COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Germany Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Germany
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Germany, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, innovation, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.6.2025  SWD(2025) 205 final  COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Germany Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Germany {COM(2025) 205 final}  
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

benefit  from  improving  financing  conditions 
and  a  slight  uptick  in  construction  orders. 
However,  these  positive  trends  are  partly 
offset  by  new  trade  restrictions  and  ongoing 
global  uncertainty,  particularly  linked  to  US 
trade  policy.  US 
impact 
tariff 
Germany especially severely, as it is one of the 
most exposed countries in the EU. In particular, 
the car and machines industries are hit hard. 

increases 

Graph 1.1: GDP level in Germany and the EU 

Source: Eurostat; Q4-2019 = 100 

Graph 1.2: Net investment 

New impulses expected to support 
recovery 

in 

large  share  of  manufacturing 

Germany  has  been  through  a  prolonged 
period  of  economic  stagnation.  Since  the 
COVID-19  pandemic,  it  has  recorded  one  of 
the  weakest  recoveries  in  the  EU.  The  gap  to 
the  EU  average  has  widened,  with  Germany 
being  the  only  major  EU  economy (1)  to 
contract in 2024 (Graph 1.1). The energy shock 
in  2021  hit  Germany  particularly  hard  given 
the 
its 
economy.  Production 
in  energy-intensive 
industries fell by 15% between late 2021 and 
early  2025.  At  the  same  time,  weak  export 
dynamics  weighed  on  growth.  German 
exporters began losing global market share as 
China  shifted  from  a  key  market  to  a  direct 
competitor, 
in  machinery, 
automotive and green technologies (2). Broadly 
stagnating  domestic  demand  delayed  the 
further: 
recovery 
in  2024,  households 
their  savings  amid  heightened 
increased 
uncertainty,  while 
in  housing 
declined.  Companies  cut  their  investment  and 
remained  net 
investment 
declined  sharply,  by  6.3%  between  2019  and 
2024,  driven  partly  by  increased  financing 
costs. Net investments were the lowest in the 
EU (Graph 1.2). 

lenders.  Overall, 

investment 

especially 

rising  global 

Looking  ahead,  growth  is  set  to  resume 
trade 
slowly  despite 
tensions.  In  2025,  GDP 
is  projected  to 
stagnate, before accelerating in 2026 to 1.1%. 
The rebound is mainly driven by a catch-up in 
private  consumption.  Investment  is  set  to 

(1)  Germany, France, Italy, Spain, the Netherlands and 

Poland. 

(2)  Projektgruppe Gemeinschaftsdiagnose, 2024, Deutsche 
Wirtschaft im Umbruch, gemeinschaftsdiagnose.de. 

2024, % of GDP. IE omitted as an outlier. 
Source: AMECO 

The  turnaround  in  fiscal  policy  could 
rekindle  short-  and  long-term  growth.  In 
March 2025, a constitutional amendment was 

2 

859095100105201920202021202220232024EU27DE0481216ROLTCYHREEBGSEPLMTSKBELVFRCZESITNLDKHUATSIPTLUFIDEPublicPrivate 
 
 
   
 
   
Box 1:  UN Sustainable Development Goals (SDGs) 

Germany  performs  above  the  EU  average  and  is  further  improving  on  most  SDGs 
related  to productivity  (SDGs  8  and  9)  but  needs  to  catch  up  with  the  EU  average  on 
quality education (SDG 4). 

Worsening  education  outcomes,  a  high  number  of  young  people  leaving  school  early 
and  weak  basic  digital  skills  risk  exacerbating  the  skills  shortages  and  further 
hampering  economic  growth  and  competitiveness.  Out  of  the  17  indicators,  7  SDGs 
remain below the EU average. These relate to quality education (SDG 4), environmental 
sustainability (SDGs 2, 12 and 13) and fairness (SDGs 5, 7 and 10) (Annex 15).  

adopted  allowing  the  government  to  take  on 
additional  debt.  The  reform  exempts  -  and 
security-related  spending  above  1%  of  GDP 
from  the  debt  brake.  Moreover,  the  regional 
governments  (Länder)  are  granted  up  to 
0.35% of GDP for structural new borrowing. A 
new  special  infrastructure  fund  of  up  to 
EUR 500 billion has been set up for 12 years, 
allowing  for  additional  public  investment.  The 
growth  impact  could  be  significant  but  will 
depend  on  spending  priorities,  timely  and 
in 
efficient 
removing  bottlenecks  to  public  investment 
(see Section 2). In previous years, the level of 
public  investment  had  been  insufficient  to 
meet  spending  needs,  with  the  resulting 
investment  gap  estimated  to  be  between 
EUR 40  and  130  billion  yearly  (1-3%  of 
GDP) (3). 

implementation,  and  progress 

More  sustained  public  investment  could 
contribute  to  a  rebalancing  of  the 
towards  stronger  domestic 
economy 
demand.  Germany  has  recorded  a  high 
current  account  surplus  for  two  decades, 
reflecting  sluggish  domestic  demand,  with 
savings  considerably  exceeding  investment. 
The recently undertaken in-depth review under 
the  macroeconomic 
imbalance  procedure 
shows  that  the  current  account  remains  high, 
even  if  it  has  declined  from  the  heights 
recorded  in  the  past  two  decades  (4).  Looking 
ahead,  higher  domestic  demand  combined 

(3)  Studies by BDI, IW Köln/IMK and Dezernat Zukunft. For 
an overview see European Commission, 2025, In-Depth 
Review for Germany, Institutional Paper 307, 
ec.europa.eu; 

with  weaker  export  dynamics  are  expected  to 
lead  to  a  shrinking  of  the  current  account 
surplus  to  levels  below  the  5.7%  of  GDP 
registered in 2024. 

Structural challenges call for an 
economic transformation 

is 
Germany’s  potential  GDP  growth 
among  the  lowest  in  the  EU.  Potential 
growth  is  the  long-term  rate  at  which  an 
economy  grows  when  using  its  resources  – 
labour,  capital  and  technology  –  at  a  normal 
level.  For  Germany,  it  is  projected  to  average 
just  0.5%  annually  over  the  period  2025-
2029,  placing  it  at  the  back  end  among  EU 
economies.  This  reflects  a  combination  of 
structural  challenges,  which  pre-date  recent 
crises.  Demographic  ageing 
is  dampening 
economic growth as a shrinking labour force in 
combination  with  low  and  declining  hours 
worked 
intensifies  a  shortage  of  skilled 
workers. Without significant policy changes the 
number  of  workers  is  expected  to  shrink, 
weighing  on  GDP  growth  by  –0.1  pps  in  the 
period  2025-2029.  This  is  a  sharp  decline 
the  0.6  pps  GDP  growth 
compared 
to 
In 
contribution  each  year 
addition,  low  public  and  private  investment 
over many  years  has led to  an  ageing  capital 
stock  weighing  on  growth  potential  and 
starting to impact export competitiveness (5). 

in  2010-2019. 

(4)   European Commission, 2025, In-Depth Review for 
Germany, Institutional Paper 307, ec.europa.eu 

(5)  European Commission, 2025, In-Depth Review for 
Germany, Institutional Paper 307, ec.europa.eu 

3 

 
 
 
 
to  decline  more  sharply  than  in  other  EU 
countries,  with  the  20-64  age  group  falling 
from  50  million  in  2023  to  46  million  by 
2035 (6). Average hours worked are among the 
lowest in the EU and continue to decline. Low 
and deteriorating education outcomes coupled 
with a very high share of early school leavers 
further aggravate the situation (see Section 4). 

is 
Accelerating  the  green  transition 
essential 
sustainable 
for  achieving 
growth.  Germany  plays  an  important  role  in 
both  the  supply  of  and  demand  for  clean 
technologies (Annex 7). It is one of the leaders 
on  eco-innovation  and  performs  strongly  on 
green  patents (7).  The  expansion  of  renewable 
energy  has  also  made  considerable  progress. 
However,  major 
in 
balancing 
this  expansion  with  affordable 
energy prices and a stable supply. Meeting this 
grid 
objective 
development.  In  addition,  further  progress  on 
faster 
decarbonisation  will  depend  on 
emission 
and 
electrification 
reductions across all sectors (see Section 3). 

cost-effective 

challenges 

targeted 

requires 

remain 

Fiscal policies loosen, making it 
even more important to focus on 
the quality of public finances 

Germany’s  public  debt  has  gone  down 
since  the  COVID  shock,  but  public 
expenditure  stays  high.  The  debt-to-GDP 
ratio has been on a downward trajectory from 
its peak at 68.1% in 2021, until levelling out in 
recent  years  (62.9%  in  2023  and  62.5%  in 
2024).  It  remains  far  below  the  euro  area 
average  of  89%.  The  headline  deficit 
decreased  slightly  from  3.2%  (2021)  to  2.8% 
(2024).  Government  expenditure  however  has 
remained high since the pandemic. It increased 
from 45.6% of GDP in 2019 to 49.5% of GDP 
in  2024,  negatively  affecting  overall  fiscal 

(6)  European Commission, 2024, 2024 Ageing Report. 

economy-finance.ec.europa.eu. 

(7)  German Patent and Trade Mark Office, 2022, Germany 
is leading in the field of climate-friendly innovations, 
dpma.de. 

offer 

shifts  and 

technological 

is 
While  Germany’s  competitiveness 
its  strong  economic 
under  pressure, 
foundations 
for 
potential 
transformation.  In  the  past,  the  country’s 
comparative  advantage  came  from  the  large 
clusters  surrounding  its  industrial  production. 
However, 
still 
relatively high energy prices cast doubt on the 
this  model.  Sectors  such  as 
future  of 
automotive  and  chemicals  have  experienced 
economic 
downturns, 
performance.  Manufacturing 
longer 
driving  growth,  and  it  is  not  certain  how  the 
gap  should  be  filled.  Yet,  the  diversified 
economy  with  a  strong  industrial  base  and 
dynamic  small  and  medium-sized  enterprises 
provides  a  strong  foundation  for  addressing 
the  need 
the 
economy. 

to  modernise  and  adapt 

impacting 

overall 

is  no 

business 

Germany’s 

environment 

still  has  many 

is 
The 
business 
deteriorating. 
environment 
strengths, 
including  the  large  market  size,  a  relatively 
well-developed  infrastructure  and  a  highly 
trained  workforce.  However,  productivity  and 
competitiveness are hampered by considerable 
red  tape,  limited  disruptive  innovation  and 
business  dynamism,  and  delays  in  expanding 
digital  networks  and  services  (see  Section 
2). These  challenges  are  also  reflected  in  the 
the 
ranking  by 
global 
International 
for  Management 
Development, in which Germany  fell from 6th 
to 24th place in less than a decade. 

competitiveness 
Institute 

The  labour  market  remains  relatively 
robust  but  shortages  persist.  In  the  last 
years, declining employment in manufacturing 
was  largely  offset  by  job  growth  in  public 
services,  education  and  the  health  sector. 
Unemployment  increased  only  slightly  (from 
3.2%  end  2023  to  3.5%  end  2024)  and 
remains  well  below  the  EU  average.  Although 
employment growth came to a halt by the end 
of  2024  and  labour  market  tightness  eased 
slightly,  28%  of  companies  still  reported 
labour shortages as of February 2025. Broad-
based  wage  increases,  benefiting in particular 
lower earners, have helped real wages recover 
to  near  pre-pandemic  level.  Looking  ahead, 
shortages  are 
intensify. 
Germany’s working-age population is projected 

likely  to  further 

4 

 
 
There  are  several  levers  that  could  enhance 
the  sustainability  of  the  pension  system  as 
well,  including  reducing  incentives  for  early 
retirement,  adjusting  pension  indexation  and 
revising  contribution  ceilings (14).  In  addition, 
the  efficiency  of  public  spending  can  be 
enhanced by conducting spending reviews. The 
state subsidy ratio in Germany remains high at 
around  6.6%  of  GDP  since  2022 (15),  leaving 
room  for  assessing  which  subsidies  could  be 
phased out or replaced. 

space  for  new  spending.  This  was  mainly 
driven  by  government  consumption,  social 
benefits  and  subsidies.  Revenues  have  been 
lower  than  expected  for  two  years (8)  but  are  
still  elevated  due  to  wage  growth (9).  These 
developments will be assessed in the medium-
term fiscal-structural plan, to be submitted by 
Germany this year. 

