investment and portfolio equity shares.  
Source: Eurostat and ECB as of 2 May 2023, where available; European Commission for forecast figures (Spring forecast 2023). 

78 

2004-072008-122013-1920202021202220232024Real GDP (y-o-y)2.20.71.6-3.72.61.80.21.4Potential growth (y-o-y)1.31.01.40.80.80.50.61.1Private consumption (y-o-y)0.60.91.5-5.70.44.30.01.8Public consumption (y-o-y)0.72.12.24.03.81.2-0.31.4Gross fixed capital formation (y-o-y)2.90.72.2-2.31.20.4-0.72.0Exports of goods and services (y-o-y)9.82.23.1-9.39.72.91.53.1Imports of goods and services (y-o-y) 7.82.34.1-8.59.06.00.43.4Contribution to GDP growth:Domestic demand (y-o-y)1.01.01.6-2.61.32.5-0.21.7Inventories (y-o-y)0.0-0.40.1-0.20.50.4-0.1-0.3Net exports (y-o-y)1.10.1-0.2-0.80.8-1.10.50.0Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.20.20.40.00.0-0.2-0.10.2Capital accumulation (y-o-y)0.30.20.30.30.30.20.20.2Total factor productivity (y-o-y)0.80.60.70.60.50.50.50.6Output gap-0.3-0.70.5-3.2-1.5-0.2-0.6-0.3Unemployment rate9.66.34.03.73.73.13.23.1GDP deflator (y-o-y)0.91.21.81.83.15.56.12.4Harmonised index of consumer prices (HICP, y-o-y)1.91.71.20.43.28.76.82.7HICP excluding energy and unprocessed food (y-o-y)1.41.31.40.92.35.06.53.8Nominal compensation per employee (y-o-y)0.72.22.70.43.14.25.55.3Labour productivity (real, hours worked, y-o-y)1.30.50.91.00.90.4-0.20.8Unit labour costs (ULC, whole economy, y-o-y)-0.82.32.23.40.63.75.94.1Real unit labour costs (y-o-y)-1.71.10.41.6-2.4-1.7-0.21.6Real effective exchange rate (ULC, y-o-y)-2.90.31.3-1.00.40.20.10.6Real effective exchange rate (HICP, y-o-y)0.4-1.20.50.81.0-1.6..Net savings rate of households (net saving as percentage of net disposable income)10.610.310.316.415.111.4..Private credit flow, consolidated (% of GDP)0.21.23.96.45.7...Private sector debt, consolidated (% of GDP)125.9119.0109.3121.2120.4...of which household debt, consolidated (% of GDP)65.959.053.757.056.7...of which non-financial corporate debt, consolidated (% of GDP)60.160.055.664.163.7...Gross non-performing debt (% of total debt instruments and total loans and advances) (1).2.11.71.11.0...Corporations, net lending (+) or net borrowing (-) (% of GDP)1.62.41.42.03.20.61.60.4Corporations, gross operating surplus (% of GDP)26.425.123.923.224.523.924.222.5Households, net lending (+) or net borrowing (-) (% of GDP)5.95.45.39.07.85.45.95.9Deflated house price index (y-o-y)-2.00.74.17.18.2-1.5..Residential investment (% of GDP)5.25.46.07.07.27.6..Current account balance (% of GDP), balance of payments5.56.17.87.17.74.25.95.7Trade balance (% of GDP), balance of payments5.65.56.75.85.52.1..Terms of trade of goods and services (y-o-y)-0.7-0.50.82.0-2.6-4.73.3-0.1Capital account balance (% of GDP)-0.10.00.0-0.30.0-0.5..Net international investment position (% of GDP)14.123.040.763.870.171.1..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)9.619.139.654.754.349.7..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)125.9164.2148.8162.2164.2164.6..Export performance vs. advanced countries (% change over 5 years)14.4-1.0-1.12.4-0.8...Export market share, goods and services (y-o-y)-0.4-3.60.52.1-3.7-1.0-1.1-0.7Net FDI flows (% of GDP)1.71.21.5-0.12.83.2..General government balance (% of GDP)-2.0-1.71.1-4.3-3.7-2.6-2.3-1.2Structural budget balance (% of GDP)..1.0-2.7-2.9-2.3-2.0-1.0General government gross debt (% of GDP)65.976.268.668.769.366.365.264.1forecast 
 