Net  expenditure  growth  is  expected  to 
decline in 2025. In 2024, net expenditure(10) 
in Germany grew by  4.0% (see Annex  1).  This 
increase  is  mainly  driven  by  intermediate 
consumption  and  social  transfers.  In  2024, 
discretionary  revenue  measures  of  0.4%  of 
GDP  are  subtracted  from  net  expenditure 
growth. In 2025, net expenditure is forecast by 
the Commission to grow by  2.1%. The  decline 
is  due  to  lower  expenditure  growth  across 
most  categories  and  a  higher  volume  of 
discretionary revenue measures.  

Large parts of the federal budget are still 
earmarked  for  recurring  transfers,  which 
risks crowding out productive spending. In 
particular,  payments  from  the  federal  budget 
to  the pension  system  have  consistently  been 
over  EUR 100  billion  (around  25%  of  federal 
government  expenditure)  in  recent  years (11), 
around five times as high as federal spending 
on  research  and  development  outside  of 
higher  education (12).  Exploring  the  use  of 
individual  or  national  investment  funds  could 
help  finance  the  pension  system  and  channel 
investment (13). 
long-term  savings  towards 

(8)  Germany’s 168th tax estimate, bmf.de. 

(9)  European Commission, 2025, European Economic 
Forecast Spring 2025, Institutional Paper 318,  
ec.europa.euCommission. 

expenditure, 

(10)  Net expenditure is defined in Article 2(2) of  Regulation 
(EU)  2024/1263  as  government  expenditure  net  of  (i) 
interest 
revenue 
(ii) 
measures, (iii) expenditure on programmes of the Union 
fully  matched  by  revenue  from  Union  funds,  (iv) 
national  expenditure  on  co-financing  of  programmes 
funded  by 
(v)  cyclical  elements  of 
unemployment  benefit  expenditure,  and  (vi)  one-off 
and other temporary measures. 

discretionary 

the  Union, 

(11)  Bundesministerium für Arbeit und Soziales (BMAS), 
2024, Rentenversicherungsbericht 2024, bmas.de. 

(12)  Bundesministerium für Finanzen (BMF), 2025, Overview 

of federal budgetary and financial data, bmf.de. 

(14)  GCEE, 2024, Annual report, svr-wirtschaft.de. 

(15)  Kiel Institute 2025, Kiel Subsidy Report 2024, ifw-

(13)  GCEE, 2023, Annual Report 2023, svr.de. 

kiel.de. 

5 

 
 
 
 
 
Box 2: 

Barriers to private and public investment 

Over  the  past  decades,  overall  investment  has  fallen  short  of  investment  needs. 
According  to  studies  from  Germany’s  economic  institutes (16)  and  surveys  from  the 
European Investment Bank, the most important factors slowing private investments are: 

•  Burdensome  bureaucracy.  Extensive  obligations  regarding  documentation 
and reporting, long administrative processes, in particular for permitting, as well 
as regulatory differences between regions hamper innovation and the growth of 
private businesses. 

•  Lack  of  skilled  labour.  Despite  a  slight  easing  due  to  the  recession,  large 
parts of the economy are still curbed by a lack of skilled workers, which might 
further intensify in the future. 

•  High energy costs. The unprovoked Russian war of aggression against Ukraine 
has led to an upward shift in energy prices and a strong contraction of energy-
intensive industry, which is significantly affecting investment plans. 

Public  investment  is  also  affected  by  these  factors.  The  newly  legislated  special  fund 
for  infrastructure  will  create  fiscal  space,  but  other  bottlenecks  for  public  investment 
remain.  Two  decades  of  low  public  investment  have  resulted  in  a  considerable 
downscaling  of  planning  capacities (17).  Complexity  inherent  in  federal  structures  and 
divided  responsibilities  might  hinder  a  timely  and  efficient  implementation  of 
investment projects. Successful absorption of infrastructure investments was previously 
held back by a lack of clear planning, strategies and goals (18).  

The  implementation  of  Germany’s  RRP  is  well  underway.  At  present,  Germany  has 
fulfilled  54%  of  the  milestones  and  targets  in  its  RRP.  While  Germany  has  leveraged 
STEP to reallocate some Cohesion Policy resources towards this priority, it can further 
support the development or manufacturing of critical technologies in the areas of digital 
and deep tech, clean and resource efficient technologies, and biotechnologies.  

It remains important to accelerate the implementation of cohesion policy programmes. 
The mid-term review offers opportunities to speed up  progress and better address EU 
strategic priorities related to competitiveness, defence, housing, water resilience and the 
energy transition. 

(16) Ifo, 2024, Der Investitionsstandort Deutschland aus 

Unternehmenssicht, ifo.de; KFW, 2025, 
Investitionsentwicklung in Deutschland, kfw.de. 

(17) KfW, 2022, Knappe Personalkapazitäten erschweren 
Ausweitung kommunaler Investitionen, kfw.de. 

(18) Bundesrechnungshof, 2024, Annual Report, 

Bundesrechnungshof.de. 

6 

 
 
 
 
    
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

Fostering business dynamism and 
innovation 

As  part  of  its  economic  transformation, 
Germany  would  benefit  greatly  from 
boosting business dynamism. The country’s 
weak business dynamism, marked by declining 
firm entry rates(19)  in the last years and weak 
post-entry  growth  of  firms  in  almost  all 
sectors  of  the  economy,  poses  challenges  to 
its  economic 
foster 
innovation  and  find  new  sources  of  growth,  it 
would  be  beneficial 
to  create  a  more 
firm  entry, 
supportive  environment 
innovation  and  expansion.  For  example, 
starting  a  company  still  involves  significant 
red  tape  due  to  the  lack  of  a  ‘one-stop 
shop’ (20). 

transformation.  To 

for 

The  innovation  activity  of  the  private 
sector  is  highly  concentrated  and  the 
uptake  of  new  technologies  has  been 
slow. While private R&D spending is high, it is 
concentrated  in  large  companies  and  specific 
regions (Annex 17). Crucially, R&D expenditure 
by small and medium-sized enterprises (SMEs) 
remains  low  (0.20%  in  2021  vs  0.42%  EU 
average,  Annex  3).  The  declining  share  of 
SMEs  engaged  in  innovation  activities  risks 
slowing  productivity  growth  and  the  broader 
adoption  of  new  technologies.  Fine-tuning  of 
R&D 
the 
tax  allowances  could  enhance 
innovation  of  SMEs.  The  slow  shift  towards 
new  tech  fields,  notably  compared  to  the 
United  States,  is  also  reflected  in  the  low 
start-up rate, particularly in high-tech sectors. 

(19)  Eurostat Business demography statistics 

(20)  OECD, 2025, Economic Survey Germany, forthcoming. 

for 

and 

deep 

Public  research  performance  has  been 
stagnating 
commercialisation 
remains  weak.  Public  R&D  spending  has 
stagnated  over  the  last  years  (0.92%  of  GDP 
in  2023,  0.90%  in  2015).  The  innovation 
environment  could  benefit  from  more  public 
funding 
tech/transformative 
innovation.  R&D  output  has  fallen  when 
measured  as  a  share  of  most  cited 
publications and patent applications (Annex 3). 
Germany  struggles  to  turn  excellent  research 
into  successful  products,  partly  because 
knowledge transfer is not viewed as a holistic, 
continuous  process (21).  There  are  positive 
examples  of  universities,  like  the  Technical 
University  of  Munich 
include 
entrepreneurship  in  engineering  or  science 
curricula  and  have  dedicated  transfer  offices 
and  start-up  accelerators.  However,  a  more 
widespread  and  structured  initiative  to  bridge 
research and commercialisation is still lacking, 
and  dedicated  budgets  for  universities  and 
research 
support 
commercialisation  and  entrepreneurship  are 
limited. 

(TUM),  that 

institutions 

to 

a 

key 

challenge 

Venture  capital  financing  has  improved 
but  remains  insufficient.  Besides  red  tape 
and  a  shortage  of  skilled  labour,  financing 
remains 
young 
entrepreneurs (22).  With  an  average  yearly 
venture  capital  investment  of  0.084%  of  GDP 
between 2021 and 2023, Germany is  behind 
its  international  competitors  (Graph  2.1)  (23). 
While  improvements  can  be  observed,  the 
access to growth capital remains a bottleneck 
the  start-up  sector.  Regulations  on 
for 

for 

(21)  EFI, 2025, Forschungs- und Innovationspolitik stärken, 

wirtschaftsdienst.eu. 

(22)  Startup Verband, 2024, Innovation Agenda 2030, 

startupverband.de. 

(23)  Other sources like Dealroom.co have substantially 
higher VC figures for EU countries. However, a 
substantial gap to the US remains, see kfw.de.   

7 

 
 
 
 
portfolio management in funds of institutional 
investors  limit  the  amount  of  exposure  to 
high-yielding  asset  classes.  Strengthening  the 
role  of 
investors  as  capital 
providers  could  help  deepen  capital  markets 
and improve efficiency and investment growth. 

institutional 

Graph 2.1: Venture Capital Investment 

decade  score  for  digital  public  services  for 
businesses (78.6 vs 85.4 EU average) (26). 

Lengthy  and  complex  administrative 
procedures  have  been  holding  back 
investment.  90%  of  firms 
that 
bureaucracy  and  tight  regulation  constitute  a 
barrier  to  investment  for  them.  This  makes 
important  obstacle, 
bureaucracy  the  most 
followed by energy costs (80%) and a lack of 
skilled labour (79%) (27). 

report 

red 

tape.  The  new 
the 

A  lack  of  digitalisation  of  the  public 
services has limited the progress made in 
cutting 
coalition 
agreement  for 
incoming  government 
includes  the  target  to  reduce  bureaucracy  by 
25% in the next four years which could help to 
make  the  simplification  efforts  more  binding. 
A considerable reduction of the administrative 
burden could be achieved by digitalising public 
services  and  limiting  compliance  costs  in 
existing  and  new 
legislation.  Furthermore, 
modernising  public  registries  with  the  ‘once-
only’  principle  based  on  the  sharing  of  data 
across  federal  states  could  lead  to  further 
simplifications (28). 