 
 
      
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  Annex  assesses  fiscal  sustainability 
risks  for  Germany  over  the  short,  medium 
and  long  term.  It  follows  the  same  multi-
dimensional 
European 
Commission’s  2022  Debt  Sustainability  Monitor, 
updated  based  on  the  Commission  2023  spring 
forecast. 

approach 

the 

as 

1  -  Short-term  risks  to  fiscal  sustainability 
are 
low  overall.  The  Commission’s  early-
detection  indicator  (S0)  does  not  signal  major 
short-term  fiscal  risks  (Table  Ax.3). (163)  Gross 
financing needs are expected to be around 16% of 
GDP in the short term (i.e. over 2023-2024) and to 
decline  compared  with  the  recent  peak  in  2020 
(Table  Ax.1).  Financial  markets’  perceptions  of 
sovereign risk are investment grade, as confirmed 
by the main rating agencies. 

2 - Medium-term risks to fiscal sustainability 
are medium overall. 

The  Debt  Sustainability  Analysis  (DSA)  for 
Germany shows that, under the baseline, the 
government debt ratio is projected to decline 
slightly to 63.5% of the GDP by 2033 (Graph 
A21.1) (164), (165)  The  assumed  structural  primary 
balance  (a  deficit  of  0.1%  of  GDP  as  of  2024) 
contributes  to  these  developments.  It  appears 
plausible  compared  with  past  fiscal  performance, 

(163) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of macro-financial and 
fiscal variables that have proven to perform well in the past 
in detecting situations of upcoming fiscal stress.  

(164) The assumptions underlying the Commission’s ‘no-fiscal 
policy change’ baseline notably comprise: (i) a structural 
primary deficit, before ageing costs, of 0.1% of GDP as of 
2024; (ii) inflation converging linearly towards the 10-year 
forward inflation-linked swap rate 10 years ahead (which 
refers to the 10-year inflation expectations 10 years from 
now); (iii) the nominal short- and long-term interest rates on 
new and rolled over debt converging linearly from current 
values to market-based forward nominal rates by T+10 (as 
for all Member States); (iv) real GDP growth rates from the 
Commission 2023 spring forecast until 2024, followed by 
EPC/OGWG ‘T+10 methodology projections between T+3 and 
T+10, i.e. for 2025-2033 (on average 0.8%); (v) ageing costs 
in line with the 2021 Ageing Report (European Commission, 
Institutional Paper 148, May 2021). For information on the 
methodology, see the 2022 Debt Sustainability Monitor 
(European Commission, Institutional Paper 199, April 2023). 

indicating that the country has room for corrective 
action.  At the  same  time, the  baseline  projections 
up  to  2033  benefit  from  a  favourable  (although 
diminishing) snowball effect with real GDP growth 
at  around  0.8%  of  GDP  over  2025-2033. 
Government gross financing needs are expected to 
reach around 17% of GDP in 2033, slightly above 
the level forecast for 2024. 

reverting 

The  baseline  projections  are  stress  tested 
against  four  alternative  scenarios  to  assess 
the  impact  of  changes  in  key  assumptions 
to 
(Graph  A21.2).  For  Germany, 
historical  fiscal  trajectories  under  the  ‘historical 
structural  primary  balance  (SPB)’  scenario  would 
lead to a smaller government debt ratio. If the SPB 
gradually  converged  to  a  surplus  of  1.4%  of  GDP 
(its  historical  15-year  average),  the  projected 
debt-to-GDP ratio would be around 10 pps. of GDP 
lower  compared  to  the  baseline  in  2033.  A 
the  macro-financial 
permanent  worsening  of 
conditions,  as 
‘adverse 
reflected  under 
interest-growth rate differential’ scenario (i.e. 1 pp. 
higher than the baseline) would result in a higher 
government debt-to-GDP ratio, by around 5 pps. of 
GDP  by  2033,  as  compared  with  the  baseline.  A 
temporary  worsening  of  financial  conditions,  as 
reflected  in  the  ‘financial  stress  ‘scenario  (i.e. 
temporarily  increase  of  interest  rates  by  1  pp.), 
would lead to a broadly similar public debt-to-GDP 
ratio  by  2033  compared  with  the  baseline.  The 
‘lower  structural  primary  balance  (SPB)’  scenario 
(i.e. SPB level permanently reduced by half of the 
cumulative  forecast  change),  would  lead  to  a 
significantly  higher  government  debt-to-GDP  ratio 
by 2033 (around +7 pps. of GDP) compared to the 
baseline.  

the 

Additionally,  stochastic  debt  projections 
indicate  low  risk  (Graph  A21.2). (166)  These 
stochastic  simulations  point  to  a  35%  probability 
of  the  debt  ratio  in  2027  being  greater  than  in 
2022, entailing low risk given the initial moderate 
debt  level.  In  addition,  such  shocks  point  to  low 
uncertainty  (i.e.  the  difference  between  the  10th 
and 90th debt distribution percentiles) surrounding 
the government debt baseline projections. 

(165) Table 1 shows the baseline debt projections and its 

(166) These projections show the impact on debt of 2000 different 

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.  

shocks affecting the government’s primary balance, 
economic growth, interest rates and exchange rates. The 
cone covers 80% of all simulated debt paths, therefore 
excluding tail events. 

79 

 
 
                                                 
                                                 
 
 
3  -  Long-term  risks  to  fiscal  sustainability 
are medium overall. (167) 

The  S2  sustainability  gap  indicator  (at  2.3 
pps.  of  GDP)  points  to  medium  risk, 
suggesting  that  Germany  would  need  to 
improve  its  structural  primary  balance  to 
ensure debt stabilisation over the long term. 
This result is mostly due to increasing ageing costs 
(2.1  pps.  of  GDP),  mostly  due  to  an  increase  of 
pension  spending  (1.0  pp.  of  GDP)  together  with 
health  care  and  long-term  care  expenditure  (joint 
contribution of 0.5 pp. of GDP) (Table A21.1).  

Given  low  long-term  debt  vulnerabilities,  as 
highlighted by the S1 indicator, overall long-
term  risks  are  assessed  as  medium.  The  S1 
sustainability  gap  indicator  signals  that  only  a 
limited  consolidation  effort  of  1.6  pps.  of  GDP 
would be needed to reduce debt to 60% of GDP by 
2070.  This  result  is  mainly  driven  by  expected 
ageing  costs  (contribution  of  1.7  pps.  of  GDP) 
(Table A21.1). 

Finally,  several  additional  risk  factors  need 
to  be  considered  in  the  assessment.  On  the 
one hand, risk-increasing factors are related to the 
recent  increase  of  interest  rates  and  a  relatively 
high share of short-term government debt. On the 
other-hand,  risk-mitigating  factors  include  the 
lengthening  of  debt  maturity  in  recent  years, 
(with  a 
relatively  stable 
diversified and large investor base), a low share of 
public debt held in foreign currency and Germany’s 
positive net international investment position.  

financing  sources 

(167)The S2 fiscal sustainability gap indicator measures the 

permanent fiscal effort (SPB adjustment) in 2024 that would 
be required to stabilise public debt over the long term. It is 
complemented by the S1 fiscal sustainability gap indicator, 
which measures the permanent fiscal effort required in 2024 
to bring the debt-to-GDP ratio to 60% in the long term (by 
2070). For both the S1 and S2 indicators, the risk 
assessment depends on the amount of fiscal consolidation 
needed: ‘high risk’ if the required effort exceeds 6 pps. of 
GDP, ‘medium risk’ if it lies between 2 pps. and 6 pps. of 
GDP, and ‘low risk’ if the effort is negative or below 2 pps. of 
GDP. The overall long-term risk classification brings together 
the risk categories derived from S1 and S2. S1 may notch up 
the risk category derived from S2 when it signals a higher 
risk than S2. See the 2022 Debt Sustainability Monitor for 
further details. 

80 

 
                                                 
Table A21.1: Debt sustainability analysis - Germany 

Source: Commission services. 