Easing public investment 
bottlenecks to support 
competitiveness 

Addressing bottlenecks for public investment is 
key. Strategic sectors like energy, education or 
research  may  present  opportunities 
for 
targeted  public  investment  to  help  boost 
economic 
innovation 
growth (29) in the context of the infrastructure 
fund.  However,  addressing  bottlenecks  for 

sustainable 

and 

(26)  European Commission, 2024, Digital Decade country 

report Germany, digital-strategy.ec.europa.eu. 

(27)  Ifo, 2024, Der Investitionsstandort Deutschland aus 

Unternehmenssicht, ifo.de. 

(28)  National Regulatory Control Council, 2025, 

Empfehlungen für eine Reformagenda der nächsten 
Bundesregierung, normenkontrollrat.bund.de. 

(1) As a share of GDP, 3-year rolling average 2021-2023 
Source: OECD 

Reducing red tape to enhance 
private investment 

The  bureaucratic  burden  is  high  and 
growing. According to the National Regulatory 
Control  Council,  the  costs  of  complying  with 
national  legislation  have  risen  significantly 
since 2021. Efforts to reduce red tape, such as 
the  Bureaucracy  Relief  Act  IV  (Bürokratie-
IV)  of  October  2024, 
entlastungsgesetz 
provided  some  limited  relief  but  did  not 
reverse  the  overall  upward  trend (24).  Often  it 
is  the  interaction  with  authorities  more  than 
the  laws  themselves  which  are  seen  as  the 
main problem by companies. Concerns include 
lengthy  administrative  procedures,  multiple 
data  entries  and  the  lack  of  communication 
between  authorities (25).  These 
issues  are 
linked  to  the  lagging  digitalisation  of  public 
low  digital 
administration,  reflected 

in  a 

(24)  National Regulatory Control Council, 2024, Annual 

Report, normenkontrollrat.bund.de. 

(25)  German Business Panel, 2024, GBP-Monitor, research-

(29)  German Council of Economic Experts, 2023, Annual 

in-germany.org. 

Report, sachverstaendigerrat-wirtschaft.de. 

8 

0.00.20.40.60.8USAEEDKGBSEDEseedearlylater 
   
 
 
revising  building 

public investment (see box 2 in Section 1) will 
be of crucial importance. The German recovery 
and resilience plan (RRP) includes measures to 
accelerate  planning  and  permit  approval 
procedures,  for  example  by  digitalising  public 
services  and 
legislation. 
These initiatives could help improve the overall 
framework  for  private  and  public  investment. 
This would allow for a swift and effective use 
of  both  EU  and  national  funds.  Beyond  that, 
encouraging more cooperation across regional 
authorities  offers  potential 
for  creating 
synergies  and  avoiding  parallel  structures,  for 
example  in  Germany’s  more  than  10 500 
municipalities.  Germany  could  also  build 
further  on  its  efforts  to  strengthen  capacity 
and knowledge of public procurers at regional 
level (Annex 4). 

can 

The  private  sector  could  contribute  more 
to  building  and  maintaining  public 
infrastructure.  As  it  takes  time  to  build 
public investment management capacities and 
investment  needs  are  sizeable,  involving  the 
private  sector  in  the  design,  realisation  and, 
potentially, 
in  the  maintenance  of  public 
service  provision  could  help  to  ensure  that 
public  services  are  rolled  out  more  quickly. 
Public-private  partnerships 
leverage 
private  sector expertise  and  financial  capacity 
to  improve  the  delivery  of  public  services.  A 
careful design of these partnerships is key for 
ensuring  that  risks  and  responsibilities  are 
private 
allocated 
stakeholders  according 
relative 
advantages. Public services would also benefit 
from  regular  performance  checks  to  make 
sure they match the public interest (30). Several 
highways,  airports  and  rail  subsidiaries  have 
already  profited  from  private  funding  to 
complete  construction  projects  more  quickly 
(31). 

public 
to 

and 
their 

between 

Optimising the tax mix to foster 
inclusive growth and sustainable 
competitiveness 

Germany’s 
tax  and  benefit  system 
discourages  longer  working  hours.  This 
reduces  labour  supply  at  a  time  of  labour 
shortfall. Workers in Germany face the second 
highest  level  of  taxes  and  social  security 
contributions on earnings in the EU (Annex  2). 
The  structure  of  the  German  tax  and  benefit 
system  creates  disincentives 
to  entering 
employment or increasing working hours. High 
marginal  tax  rates  and  benefit  withdrawal 
rules  limit  financial  gains  from  additional 
work,  particularly  for  low-income  earners  and 
second earners, who are  often women (Annex 
2).  This  hinders  a  more  efficient  use  of 
untapped  labour  market  potential.  Flattening 
the  steep  tax  progression  for  middle  incomes 
(Mittelstandsbauch)  could  further 
increase 
incentives  to  work  more (32).  Furthermore, 
research has consistently shown that a reform 
of 
system 
the 
towards  a  system  of 
(Ehegattensplitting) 
labour 
increase 
individual 
supply by second earners (33). 

taxation  could 

taxation 

joint 

Germany  has  one  of 
the  highest 
corporate  income  tax  rates  in  the  EU, 
including  the  local  trade  tax  (Gewerbesteuer). 
These  tax  rates  have  a  combined  effect  of 
creating  a  complex  and  opaque  system. 
Consequently, tax compliance costs are among 
the highest in the EU (Annex 2). The corporate 
taxation  system  also  provides  few  incentives 
for investment and innovation. The tax burden 
on  investment  returns  is  the  third  highest  in 
 (34).  Temporary  enhancement  of 
the  EU 
depreciation options and R&D tax credits – as 
foreseen  in  the  coalition  agreement  –  can  be  

(30)  European Commission, 2024, The future of European 

competitiveness – In-depth analysis and 
recommendations, commission.europa.eu. 

(32)  Ifo, 2025, Elemente einer grundlegenden Reform für 

das Steuer- und Abgabensystem in Deutschland, ifo.de. 

(33)  German Council of Economic Experts, 2023, Annual 

Report 2023/2024, svr-wirtschaft.de. 

(31)  BMDV, 2020, PPP contracts, bmdv.bund.de. 

(34)  OECD, Corporate tax statistics, oecd.org. 

9 

 
 
 
cost-effective 
investment (35) (see also above). 

ways 

of 

stimulating 

taxes 

less 
Environmental  taxes  and  other 
remain  underused. 
distorting 
Germany’s  tax  mix  is  highly  reliant  on  labour 
taxation,  which  accounts  for  55.5%  of  total 
taxation.  At  the  same  time,  environmental 
taxes  appear  to  be  underused:  revenue  from 
environmental  taxes  in  Germany  (1.8%  of 
GDP)  has  remained  below  the  EU  average 
(2.4%)  and  has  strongly  declined  as  a 
percentage  of  total  tax  revenues  since  2012 
(Annex  2).  Similarly,  revenue  from  property 
taxes and from recurrent taxes on immovable 
property  has  remained  below  the  EU  average 
in  the  past  15  years.  Shifting  the  tax  burden 
towards  less  distorting  tax  types  of  this  kind 
could 
sustainable  growth  and 
competitiveness (36). 

support 

Accelerating the digital transition 

Public  administration 
is  digitalising 
slowly.  Germany  is  lagging  behind  the  EU 
targets 
average  on  key  digital  decade 
regarding 
the  provision  of  digital  public 
services for (76 in 2024, EU  average 79)  and 
businesses (79 in 2024, EU average 85). When 
it  comes  to  the  uptake  of  digital  public 
services,  people  in  Germany  are  second  least 
likely to use electronic identification (eID)  and 
third  least  likely  to  use  the  internet  for 
interactions  with  public  authorities.  Data 
registers  are  of 
low  quality  and  poorly 
connected  (37),  so  that  Germans  have  fewer 
pre-filled  forms  than  other  Europeans  (DESI 
indicator  score:  41  vs  71) (38).  The  Recovery 
and Resilience Facility (RRF) includes measures 
to  create  an  online  European  identity  system 
and  modernise  data  registers.  Under  the  RRF, 
Germany  has  digitalised  more  than  200 

(35)  IW Köln, 2024, Der Effekt von Sofortabschreibungen 
auf die Attraktivität des Steuerstandorts, iwkoeln.de. 

(36)  Leodolter et al., 2020, Taxation of residential property 
in the euro area, economy-finance.ec.europa.eu. 

(37)  National Regulatory Control Council, see above. 

(38)  European Commission, 2024, Digital Decade country 

federal, 

levels  has 

implementation 

services  at  federal  and  state  (Länder)  level. 
Progress  has  been  made  especially  for  the 
services that are most used by the public, such 
as registration. transformative, the distribution 
of  legal  and  financial  responsibilities between 
led 
different  government 
to 
inconsistent 
services 
of 
between 
state  and  municipal 
levels (39).  In  addition,  studies  have  criticised 
the  slowness  with  which  public  services  have 
been  digitalised (40)(41).  More  cooperation 
among  governmental  levels,  guidance  by  the 
federal  government  and,  where  feasible, 
standardisation,  are  needed 
to  ensure 
interoperability  and  uptake  of  IT  solutions.  In 
addition,  streamlining  and  simplification,  for 
instance  by  supervising  data  protection  at 
federal  government level, will allow for faster 
and more coherent digitalisation. 

gigabit 

connectivity 

Germany  still  lags  behind  the  digital 
decade 
target 
despite  a  positive  dynamic.  The  country 
lags  behind,  especially  on  very  high-capacity 
networks  in  rural  areas  (38%,  EU  average 
56%).  Fibre  to  the  premises  coverage  is 
insufficient,  with  only  30%  of  households 
covered,  considerably  below  EU  average.  The 
trend for 2024 appears positive but is not yet 
confirmed  in  new  EU-level  data.  At  98%, 
Germany  is  close  to  reaching  overall  5G 
coverage, but 5G coverage on the 3.4-3.8 GHz 
for  enabling 
spectrum  band,  essential 
advanced 
large 
spectrum  bandwidth,  remains  considerably 
below the EU average (42). 

applications 

requiring 

(39)  Nationaler Normenkontrollrat, see above. 

(40)  BMWK, 2024, Digitalisierungsindex, de.digital. 

(41)  Bundesrechnungshof, 2024, Bericht zur Umsetzung des 
Onlinezugangsgesetzes, bundesrechnungshof.de. 

report Germany, digital-strategy.ec.europa.eu. 

(42)  Digital Decade Country Report 2024: Germany 

10 

 
 
 
Increasing housing supply through 
investment and simplified 
regulation 

private  investment  incentives  in  the  housing 
sector and hinder the efficient use of available 
housing 

labour (44).  Addressing 

Housing  investment  fell  for  the  fourth 
year  in  a  row.  Investment  in  housing  has 
since  2020.  The 
contracted  by  15% 
government’s  goal  of  400 000  new  homes 
every  year  has  consistently  been  missed.  In 
2023,  only  around  290 000  new  dwellings 
were  completed.  A  quick  turnaround  is  not 
projected,  given  that  in  2024  only  215 900 
housing permits were issued, 43% less than in 
2021. Estimations of the gap between housing 
supply  and  demand  go  up  to  600 000 
dwellings (43).  This 
shortage  exacerbates 
housing  affordability  challenges  (Annexes  11 
and  17)  and has macroeconomic implications, 
as it hinders labour mobility: more than half of 
companies  and  workers  consider  that  the 
housing  shortage  is  directly  linked  to  the 
this 
shortage  of 
challenge  requires  a  more  dynamic  business 
environment 
the  construction  sector, 
supported  by  innovation  in  building  practices. 
These include, for example, modular and serial 
construction,  digital  planning,  and  simplified 
and  harmonised  regulations  (such  as  building 
type  E,  which  simplifies  standards  for  certain 
residential buildings). To increase the supply of 
housing and ease bottlenecks for construction, 
building land could be made available through 
improved 
for 
densification  and  better  transport  links  to 
suburban  areas.  Furthermore,  reducing  gold 
plating  and  shortening  procedures  could  help 
to  reduce  costs (45).  Rent  regulation  measures 
such as rent caps and limits on rent increases 
do  not  address  the  underlying  causes  of 
housing  shortages 
If 
in 
regulation  is  too  restrictive,  it  can  weaken 

plans  allowing 

tight  markets. 

land-use 

in 

(43)  Pestel-Institut, 2025, Wohnungsbau und 

Wohnungsmärkte, dgfm.de; zia-deutschland.de. 