Table A21.2: Heat map of fiscal sustainability risks - Germany 

Source: Commission services. 

81 

BaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallLOWLOWMEDIUMMEDIUMLOWLOWDebt level (2033), % GDP63.554.070.268.964.0Debt peak year20222022203320332022Fiscal consolidation space66%39%78%66%66%Probability of debt ratio exceeding in 2027 its 2022 level35%Difference between 90th and 10th percentiles (pps. GDP)25.2Source: European Commission (for further details on the Commission's multidimensional approach, see the 2022 Debt Sustainability Monitor)(1)Debtlevelin2033.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidtationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2027its2022level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifference 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.Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)LOWMEDIUMMEDIUMLOWMEDIUMTable 1. Baseline debt projections20202021202220232024202520262027202820292030203120322033Gross debt ratio (% of GDP)68.769.366.365.264.163.162.461.861.561.461.762.262.863.5Changes in the ratio9.10.5-3.0-1.0-1.2-0.9-0.8-0.6-0.30.00.20.50.60.7of whichPrimary deficit3.73.21.91.50.30.30.40.50.60.80.91.11.21.4Snowball effect1.8-3.2-4.1-3.1-1.5-1.3-1.1-1.1-0.9-0.8-0.7-0.6-0.6-0.7Stock-flow adjustments3.60.6-0.80.60.00.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)20.318.715.616.414.914.814.814.915.115.315.616.016.316.6S1S2Overall index  (pps. of GDP)1.62.3of which Initial budgetary position-0.10.2Debt requirement0.1Ageing costs1.72.1of which    Pensions0.81.0     Health care0.30.4     Long-term care0.20.1Others0.40.5Table 2. Breakdown of the S1 and S2 sustainability gap indicators3035404550556065707520202021202220232024202520262027202820292030203120322033Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p9030405060708020202021202220232024202520262027% of GDPGraph 2. Stochastic debt projections 2023-2027MedianBaseline 
 
 
 
 
 
 
   
 
 
   
 
ANNEX 22: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX  

The  Macroeconomic 
Imbalance  Procedure 
matrix presents the main elements of the in-
depth  review  undertaken  for  Germany (168). 
Germany  was  selected  for  an  in-depth  review  in 
the  2023  Alert  Mechanism  Report.  This  in-depth 
review  on  the  prevention  and  correction  of 
macroeconomic  imbalances  presents  the  main 
findings  on  the  gravity  and  evolution  of  the 
challenges  identified,  as  well  as  policy  responses 
and potential policy needs. Findings cover all areas 
of vulnerability assessed in the in-depth review.  

Germany’s persistently large current account 
surplus  has  eased  gradually  since  2015, 
reflecting  a  decline  in  net  export  of  goods 
and  services,  and  fell  to  4.2%  in  2022.  In 
2011  to  2021  the  current  account  surplus 
exceeded  6%  of  GDP,  reflecting  a  substantial 
demand  shortfall  with  a  gap  between  output  and 
domestic  consumption  and 
investment.  After 
peaking  in  2015  at  8.6%  of  GDP,  the  current 
account balance started  declining, easing to 7.6% 
of  GDP  in  2019  and  7.7%  in  2021.  The  fall  was 
driven primarily by a declining surplus in the trade 
in  goods  that  fell  from  8.2%  of  GDP  in  2015  to 
6.3%  of  GDP  in  2019  and  5.4%  in  2021,  while 
manufacturing  intensity  receded.  In  2022,  the 
current  account  surplus dropped  abruptly to  4.2% 
of  GDP,  reflecting  price  increases  for  imported 
energy, loss of export market shares in non-energy 
goods,  higher 
imports  of  equipment  and 
intermediate  goods  as  well  as  higher  tourism 
imports  after  the  expiry  of  COVID-19  related 
restrictions.  From  the  savings  and  investment 
perspective,  the  decline  in  the  current  account 
surplus  also  reflected  the  shrinking  surplus  of 
savings  of  corporates  and  households  relative  to 
domestic  investment,  as  excess  private  savings 
related  to  the  pandemic  started  to  unwind  while 
increasing. 
the 
Domestically,  the  investment  ratio  increased,  also 
reflecting 
The 
government  contributed  to  narrowing  the  current 
account balance becoming a net borrower in 2020, 
with  a  deficit  of  -4.3%  of  GDP.  The  deficit 
decreased to -3.7% in 2021 and to -2.6% in 2022. 
House  prices  have  been  growing  in  the  decade 
preceding  2022,  leading  to  overvaluation,  which 

investment 

continued 

inventory 

growth. 

record 

ratio 

(168)  European Commission (2023), In-Depth Review for 

Germany, Commission staff working document, (COM(2023) 
629 final),  in accordance with Article 5 of Regulation (EU) No 
1176/2011 on the prevention and correction of 
macroeconomic imbalances.  

has  been  moderating  somewhat  as  house  prices 
started  declining  while  inflation  has  been  high. 
Although  increased  since  2010,  housing  supply 
cannot  catch  up  with  demand  and  housing 
completions  have  declined  since  2020,  remaining 
below government targets. 

The  current  account  surplus  is  expected  to 
rebound  towards  6%  of  GDP,  remaining 
below  the  MIP  threshold.  The  current  account 
surplus  is  expected  to  increase,  but  stay  below 
pre-pandemic  levels  as  well  as  below  the  MIP 
threshold, due to a lower balance of trade in goods 
and  services.  In  particular,  energy  prices  are 
expected to fall from their 2022 highs but remain 
above earlier levels, affecting the value of imports 
and  weighing  on  cost  competitiveness,  while 
incentivising 
is 
expected to accelerate reflecting continued labour 
shortages, with unit labour cost growth exceeding 
the euro area average. While in the late 2010s the 
government  registered  consecutive  surpluses,  in 
the  future  government  deficits  are  forecast.  The 
house  price  overvaluation  and  the  ongoing  price 
correction  can  have  implications  for  the  financial 
sector, meriting close monitoring, even if no major 
disruption is expected.  

investments.  Wage  growth 

policy 

initiatives 

supported 
Several 
consumption  and  contributed  to  increased 
domestic investment. The government increased 
the  minimum  wage  by  25%  between  December 
2021 and November 2022 setting it at EUR 12 per 
hour  and 
took  ambitious  measures  against 
heightened  energy  costs  to  stabilise  domestic 
demand  and  cushion  the  burden  on  household 
disposable  income  and  corporate  income.  The 
timely and effective implementation of Germany’s 
recovery  and 
implementing 
resilience  plan, 
tackle  administrative  bottlenecks 
reforms 
related to planning and permitting and to address 
shortages of skilled labour are expected to benefit 
investment, and help effectively channel the funds 
from  the  recently  set  up  or  expanded  special 
purpose  vehicles  for  defence  and  for  the  green 
transition.  This  could  reinforce  the  adjustment  of 
the  external  position. 
In  the  housing  sector, 
construction supply is hampered by administrative 
burden, divergent construction rules across Länder, 
insufficient 
administrative 
procedures  and  barriers  to  employment  of  skilled 
labour. Social housing remains very limited. 

digitalisation 

of 

to 

Based  on  this  assessment,  the  Commission 
considered  in  its  communication  European 

82 

 
 
 
                                                 
 
 
 
 
Table A22.1: Assessment of macroeconomic imbalances matrix 

Source: European Commission 

Semester – 2023 Spring Package (COM(2023) 
600  final)  that  Germany  continues  to 
experience imbalances. 