(44)  German Council of Economic Experts, see above and 
PWC, 2025, Wohnungsnot und die Folgen für den 
Arbeitsmarkt, pwc.de; DIHK, 2024, Wie die 
Wohnungsnot den Arbeitsmarkt beeinflusst, dihk.de. 

(45)  IW Köln, 2024, Optionen für bezahlbaren Neubau, 
iwkoeln.de; ARGE, 2024, Wohnungsbau 2024 in 
Deutschland, arge-ev.de. 

11 

 
 
 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

Addressing grid congestion to reap 
full benefits of renewables 
expansion 

Graph 3.1: Installed capacity of the main 
renewable energy sources and national 
targets (in GW) 

continues 

to  expand 

Germany 
its 
renewable  energy  capacity,  with  clean 
energy  now  accounting  for  a  majority 
share  of  electricity  generation.  In  2024, 
renewables  made  up  57.5%  of  the  electricity 
mix (Annex 8). This growth, mainly  due to the 
increase  in  solar  and  wind  energy  sources 
(Graph  3.1),  reflects  ongoing  policy  efforts, 
technological advancements and investment in 
clean  energy 
infrastructure.  Germany  has 
made  progress  in  accelerating  its  energy 
transition,  including through  the  Recovery  and 
Resilience Plan (RRP), which features the Wind 
Energy  on  Land  Act  and  the  Offshore  Wind 
to  speed  up  wind  power 
Energy  Act 
deployment.  Additional 
policy  measures 
beyond  the  RRP  have  simplified  approval 
processes 
for  grid  expansion,  supported 
electricity storage and promoted the uptake of 
renewable  and  low-carbon  hydrogen  fuels. 
in 
However,  structural  challenges  remain 
terms  of 
integrating  higher  shares  of 
renewables  into  the  energy  system  and  the 
very  high  costs  of 
the  system.  These 
imply  that  Germany  has  the 
challenges 
highest  electricity  prices  of  the  EU  Member 
States.  In  this  respect,  the  fiscal  package, 
including  the  EUR 500  billion  infrastructure 
is 
fund 
specifically 
and 
Transformation  Fund),  has  the  potential  to 
remedy Germany’s  overall  investment  gaps  in 
energy-related infrastructure (see also Section 
1).  Nevertheless,  the  additional  investment 
would  benefit  from  being  undertaken  in  a 
cost-efficient  manner,  taking  into  account  the 
overall system costs into account. 

(out  of  which  EUR 100  billion 
the 

Climate 

for 

Source: Bundesnetzagentur 

and 

demand 

industrial 

The  geographical  mismatch  between 
energy generation and consumption leads 
to  grid  congestion  and 
inefficiencies, 
which  have  an 
impact  not  only  on 
Germany but also on its neighbours. Wind 
power is concentrated in the northern regions, 
while 
urban 
consumption  are  highest  in  the  south  and 
west (46).  This  limits  the  full  utilisation  of 
renewable energy due to network bottlenecks. 
In  addition,  higher  grid  charges  in  renewable 
abundant regions, mainly in wind power, act as 
a disincentive for industry to establish itself in 
locations  where  energy  is  generated,  thereby 
increasing  the  mismatch (47).  Since  January 
2025, 
Agency’s 
requirement  for  a  fairer  distribution  of  grid 
costs for the integration of renewable energies 

Federal  Network 

the 

(46)  Bundesministerium für Wirtschaft und Klimaschutz, 

2024, Ein Stromnetz für die Energiewende, bmwk.de. 

(47)  OECD, 2023, Economic Surveys: Germany, oecd.org. 

12 

01002003004005006002016201820202022202420302040/45Offshore windSolar photovoltaicOnshore windinstalledtarget 
 
   
 
for 

to  grid 

accelerate 

to 
particularly 

has  been  in  effect.  However,  further  efforts 
remain  necessary  for  a  fairer  distribution  of 
grid costs. Germany still has a long way to go 
to  finalise  its  approximately  16 800 km  of 
transmission  grid  expansion  projects.  This  is 
despite  progress  being  made  in  streamlining 
permitting  procedures  as  a  result  of  updates 
to the Energy Industry Act and the enactment 
of  the  Network  Expansion  Acceleration  Act.  A 
more  coordinated,  cost-efficient  and  strategic 
investment  would  be 
approach 
infrastructure 
beneficial 
north-south 
expansion, 
transmission  corridors  and  distribution  grid 
reinforcement.  However,  to  ensure  a  cost-
efficient 
integration  of  renewable  energy 
sources, limited feed-in in times of high supply 
and  optimisation  of  existing  grid  capacity 
could also be explored (48). To this end, market 
mechanisms,  such  as  balancing  obligations 
and  negative  prices,  could  be  applied  to 
renewable  energy  sources,  and  government 
support,  for  instance  for  rooftop  photovoltaic 
systems,  could  be  restricted  to  guarantee 
efficient  feed-in.  Expanding  digitalisation  and 
the  roll-out  of  demand  response  mechanism 
would  help  align  electricity  demand  with 
improving 
renewable  generation, 
system  efficiency,  flexibility  and  reliability (49). 
For  example,  the  roll-out  of  smart  meters  in 
Germany,  which  lags  significantly  behind  the 
EU  average,  could  be  accelerated  in  line  with 
the  EU  smart  meter  framework  by  reducing 
legal and bureaucratic hurdles. 

thereby 

Powering affordability: addressing 
high and volatile energy prices 

Germany  is  among  the  Member  States 
with  the  highest  electricity  prices  for 
households  and  industry  in  the  EU  (2024 
figures), 
financial 
pressure on consumers (Annex 8, Graph A8.1). 
Compared 
the  EU  average,  German 
households  pay  a  substantial  premium  of 

considerable 

placing 

to 

levies  and 

almost  40%.  This  comes  as  a  result  of 
structural  factors,  such  as  high  taxes,  levies 
and  grid-related  costs.  Electricity  prices,  and 
electricity  taxation  in  particular,  are  higher 
than  gas  prices  for  industries  (but  also  for 
consumers,  for  whom 
taxes 
represent  29%  of  the  electricity  bill).  This 
disincentivises  electrification  (see  Annex  7).  In 
addition,  electricity  prices  also  experienced 
high  volatility  in  the  autumn  and  winter  of 
2024.  This  was  driven  by  an 
increased 
demand  for  heating  and  by  a  ‘Dunkelflaute’ 
(low  wind  and  solar  output)  (see  Annex  8), 
causing uncertainty for consumers. Temporary 
government relief payments ceased at the end 
of 2023. This further exacerbated affordability 
concerns,  as  previously  implemented  price 
caps  and  reduced  tax  rates  were  phased  out, 
leading  to  a  full  return  to  market-driven 
electricity  pricing.  A  draft  to  reduce  electricity 
taxes  to  an  EU-wide  minimum  for  all  final 
consumers is currently underway. 

The 

Subsidies  are  not  enough  to  address 
primary 
concerns. 
affordability 
measures 
last  years 
introduced  over  the 
include  the  transfer  of  renewable  energy 
source  (EEG)  charges  from  the  consumer  to 
the  federal  budget,  the  2023  electricity  price 
cap, rebates for energy intensive industry and 
the  one-off energy price allowance  (50). While 
many  of  these  subsidies  expired  by  2024, 
Germany  introduced  additional  measures  via 
the  electricity  price  package  at  the  end  of 
2023.  These  measures  included  an  electricity 
tax  reduction  for  industry  from  1.5  cents  per 
kilowatt  hour  to  the  EU  minimum  amount  of 
0.05  cents,  an  extension  of  electricity  price 
compensation  to  offset  prices  for  industry 
under the EU’s emissions trading scheme (ETS) 
and  additional  measures  for  industry  and 
households (51).  Also, 
coalition 
agreement  from  9  April  2025  between 
CDU/CSU and SPD foresees a reduction of the 
electricity price by 5 cents per kWh, notably via 
a  reduction  of  the  electricity  tax  for  all,  a 
reduction  of  surcharges  and  network  charges, 

the  new 

(48)  IMK, 2024, Ausbau der Stromnetze: Investitionsbedarfe, 

(50)  Bundesfinanzministerium - Schnelle und spürbare 

boeckler.de. 

Entlastungen in Milliardenhöhe 

(49)  Agora Energiewende, 2025, Die Energiewende in 

(51)  Strompreispaket für energieintensive Unternehmen | 

Deutschland, agora-energiewende.de. 

Bundesregierung 

13 

 
 
 
and  a  permanent  cap  on  network  charges. 
However,  the  price  difference  to  the  EU 
average  remains  significant,  making  cost-
efficient  expansion  of  renewable  electricity 
and reliance on market mechanisms advisable. 
Additional measures, such as locational signals 
(regional  and  local  price  signals  that  support 
better  regional  load  management),  could  help 
mitigate  upward  pressure  on  grid  fees.  This 
includes phasing out cost-inefficient practices, 
such  as  feed-in  tariffs  for  small  installations, 
compensation  for  curtailed  renewables  and 
incentivise 
support  mechanisms 
generation  during  periods  of  negative  prices. 
Further  efforts  to  enhance  affordability  could 
also include targeted adjustments to electricity 
taxes  and  ensuring  that  levies  take  into 
account  the  need  to  minimise  the  fiscal  cost 
and  preserve  price  incentives  to  save  energy. 
Expanding  support 
for  energy  efficiency 
improvements,  such  as  home  retrofits  and 
smart  energy  management 
technologies, 
would  provide  additional  tools  for  energy 
savings and effective cost reductions. 

that 

Further reducing fossil fuel 
reliance to enhance energy 
security 

Despite  growing  renewable  electricity 
production, Germany’s energy system still 
relies  heavily  on  fossil  fuels.  Oil  (37%), 
natural  gas  (25%),  and  coal  (17%)  accounted 
for 
inland 
consumption 
renewables 
in  2023,  while 
contributed  only  19% (52).  Germany  aims  to 
phase  out  coal  by  2038  and  to  replace  fossil 
gas with cleaner alternatives by 2045. 

significant  parts  of  gross 

Progress has been made in strengthening 
Germany’s  security of energy  supply, but 
key  challenges  remain  in  the  transition 
towards a more sustainable and resilient 
energy  system.  Germany  is  phasing  out  its 
dependency on Russian gas, with an increasing 
share  of  energy  now  supplied  via  alternative 
pipelines  (from  Belgium,  the  Netherlands  and 

through 

Norway).  Imports  of  liquefied  natural  gas 
the  US,  have  also 
(LNG),  mainly  from 
increased 
the  commissioning  of 
floating  storage  regasification  units  (FSRUs). 
This  diversification  via  pipeline  gas  and  via 
LNG  has  made  energy  procurement  more 
flexible  and  reduced  exposure  to  geopolitical 
risks,  thus  strengthening  Germany’s  energy 
resilience  (Annex  8).  While  the  transition  to 
renewables  and  a  more  diversified  energy 
supply  continues, 
rising  energy  demand 
requires  investment  in  additional  sources  of 
flexibility  to  ensure  security  of  supply.  This 
includes  building  on  previous  government 
proposals  by  advancing  mechanisms,  such  as 
auctions, not only for non-fossil flexibility (e.g. 
demand  response  and  storage),  but  also  for 
firm  capacity  from  gas-fired  power  plants  – 
and potentially hydrogen in the future. 