83 

Gravity of the challengeEvolution and prospectsPolicy responseUnsustainable trends, vulnerabilities and associated risksExternal positionOver the past decade, Germany had a persistently large current account surplus, considerably above what fundamental factors suggest. The surplus has reflected a substantial gap between domestic demand and output, with consumption and investment both relatively limited. The domestic under-investment has impeded capital deepening and potential growth, while it has been accompanied by direct investments in other EU countries and internationalisation of value chains.Germany's current account surplus has been declining from its peak in 2015, driven in particular by a declining balance of trade in goods and services. The current account balance dropped abruptly in 2022 to 4.2% of GDP, reflecting price increases for imported energy, loss of export market shares in non-energy goods and higher import of equipment and intermediate goods. The balance of services moved to a deficit of -0.8% of GDP from a roughly balanced position in 2021, mainly reflecting normalisation as tourism resumed after the expiry of COVID-19 related restrictions.The gradual decline in the current account surplus after 2015 was aligned with the shrinking excess savings of corporates as they increased their investment, while the rapid decline in 2022 was only partly explained by a rebound of domestic demand, and showed the effect of temporary factors which are likely to reverse to some extent. Reflecting both the contraction of GDP that reduced government revenues and generous support measures, the government became a net borrower in 2020-2022, running deficits of 2-4% of GDP.The government took ambitious measures against heightened energy costs to stabilise domestic demand, lower consumer price inflation and cushion the burden on household disposable income. The measures implemented include a wide range of support (one-time bonuses and increased allowances, price brakes on heating and electricity, temporary VAT relief). As a permanent measure, the renewable energy surcharge was abolished and it is planned to systematically adjust the income tax schedule to inflation. The current account surplus is expected to bounce back towards 6% of GDP in 2023 and 2024. This reflects a partial reversal of the energy price shock, while moderate external demand is expected to limit exports, in particular from the manufacturing sector. Effects that still weighed on consumption in 2022 (COVID-19 related restrictions still in place in early 2022 and soaring inflation resulting in loss of purchasing power) are expected to ease. As real wage growth resumes and economic uncertainty diminishes, this will benefit household incomes, while the growth of unit labour costs are expected to exceed that of other euro area economies. Investment is expected to be weak in 2023 reflecting high energy prices and increasing interest rates; and is expected to pick up in 2024, reacting to high order books, pressing needs for the green and digital transition, as well as the desire to enhance security of supply. Moderate gGovernment deficits are projected to persist in the coming years also due to increased spending by the various extra-budgetary funds.Overall, Germany’s government sector provided ample crisis policy support and the fiscal balance turned negative contributing to the reduction in the current account surplus. In addition, special purpose vehicles were set up with the objective of enhancing public investment in defence and promoting the green transition, and funds allocated to broadband rollout and rail also increased. Measures to reduce planning and implementation bottlenecks and to reduce red tape are expected to intensify public and private investment. The effective implementation of allocated public investment funding and reforms that remove obstacles to investment could reinforce the adjustment of the external position.Housing marketHouse prices have been growing for a decade, leading to overvaluation.Although increased since 2010, housing supply cannot catch up with demand and housing completions have declined since 2020 and are below targetsThe overvaluation in the housing market and the ongoing price correction can have implications for the financial sector, meriting close monitoring, even if no major disruption is expected.Following a decade of steady growth, in 2022 house prices in nominal terms were on average 80% higher than in 2012, having expanded with a peak annual growth rate at 12% during the pandemic. Housing affordability declined considerably, the price-to-income ratio has increased by 40% and the house price-to-rents ratio by 58% between 2012 and 2022, resulting in an estimated overvaluation of about 25%.Since the second half of 2022 house prices receded, reflecting the increasing interest rate environment and the reduced purchasing power of buyers.The number of housing completions increased to 293,000 in 2019 and around 306 000 in 2020, while going down to 278 000 in 2022, which is clearly below government estimates that around 400 000 new dwelling are needed a year, which was also included in the coalition agreement of 2021. In December 2021, the European Systemic Risk Board (ESRB) issued a recommendation on medium-term vulnerabilities in the residential real estate sector in Germany. The ESRB considered house price overvaluation and high house price growth as well as possible loosening of lending standards and significant data gaps to be the main vulnerabilities in the German housing market and the policy mix is considered only partially appropriate and partially sufficient to address the increasing vulnerabilities. Construction supply is hampered by administrative burden, divergent construction rules across Länder,  insufficient digitalisation of administrative procedures and barriers to employment of wkilled labour. The availability of social housing remains very limited too. The government acknowledged that the targeted 400 000 new housing completions will not be reached at least until 2024, yet it is not clear how government measures would make a tangible contribution reaching this objective – although the support for housing renovation is expected to contribute to improvements in the housing stock and to climate-friendly construction. The ESRB has concluded that borrower-based measures, in particular the loan-to-value (LTV) ratio measure should be activated.