Delivering on decarbonisation 
goals across all sectors 

Germany  is  aiming  for  climate  neutrality 
in  2045  and  is  making  advances  in 
emission cuts, but key sectors continue to 
fall  behind.  Germany  has  set  itself  the  goal 
of  reaching  climate  neutrality  by  2045  and  is 
on  track  to  cut  its  greenhouse  gas  emissions 
by  65%  by  2030,  meeting 
its  own 
intermediary  climate  goal.  However,  under  EU 
rules  (Effort  Sharing  Regulation),  which  set 
limits  for  emissions  in  areas  like  transport, 
existing  buildings  and  farming,  Germany  may 
still  exceed  its  allowed  emissions  (53).  While 
emission  reductions  have  been  largely  driven 
by  the  energy  sector  and to  a  smaller degree 
by 
further  climate 
mitigation  policies  are  needed  in  the  effort 
sharing sectors. 

industry  sector, 

the 

is 

uptake 

vehicle 

Electric 
slowly 
increasing,  but  infrastructure  expansion 
remains  a  challenge.  Battery  electric 
vehicles  (BEVs)  represented  13.5%  of  the 
market share of new registrations in February 

(52)  Energy Balances - Eurostat 

(53)  Umweltbundesamt,2025, Aktuelle Treibhausgas-

Projektionen, umweltbundesamt.de. 

14 

 
 
 
disparities   

points 

regional 

However, 

enhanced 

2024 (54). The charging network has expanded, 
supported  by  RRP-funded  investments  in  new 
charging 
grid 
and 
connections.  Germany  is  on  track  to meet the 
mandatory  deployment  targets  for  Light-Duty 
Vehicle  (LDV)  charging  infrastructure,  with 
market  forces  playing  a  central  role 
in 
delivering  a  comprehensive  and  user-friendly 
network. 
remain,  and  it  is  important  to  ensure  that 
sufficient  charging  infrastructure  is  available 
across  all  regions,  including  in  rural  areas.  As 
electric trucks increasingly enter the market, it 
would be beneficial to accelerate the rollout of 
dedicated 
for  Heavy-Duty 
Vehicles  (HDVs)  and  to  ensure  a  competitive 
the  development  and 
environment 
operation  of  this  infrastructure.  Distribution 
networks could therefore be further expanded, 
which  could  enable  powerful  home  charging 
stations to be installed. As part of this process, 
flexibility options could be used and measures 
taken which allow the distribution networks to 
be  expanded  cost-efficiently.  To  boost  the 
uptake  of  electric  vehicles,  the  German  RRP 
provides  purchase  subsidies  and  makes 
provision  for  the  extension  of  the  initial 
registration  period  for  granting  a  10-year  tax 
exemption for fully electric vehicles. 

infrastructure 

for 

Significant  improvement  to  the  public 
transport  infrastructure  would  still  be 
beneficial.  While  some  investment,  notably 
through  the  support  of  the  RRF,  has  been 
made to modernise rail networks and increase 
the  capacity  of  public  transport,  delays  in 
major  railway  projects  have  slowed  progress. 
Germany  also  supports  the  electrification  of 
municipal  and  commercial  fleets  through 
grants  for  vehicle  purchases  and  charging 
infrastructure.  In  particular,  freight  transport 
remains  heavily  dependent  on  road  haulage. 
Investing  in  the  expansion  of  rail  networks 
rail.  The 
could  help 
development of alternative propulsion systems 
for  heavy-duty  transport  has  seen  some 
progress, 
initiatives 
supporting  the  adoption  of  hydrogen-powered 
trucks  and  buses. 
and  battery  electric 

RRP-backed 

freight 

shift 

with 

to 

However,  their  deployment  is  still  in  its  early 
stages, and cost barriers remain high (55). 

The  building  sector  faces  significant 
is 
hurdles  in  reducing  emissions.  This 
caused  in  particular  by  the  slow  pace  of 
renovations  and 
the  need  to  modernise 
heating  systems.  In  Germany,  as  in  other 
Member  States,  many  buildings  are  old  and 
inefficient, requiring substantial  investment to 
meet modern energy standards. However, with 
the  current  renovation  rate  at  only  1%  per 
year,  progress  remains  too  slow  to  bring  this 
sector  into  line  with  climate  goals  (Annex  7). 
These challenges are compounded by  broader 
economic  conditions:  heightened  uncertainty, 
high  construction  and  financing  costs,  and  a 
subdued 
have 
contributed  to  a  sharp  decline  in  housing 
investment, which fell by 6.3% between 2019 
and  2024.  The  RRP  plays  a  key  role  in 
addressing  these  challenges  via  numerous 
measures,  such  as  energy-efficient  building 
renovations  and  municipal  living  labs  serving 
as  real-world  testing  grounds  for  integrated 
energy  solutions  in  urban  neighbourhoods. 
Complementary  support  is  provided  by  the 
European  Regional  Development  Fund  for  the 
renovation  of  public  and  social 
energy 
infrastructure, 
research 
businesses 
institutes.  Further  policy  action  would  be 
beneficial. 

environment 

investment 

and 

Addressing environmental and 
climate vulnerabilities to ensure 
sustainable growth 

Nature  degradation  and  water  pollution 
create  significant  risks  to  biodiversity 
and  to  the  economy.  In  Germany,  100%  of 
surface  water  bodies  fail  to  achieve  a  good 
chemical  status  (Annex  9),  due  to  ubiquitous 
substances  like  mercury.  Chemical  pollutant 
emissions  from  industry  and  energy  sectors 
are  the  leading  cause  for  the  failure  of  the 

(54)  European Alternative Fuels Observatory, 2025, 

Germany: BEV market share at 13.5%, alternative-
fuels-observatory.ec.europa.eu. 

(55)  Burke et al., 2023, Projections of the costs of medium-
and heavy-duty battery-electric and fuel cell vehicles, 
sciencedirect.com. 

15 

 
 
 
has 

continued 

ecosystems 

surface  water  bodies.  Also,  the  condition  of 
many 
to 
deteriorate, due to  agriculture  and  changes in 
land  use  together  with  nitrogen  deposition 
from  agriculture  and  traffic  sources.  Further 
restoration measures and changes in land use 
practices 
these 
ecosystems  contribute  more  to  sustainable 
economic  growth  and  reverse  the  trend  of 
falling net carbon removals. 

could  potentially  make 

societal 

significant 

Germany faces severe climate challenges, 
and 
inflicting 
economic  damage.  Germany  is  among  the 
EU  Member  States  to  suffer  the  greatest 
economic  losses  as  a  result  of  weather-  and 
including  when 
climate-related  extremes, 
expressed  per  square  kilometre  or  per 
capita (56). 
resource-
By  mid-century, 
dependent 
increasingly 
sectors  will  be 
threatened  by  climate  risks.  Despite  making 
progress in climate adaptation, Germany is still 
facing issues such as insurance coverage gaps 
and  problems  relating  to  funding  and  local 
adaptation planning (see Annex 9). 

(56)  European Environment Agency, 2025, Economic losses 
from weather- and climate-related extremes in Europe, 
eea.europa.eu 

16 

 
 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

employees to transition into new sectors could 
be strengthened (59). 

for  by 

compensated 

(Section  1)  and 

Ageing is reducing the labour supply, only 
partly 
labour 
migration.  The  working-age  population  is 
projected  to  shrink 
life 
expectancy  to  grow  by  close  to  two  years 
between  2030  and  2040 (60).  Yet  the  legal 
retirement age is set  to remain unchanged at 
67  from  2031.  More  than  half  of  retiring 
workers  leave  the  workforce  before  reaching 
the legal retirement age with almost one third 
leaving early without any reduction in pension 
entitlements.  This  means  that  often  people 
who  are  well  educated  and  in  good  health 
leave the labour market (61).  Labour migration 
is  important  to  help  cushion  the  effects  of 
ageing  on  labour  supply.  After  the  first  stage 
of the Skilled Immigration Act came into force 
in  November  2023,  applications  for  visas  and 
recognition  of  foreign  qualifications 
rose 
significantly (62).  Yet  there  is  further  potential 
for  speeding  up  administrative  procedures  for 
labour and education-related migration. 

Low  hours  worked  weigh  on 
labour 
supply, in particular amongst women. The 
employment rate is high, but hours worked per 
employee  are  among  the  lowest  in  the  EU  at 
1 343  hours  in  2023  (Graph  4.1),  falling 
further by a further 0.3% in 2024 according to 
the Institute for Employment Research. Half of 
female  employees  work  part-time,  one  of  the 
highest  levels  in  the  EU.  Caring  for  children 

(59)  IAB, 2024, Impulse für Konjunktur und Transformation 
statt Verlängerung von Kurzarbeit, iab.de; Weber, E., 
2025, Beschäftigungssicherung: Kurzarbeit plus 
Qualifizierung, wirtschaftsdienst.eu. 

(60)  European Commission, 2024, Ageing Report, europa.eu 

(61)  DIW, 2024, Rente nach 45 Jahren: Auch Personen mit 

geringer Arbeitsbelastung gehen frühzeitig 
abschlagsfrei in Ruhestand, diw.de. 

(62)  BMI, 2024, The new Skilled Immigration Act one year 

on, bund.de. 

Addressing skilled labour 
shortages and declining hours 
worked 

Labour  shortages  are  already  a  major 
bottleneck  for  the  German  economy.  At 
the end of 2024, the number of vacancies had 
declined  by  19%  compared  with  the  year 
before,  reflecting  the  deterioration  in  the  
economic situation. Still, there were 1.4 million 
vacancies  and  around  one  third  of  companies 
reported being affected by labour shortages in 
Q4  2024  compared  to  39%  end  2023 (57). 
skilled 
in 
Shortages  affect, 
positions, 
the 
construction 
scientific  and 
technical  professions.  Yet  the  proportion  of 
employers  expecting  labour  shortages  to  limit 
their  production  was  at  or  above  the  EU 
average across all sectors in Q4-2024. 

the  care  and 
sector,  and 

IT  sectors, 

particular, 

to 

ability 

companies’ 

Labour  shortages  and  labour  hoarding 
make it more difficult for the economy to 
adjust and transform. Labour shortages are 
limiting 
expand 
production,  thus  directly  harming  productivity. 
This  also  results  in  low  growth  rates  among 
new  German  firms.  Labour  shortages  also 
harm  productivity  indirectly,  by  incentivising 
labour  hoarding (58).  Labour  hoarding 
in 
Germany  is  among  the  highest  in  the  EU 
according to the EU business survey and might 
be  intensified  by  the  doubling  of  the  duration 
of  short-time  work  arrangements  (Kurzarbeit) 
to two years until the end of 2025. To increase 
productivity and address frictions in the labour 
training  measures  which  help 
market, 

(57)  KfW-ifo Skilled Labour Barometer, 2024, kfw.de. 

(58)  Labour hoarding refers to the practice of keeping more 
workers than currently needed. This also occurs out of 
fear of difficulties in hiring new staff later. 

17 

 
 
 
 
and  elderly  relatives  is  a  frequent  reason  for 
working  part-time,  partly  driven  by  a  gap  in 
the  provision  of  quality, 
flexible  early 
childhood  education  and  care.  The  Recovery 
and  Resilience  Facility  (RRF)  is  supplementing 
national investments in funding places in early 
childhood  education  and  care  (ECEC).  Yet  for 
children  under  three,  there  was  a  shortfall  of 
over  306 000  places  in  2024 (63).  Whole-day 
schools are also an important lever facilitating 
the  employment  of  parents  and  the  skills 
development of pupils. Still, they are suffering 
from  staff  shortages  and  lack  of  adequate 
infrastructure, and the further need for whole-
day  primary  school  places  is  estimated  to 
342 000  by  2026/2027  (64).  In  addition,  the 
tax  and  benefits  system  creates  strong 
low-earners  and  second 
disincentives  for 
earners 
(see  also 
Section 2) (65).  Reform  proposals  show  that  it 
would  be  possible  to  increase  labour  supply 
with no or limited budgetary cost, for example 
by  unifying  benefits  (66),  and  by  creating  a 
transferable  tax  allowance  between  spouses 
(67).  The  current  mini-job  system  effectively 
locks people into working very few hours. This 
system could be made more flexible (68). 

to  work  more  hours 

(63)  Institut der deutschen Wirtschaft: IW Report 40/2024, 

iwkoeln.de. 

(64)  BMFSFJ, 2024,  Zweiter Bericht der Bundesregierung 
zum Ausbaustand der ganztägigen Bildungs- und 
Betreuungsangebote für Grundschulkinder, bmfsfj.de. 

(65)  ifo, 2024, Elemente einer grundlegenden Reform für 

das Steuer- und Abgabensystem in Deutschland, ifo.de 

(66)  Blömer, M. J., Hansen, E., Peichl A., 2024, Die 
Ausgestaltung des Transferentzugs in der  
Interdependenz mit dem Bürgergeld, der 
Kindergrundsicherung und dem Wohngeld, ifo 
Forschungsberichte 145, ifo.de. 

(67)  German Council of Economic Experts, 2023, Annual 
Report 2023/24, Chapter 4, sachverstaendigenrat-
wirtschaft.de. 

(68)  OECD, 2025, Economic survey of Germany. 

Graph 4.1: Average hours worked 

(1) 2023 data 
Source: OECD 

Strengthening active labour 
market policies and skills 

to 

linked 

Beyond the cyclical weakness, the  labour 
market  is  increasingly  facing  structural 
challenges and employment shifts (69). The 
reallocation  of  labour  across  sectors  and  job 
profiles,  also 
the  announced 
downsizing  of  the  car  and  supplier  industry, 
calls  for  effective  labour  market  and  benefit 
policies  to  support  transitions.  Basic  income 
support for jobseekers (Bürgergeld) provides a 
continuing  education  and  training  benefitto 
its  activation 
incentivise  upskilling,  but 
component  is  sometimes  seen  as  weak  and 
rules  on  supplementary  income  lead  to  high 
marginal  effective  tax  rates  (70),  posing  a 
barrier  to  people  taking  up  jobs.  Furthermore, 
a 
the  adult 
population,  especially  disadvantaged  groups, 
has  limited  access  to  training  (Annex 12). 
Upskilling  and  reskilling  efforts,  coupled  with 
targeted  support,  could  significantly  unlock 
potential,  address  poverty 
in  a 
sustainable manner and guide people towards 
is  especially 
sectors  with  shortages.  This 
important for laid-off workers and groups who 
are  under-represented  in  the  labour  market, 

significant  proportion  of 

risks 

(69)  IAB, 2024, Konjunktur und Transformation: die kritische 

Gemengelage am Arbeitsmarkt, iab.de. 

(70)  Ortmann, T., Thode, E., Wink, R., 2025, Bürgergeld: 

Anspruch, Realität, bertelsmann-stiftung.de; IAB, 2025, 
Macht Bürgergeld Arbeit unattraktiv?, iab.de. 

18 

1,0001,1001,2001,3001,4001,5001,6001,7001,8001,900ELPLCZEEITHULTIEESPTSKSILVBEUKFRFILUSEATNLDKDE 
 
   
 
like  the  low-skilled  and  people  born  outside 
the EU. 

Digital  skills  remain  weak,  complicating 
the  digitalisation  of  the  economy.  The 
government has set its national digital decade 
target  at  80%  of  adults  (16-74  year-olds) 
having  at  least  basic  digital  skills  by  2030 
However, only slightly more than half met this 
criterion  in  2023,  still  below  the  EU  average, 
with  particular  challenges  for  young  people 
and  those  born  outside  the  EU.  At  the  same 
time,  businesses  identify  a  lack  of  know-how 
as  a  hindrance  to  their  use  of  data,  which  is 
and 
essential 
competitiveness (71). 
and 
Resilience Facility helps to digitalise education 
through  the  provision  of  mobile  devices  to 
teachers  and  educational  platforms  and 
centres  of  excellence.  Beyond  that,  Germany 
comprehensively 
from 
could 
embedding  digital  education  in  the  school 
training 
curriculum,  expanding  vocational 
and 
digital 
focused 
promoting lifelong learning initiatives (72). 

competencies 

innovation 

Recovery 

benefit 

The 

for 

on 

Improving education outcomes and 
skills, especially for disadvantaged 
groups 

increased  over  the 

Basic  skills  levels  have  deteriorated  and 
are  strongly 
linked  to  pupils’  socio-
economic  background.  Underachievement 
has  significantly 
last 
decade,  with  a  quarter  of  all  pupils  now 
performing poorly in mathematics, reading and 
science (Annex 12). Every second pupil from a 
disadvantaged  socio-economic  background 
and  two  thirds  of  those  born  abroad  perform 
In  addition,  a 
poorly 
significant  proportion  of  young  people  leave 
education  and  training  early  (12.8%),  one  of 
the highest rates in the EU. Concerns are also 
growing  over  the  basic  skills  of  apprentices, 
reflecting  a  broader  decline  in  educational 

in  mathematics. 

introduction 

performance,  while  many  young  people  still 
lack  apprenticeship  opportunities  (Annex 12). 
The 
of  an  apprenticeship 
guarantee  (Ausbildungsgarantie)  in  2024  is 
helping  applicants  who  did  not  find  an 
apprenticeship  to  obtain  a  place  at  a  VET 
(vocational  education  and  training)  college. 
This  could  be  combined  with  action  to 
strengthen  the  foundational  skills  of  potential 
apprentices  and  promote  language  skills (73). 
Providing  more  support  to  schools  facing 
difficulties,  including  high  drop-out  rates,  by 
ensuring  that  target  schools  are  supported 
‘Startchancen’  programme  or 
through  the 
regional  support  schemes  could 
further 
address the declining level of basic skills. 

wealthier 

throughout 

Limited  participation  of  disadvantaged 
children in early childhood education and 
care  weighs  on  future  performances  and 
increases  inequalities.  Disadvantage  starts 
early  with  consequences 
life. 
Children 
households 
from 
participated  in  ECEC  nearly  twice  as  often  as 
their  less  affluent  peers.  A  language  other 
than  German  is  primarily  spoken  in  18%  of 
households.  Access  to  quality  ECEC  can  help 
mitigate  early  disadvantages  due  to  family 
background 
deficiencies. 
Increasing  the  provision  of  quality  inclusive 
ECEC  could  foster  equal  opportunities  for 
children  regardless  of  their  socio-economic 
and/or migrant background. 

language 

and 

shortages 

impede  both 

childcare  and 

Staff 
the 
early 
expansion  of 
education places and the improvement of 
quality.  Although  ECEC  staff  more  than 
doubled  between  2003  and  2023,  a  staff 
shortage  of  up  to  367 000  exists,  limiting 
supply, opening hours and quality (74). Working 
conditions are not sufficiently attractive, and a 
high  proportion  of  ECEC  graduates  and 
workers  seek  employment  outside  the  sector 
for  which  they  trained.  Schools  also  face  a 
serious  shortage  of  teachers,  especially  in 
STEM disciplines like mathematics. The annual 
shortage  of  teachers  is  estimated  to  reach 

(71)  DIHK, 2025, Digitalisierungsumfrage,  , DIHK-

Digitalisierungsumfrage 2025. 

(72)  Bitkom, 2025, Digitale Bildung, bitkom.org. 

(73)  OECD, 2025, Economic survey Germany. 

(74)  Autor:innengruppe Bildungberichterstattung, 2024, 
Bildung in Deutschland 2024, bildungsbericht.de. 

19 

 
 
 
between  23 500  and  40 000  by  2035  (75). 
Despite  relatively  high  wages,  teaching  in 
Germany  is  losing  its  appeal,  as  seen  in  the 
declining  numbers  of  teaching  graduates. 
Meanwhile, the proportion of teachers without 
a  teaching  diploma  more  than  doubled  from 
4% to 10% between 2015 and 2022. Reliance 
on ‘career changers’  (Quereinsteiger)  needs to 
training, 
be  accompanied  by  continuous 
updating teachers’ skills. 

of 

international 

Rising  tertiary  attainment  and  high 
students 
numbers 
support  competitiveness,  while 
lower 
skills  outcomes  weaken 
it.  Tertiary 
attainment  has  increased but  trails  about  5% 
behind the  EU  average.  The  fact  that German 
universities attract a high proportion of foreign 
students  at  Master’s  and  PhD  level  allows 
some  of  the  existing  skills  gaps  to  be  closed. 
The  fall  in  the  proportion  of  high-performing 
pupils, as reflected in PISA scores, on the one 
hand,  and  declining  basic  skills,  on  the  other, 
are a concern for longer-term competitiveness. 

(75)  Autor:innengruppe Bildungberichterstattung, 2022, 
Bildung in Deutschland, bildungsbericht.de; Robert 
Bosch Stiftung, 2025, Lehrermangel – so reagieren die 
Länder auf die Prognose, deutsches-schulportal.de. 

20 

 
 
KEY FINDINGS 

the 

areas 

In 
competitiveness, 
decarbonisation  and  skills,  Germany  would 
benefit from: 

of 

recurrent 
reviewing the efficiency of spending; 

transfers 

pension 

and 

• 

chapter; 

implementing the RRP, including the 
swiftly 
REPowerEU 
implementing cohesion policy, taking 
advantage  of  the  opportunities  under 
the  mid-term  review  and  making 
instruments, 
optimal  use  of  EU 
including 
InvestEU  and  STEP,  to 
improve competitiveness; 

•  boosting  innovation  by  improving 
the commercialisation of research and 
funding for disruptive innovation; 

•  supporting 

start-ups 

and 
expanding  venture  capital  access,  
notably  by  strengthening  institutional 
investors as capital providers;  

•  optimising  the  tax  mix  to  boost 
inclusive  growth  and  sustainable 
through 
competitiveness,  notably 
increasing  hours  worked  by  reducing 
the  labour  tax  wedge  or  by  making 
corporate taxation support investment; 

• 

increasing  housing  supply  and 
affordability by mobilising additional 
building  land,  reviewing  rental  law, 
simplifying rules and procedures; 

•  expanding  and  modernising  grid 
infrastructure  cost  efficiently  to 
better  integrate  renewables,  reduce 
north-south  imbalances  and  provide 
planning security for industry; 

•  cutting 

red 

tape 

to  enhance 
competitiveness 
private 
investment by simplifying regulations 
and procedures where possible;  

and 

•  accelerating  the  digitalisation  of 
public  administration  including  by 
linking  data  registers  and  facilitating 
cooperation of governmental levels; 

•  speeding 

up 

the 

digital 
infrastructure roll-out of very high-
capacity  networks,  especially  fibre 
optics,  and working towards achieving 
the digital decade targets;  

•  strengthening  public  investment, 
with  a  focus  on  growth-enhancing 
investments by addressing bottlenecks 
in planning and execution;  

•  enhancing  the  quality  of  federal 
containing 

finances 

public 

by 

• 

lowering  electricity  costs  through 
taxes  and  levies,  and  by  ensuring  a 
cost-efficient 
the 
system  with  market 
electricity 
mechanisms and dynamic pricing;  

expansion 

of 

•  making 

further 

progress 

to 
decarbonise  the  transport  and 
building 
increasing 
electrification  and  energy  efficiency, 
and renovating the rail network; 

sectors 

by 

•  addressing  labour  shortages  and 
low  working  hours  by  boosting 
participation  of  women,  low-income 
earners  and  older  workers,  expanding 
early  childhood  education  and  care 
(ECEC)  and  whole  day  schools,  and 
attracting talent from third countries; 

•  boosting  skills  and  activation 
through  better  access  to  training, 
including on digital skills, especially for 
disadvantaged groups; and  

21 

 
 
• 

improving  education  outcomes  by 
supporting schools and ECEC to attract 
staff and improve infrastructure. 

22 

 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Fiscal 

A1.  Fiscal surveillance and debt sustainability 

A2.  Taxation 

Productivity 

A3. 

Innovation to business 

A4.  Making business easier 

A5.  Capital markets, financial stability and access to finance 

A6.  Effective institutional framework 

Sustainability 

A7.  Clean industry and climate mitigation 

A8.  Affordable energy transition 

A9.  Climate adaptation, preparedness and environment 

Fairness 

A10.  Labour market 

A11.  Social policies 

A12.  Education and skills 

A13.  Social Scoreboard 

A14.  Health and health systems 

Horizontal 

A15.  Sustainable development goals 

A16.  CSR progress and EU funds implementation 

A17.  Competitive regions 

LIST OF TABLES 

General government balance and debt 
Net expenditure growth 
Net expenditure (outturn and forecasts) deviations vis-à-vis the recommendation 
Defence expenditure 

A1.1. 
A1.2. 
A1.3. 
A1.4. 
A1.5.  Macroeconomic developments and forecasts 
A1.6. 
A1.7. 
A1.8. 
A1.9. 

General government budgetary position 
Debt developments 
RRF – Grants 
Projected change in age-related expenditure in 2024-2040 and 2024-2070 

25 

28 

28 

34 

37 

37 

43 

48 

56 

61 

61 

68 

74 

80 

80 

84 

88 

92 

93 

95 

95 

97 

104 

28 
29 
29 
29 
30 
30 
31 
31 
32 

 
 
 
Financial indicators 
Selected indicators on administrative burden reduction and simplification 
Key Digital Decade targets monitored through the Digital Economy and Society Index 
Key clean industry and climate mitigation indicators: Germany 
Key Energy Indicators 
Key indicators on progress on climate adaptation, preparedness and environment 

A1.10.  Fiscal Governance Database Indicators 
A2.1. 
Taxation indicators 
A3.1. 
Key innovation indicators 
A4.1.  Making Business Easier: indicators. 
A5.1. 
A6.1. 
A6.2. 
A7.1. 
A8.1. 
A9.1. 
A13.1.  Social Scoreboard for Germany 
A14.1.  Key health indicators 
A16.1.  Selected EU funds with adopted allocations - summary data (million EUR) 
A16.2.  Summary table on 2019-2024 CSRs 
A17.1.  Selected indicators at regional level in Germany 

LIST OF GRAPHS 

Greenhouse gas emissions in effort sharing sectors, 2005 and 2023 
Retail energy price components for household and non-household consumers, 2024 

Accounting maturity by government sector (2025, 2030) 
Tax revenue shares in 2023 
Tax wedge for single and second earners, % of total labour costs, 2024 
VAT compliance gap (as % of VAT total tax liability) 
Sectoral distribution of R&D investment among the world’s top 2 000 R&D investors, in Germany (blue) and worldwide (red) 
Start-up rate in Germany by economic sector (2010-2023) 

A1.1. 
A2.1. 
A2.2. 
A2.3. 
A3.1. 
A3.2. 
A4.1.  Making Business Easier: selected indicators. 
A5.1. 
Net savings-investment balance in Germany 
A5.2. 
International investment position of Germany 
A5.3. 
Capital markets and financial intermediaries in Germany 
A5.4. 
Composition of NFC funding as a % of GDP 
A5.5. 
Composition of HH financial assets per capita and as a % of GDP 
A6.1. 
Trust in justice, regional / local authorities and in government 
A6.2. 
Indicators of Regulatory Policy and Governance (iREG) 
A6.3. 
Participation rate of 25-64 year olds in adult learning (%) by occupation 
A7.1. 
GHG emission intensity of manu-facturing and energy-intensive sectors, 2022 
A7.2.  Manufacturing industry production: total and selected sectors, index (2021 = 100), 2017-2023 
A7.3. 
A8.1. 
A8.2.  Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF) 
A8.3. 
A9.1. 
A9.2. 
A10.1.  Key labour market indicators (2024) 
A10.2.  Part-time employment by sex (ages 20-64, 2023) 
A10.3.  Labour shortages in key sectors for the green transition in Germany and the EU (Q4-2024) 
A11.1.  At-risk-of poverty or social exclusion rate for Germany and its components 
A11.2.  Risk of poverty or social exclusion in different age groups 
A11.3.  Housing cost overburden in different population groups (2023) 
A12.1.  Underachievement rates by field, PISA 2012, 2018 and 2022 (%) 
A12.2.  Population with at least basic digital skills, by age, country of birth and educational attainment 
A14.1.  Life expectancy at birth, years 
A14.2.  Treatable mortality 
A15.1.  Progress towards the SDGs in Germany 
A16.1.  Distribution of RRF funding in Germany by policy field 
A16.2.  Distribution of cohesion policy funding across policy objectives in Germany 
A17.1.  Labour productivity per hour 
A17.2.  Access to healthcare and primary education in rural areas, 2023 

Germany's installed renewable capacity (left) and electricity generation mix (right) 
Direct dependency(1) on ecosystem services(2) of the gross value added generated by economic sector in 2022 
Investment needs and gaps in EUR million, in 2022 constant prices 

26 

32 
36 
42 
47 
55 
57 
58 
67 
73 
79 
92 
94 
100 
101 
106 

33 
34 
35 
36 
38 
39 
44 
48 
48 
49 
51 
53 
56 
56 
59 
63 
64 
64 
68 
69 
71 
77 
77 
80 
81 
83 
84 
85 
86 
88 
90 
93 
93 
95 
98 
98 
105 
108 

 
 
 
LIST OF MAPS 

A17.1.  GDP per head (in purchasing power standard PPS), 2023 
A17.2.  Real GDP per head growth (2014-2023) 
A17.3.  Regional Competitiveness Index 2.0, 2022 edition 
A17.4.  Housing cost overburden, 2024 

104 
104 
105 
109 

27 

 
 
 
 
FISCAL 
ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY 

This  Annex  contains  a  series  of  tables  relevant  for  the  assessment  of  the  fiscal  situation  in  Germany, 
including how Germany  is responding to Council  recommendations  issued  under the reformed Economic 
Governance Framework. 

The  reformed  framework,  which  entered  into  force  on  30  April  2024(76),  aims  to  strengthen  debt 
sustainability  and  promote  sustainable  and  inclusive  growth  through  growth-enhancing  reforms  and 
priority investments. The medium-term fiscal-structural plans (hereinafter, MTPs or plans) constitute the 
cornerstone  of  the  framework,  setting  the  budgetary  commitment  of  Member  States  over  the  medium 
term. The latter is defined in terms of net expenditure growth, which is the single operational indicator for 
fiscal surveillance.  

Germany has not yet submitted its medium-term plan.  

The Annex is organised as follows. First, developments in  government deficit and debt are presented 
based  on  the  figures  reported  in  Table  A1.1.  Then,  an  assessment  of  the  fiscal  situation  of  Germany 
follows, including developments of net expenditure growth and data on defence expenditure, based on the 
relevant figures presented in Tables A1.2 to A1.8. The fiscal situation of Germany is described on the basis 
of  outturn  data  from  Eurostat,  the  Commission  Spring  2025  Forecast,  and  the  Annual  Progress  Report 
(APR), that Germany submitted on 24 April 2025.  

The Annex also provides information on the cost of ageing and the national fiscal framework. Fiscal 
sustainability risks are discussed in the Debt Sustainability Monitor 2024(77). 

Developments in government deficit and debt  

Germany’s  government  deficit  amounted  to  2.8%  of  GDP  in  2024.  Based  on  the  Commission’s  Spring 
2025  Forecast,  it  is  projected  to  decrease  to  2.7%  of  GDP  in  2025.  The  government  debt-to-GDP  ratio 
amounted to 62.5% at the end of 2024 and, according to the Commission, it is projected to increase to 
63.8% end-2025. Before this, the debt-to-GDP ratio had been on a downward trajectory from its peak of 
68.1% in 2021, until levelling out in recent years. 

Table A1.1:  General government balance and debt 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Developments in net expenditure  

The net expenditure(78) growth of Germany in 2025 is forecast by the Commission(79) to be 2.1% in 2025.  

(76)  Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies 
and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the 
excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the 
core elements of the reformed EU economic governance framework. 

(77)  Commission (2025) ‘Debt Sustainability Monitor 2024,’ European Economy-Institutional Papers 306. 

28 

2024OutturnAPRCOMAPRCOM1General government balance% GDP-2.8-2 1/2-2.7n.a.-2.92General government gross debt% GDP62.562 3/463.8n.a.64.7Variables20252026 
 
 
 
                  
 
 
 
Germany  has  requested  the  activation  of  the  national  escape  clause  for  defence.  This  request  will  be 
assessed together with the medium-term fiscal-structural plan (MTP) once it is submitted. 

Table A1.2:  Net expenditure growth 

* The cumulative growth rates in the APR are calculated by reference to the base year of 2023. The COM figures are calculated by 
reference to 2024. 
Source: Annual Progress Report (APR) and Commission's calculation based on Commission Spring 2025 Forecast (COM). 

General government defence expenditure in Germany amounted to 1.0% of GDP in 2021, 1.0% of GDP in 
2022 and 1.1% of GDP in 2023(80). According to the Commission 2025 Spring Forecast,  expenditure on 
defence is projected at 1.3% of GDP in 2024 and 1.3% of GDP in 2025. 

Table A1.3:  Net expenditure (outturn and forecast)  

* For Germany no quantitative assessment can be undertaken in the absence of the medium-term plan. 
Source: Commission Spring 2025 Forecast and Commission’s calculation.  

Table A1.4:  Defence expenditure 

Source:  Eurostat (COFOG), Commission Spring 2025 Forecast and Commission’s calculation. 

(78)  Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure, 
(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds,  (iv) 
national  expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of  unemployment  benefit 
expenditure, and (vi) one-off and other temporary measures.  

(79)  Commission Spring 2025 Forecast, European Economy-Institutional paper 318, May 2025. 

(80) Eurostat, government expenditure by classification of functions of government (COFOG).  

29 

RECAPRCOMRECAPRCOM2024n.a.3.8%4.0%n.a.n.a.n.a.2025n.a.2 1/22.1%n.a.6 1/22.1%2026n.a.n.a.3.2%n.a.n.a.5.4%AnnualCumulative*Growth rates2023202420252026OutturnOutturnCOMCOM1Total expenditurebn NAC2025.02131.62214.42297.42Interest expenditurebn NAC36.645.448.450.63Cyclical unemployment expenditurebn NAC-1.35.08.82.34Expenditure funded by transfers from the EUbn NAC9.55.98.88.45National co-financing of EU programmesbn NAC2.01.71.21.26One-off expenditure (levels, excl. EU funded)bn NAC0.00.00.00.07=1-2-3-4-5-6Net nationally financed primary expenditure (before discretionary revenue measures, DRM)bn NAC1978.22073.62147.22234.88Change in net nationally financed primary expenditure (before DRM)bn NAC95.473.687.79DRM (excl. one-off revenue, incremental impact)bn NAC16.829.618.710=8-9Change in net nationally financed primary expenditure (after DRM) bn NAC78.644.069.011Outturn / forecast net expenditure growth*% change3.97%2.1%3.2%12Recommended net expenditure growth% changen.a.n.a.n.a.13=(11-12) x 7Annual deviationbn NACn.a.n.a.n.a.14 (cumulated from 13)Cumulated deviationbn NACn.a.n.a.n.a.15=13/17Annual balance% GDPn.a.n.a.n.a.16=14/17Cumulated balance% GDPn.a.n.a.n.a.17p.m. Nominal GDP  bn NAC4185.64305.34409.04553.8Variables2021202220232024202520261Total defence expenditure% GDP1.01.01.11.31.31.42of which: gross fixed capital formation% GDP0.20.20.20.20.20.2 
 
   
 
 
                  
 
 
 
      
 
 
 
Table A1.5:  Macroeconomic developments and forecasts 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Table A1.6:  General government budgetary position 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

30 

2024OutturnAPRCOMAPRCOM1=7+8+9Real GDP% change-0.20.30.0n.a.1.12Private consumption% change0.30.50.7n.a.1.13Government consumption expenditure% change3.51.51.9n.a.1.34Gross fixed capital formation% change-2.70.40.2n.a.2.65Exports of goods and services% change-1.1-0.3-1.9n.a.1.16Imports of goods and services% change0.21.90.9n.a.1.5Contributions to real GDP growth 7- Final domestic demandpps0.31.20.9n.a.1.48- Change in inventoriespps0.00.40.2n.a.-0.29- Net exportspps-0.6-0.9-1.1n.a.-0.110Output gap% pot GDP-1.4-1.9-1.7n.a.-0.911Employment % change0.20.0-0.2n.a.0.212Unemployment rate%3.43.33.6n.a.3.313Labour productivity% change-0.40.30.1n.a.0.914HICP % change2.5n.a.2.4n.a.1.915GDP deflator% change3.12.12.4n.a.2.216Compensation of employees per head% change5.23.03.4n.a.2.917Net lending/borrowing vis-à-vis the rest of the world% GDP5.1n.a.4.4n.a.4.420252026Variables2024OutturnAPRCOMAPRCOM1=2+3+4+5Revenue46.84847.5n.a.47.6of which:2- Taxes on production and imports10.310 1/210.4n.a.10.43- Current taxes on income, wealth, etc.12.812 3/412.8n.a.12.84- Social contributions17.518 1/218.2n.a.18.35- Other (residual)6.15 3/46.2n.a.6.28=9+16Expenditure 49.550 1/250.2n.a.50.5of which:9- Primary expenditure48.549 1/249.1n.a.49.3of which:10- Compensation of employees 8.38 1/48.3n.a.8.311- Intermediate consumption6.66 1/26.6n.a.6.612- Social payments25.42626.1n.a.26.313- Subsidies1.31 1/41.2n.a.1.214- Gross fixed capital formation2.93 1/43.0n.a.3.015- Other4.043.9n.a.3.916- Interest expenditure1.111.1n.a.1.118=1-8General government balance-2.8-2 1/2-2.7n.a.-2.919=1-9Primary balance-1.7-1 1/2-1.6n.a.-1.720Cyclically adjusted balance-2.1n.a.-1.8n.a.-2.421One-offs0.00.00.0n.a.0.022=20-21Structural balance-2.1-1 1/2-1.8n.a.-2.423=22+16Structural primary balance-1.0-1/2-0.7n.a.-1.3Variables (% GDP)20252026 
 
                  
 
 
 
                  
 
 
 
Table A1.7:  Debt developments 

* End of period.  
** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the 
impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow 
adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant 
disbursements), accumulation of financial assets, and valuation and other residual effects. 
Source: Commission Spring 2025 Forecast and Commission’s calculation (COM), Annual Progress Report (APR). 

Table A1.8:  RRF – Grants 

Source: Annual Progress Report 

Cost of ageing  

Total age-related spending in Germany is projected to rise from about 24.5% of GDP in 2024 
to around 26% in 2040 and about 24.5% in 2070  (see Table A1.9). This increase results from the 
projected rise in pension spending and, to a more limited extent, healthcare and long-term care spending. 
The  rise  in  public  pension  spending  is  concentrated  in  the  medium  term,  with  a  projected  increase  of 
0.7 pps of GDP by 2040 and an additional 0.3 pps by 2070. 

31 

2024OutturnAPRCOMAPRCOM1Gross debt ratio* (% of GDP)62.562 3/463.8n.a.64.72=3+4+8Change in the ratio (pps. of GDP)-0.4 1/21.3n.a.0.9Contributions**3Primary balance1.71 1/21.6n.a.1.74≈5+6+7Snow-ball' effect-0.7- 1/4-0.4n.a.-0.9of which:5- Interest expenditure1.11    1.1n.a.1.16- Real growth effect0.1- 1/40.0n.a.-0.77- Inflation effect-1.9-1 1/4-1.5n.a.-1.48'Stock-flow' adjustment-1.4- 3/40.1n.a.0.120252026VariablesRevenue from RRF grants (% of GDP)20202021202220232024202520261RRF grants as included in the revenue projectionsn.a.0.20.10.10.00.10.12Cash disbursements of RRF grants from EUn.a.0.10.00.10.30.10.120202021202220232024202520263Total current expenditure0.00.10.00.00.00.00.04Gross fixed capital formation0.00.00.00.00.00.00.05Capital transfers0.00.00.00.00.00.10.16=4+5Total capital expenditure0.00.10.00.00.00.10.120202021202220232024202520267Reduction in tax revenue0.00.00.00.00.00.00.08Other costs with impact on revenue0.00.00.00.00.00.00.09Financial transactions0.00.00.00.00.00.0n.a.Expenditure financed by RRF grants (% of GDP)Other costs financed by RRF grants (% of GDP) 
 
 
 
 
 
                  
 
 
Table A1.9:  Projected change in age-related expenditure in 2024-2040 and 2024-2070 

Source: 2024 Ageing Report (EC/EPC). 

Public healthcare expenditure is projected at 7.7% of GDP in 2024 (above the EU average of 
6.6%)  and  is  expected  to  increase  by  0.2  pps  by  2040  and  by  a  further  0.3  pps  by  2070(81). 
Public expenditure on long-term care is projected at 1.9% of GDP in 2024 (above the EU average of 1.7%) 
and  is  expected  to  increase  by  0.4 pps  of  GDP  by  2040  and  by  a  further  0.1 pp  of  GDP  by  2070.  Not 
included  in  the  projections  are  the  expenditure  of  the  compulsory  private  insurances  in  Germany  that 
cover roughly 10% of the population.  

National fiscal framework 

The  German  Independent  Fiscal  Institution  (IFI),  The  Advisory  Board  of  the  Stability  Council, 
has  a  very  narrow  mandate  and  thin  resources.  Its  independence  could  be  strengthened  by 
expanding its resources and improving its access to information. Its annual budget of EUR 150.000, which 
has not changed since 2017, is only sufficient to finance a research assistant working at 75%, secretarial 
support,  teaching  substitutions  for the chairperson  and  some  fees.  The  Advisory  Board does  not  have  a 
legally  based  right  to  sufficient  access  to  information  and  lacks  access  to  important  information,  in 
particular on state-level budgets and on extra-budgetary funds. For greater impact, there is ample room 
to  improve  the  policy  dialogue  with  the  government  and  the  parliament,  for  example  by  enshrining  the 
process  in  law.  Similarly,  the  IFI’s  media  presence  could  also  be  improved.  Although  Board  members 
usually have a high degree of expertise, they are not subject to any formal CV requirements. 

Table A1.10:Fiscal Governance Database Indicators 

The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based 
on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The 
Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the 
targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the 
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal 
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength. 
Source: Fiscal Governance Database 

(81)  Key performance characteristics, recent reforms and investments of the German healthcare system are discussed in Annex 11 

‘Health and health systems’.    

32 

2023GermanyEU AverageCountry Fiscal Rule Strength Index (C-FRSI)14.3314.52Medium-Term Budgetary Framework Index (MTBFI)0.680.73DE24.30.70.20.40.21.525.8DEEU24.30.50.30.4-0.30.925.2EUDE24.31.00.50.40.22.126.4DEEU24.30.20.60.8-0.41.325.6EUage-related expenditure 2024 (% GDP)change in 2024-2040 (pps GDP) due to:age-related expenditure 2040 (%GDP)pensionshealthcarelong-term careeducationtotalage-related expenditure 2024 (% GDP)change in 2024-2070 (pps GDP) due to:age-related expenditure 2070 (%GDP)pensionshealthcarelong-term careeducationtotal 
 
       
 
 
 
  
 
Public Accounting 

Germany is less advanced in implementing accrual accounting for government relative to the 
EU average. This applies in particular at the federal and state levels of government (see Graph A1.1, left 
chart). Furthermore, Germany has no plans to move towards accrual accounting in the medium term (see 
Graph A1.1, right chart). Accrual accounting as a public accounting standard provides a comprehensive and 
transparent overview of a public body’s financial position and performance and can support sustainability 
and intergenerational equity. 

Graph A1.1: Accounting maturity by government sector (2025, 2030) 

Source: tables 3 and 19 of Updated accounting maturities of EU governments and EPSAS implementation cost 

33 

0%10%20%30%40%50%60%70%80%CentralgovernmentState governmentLocal governmentSocial securityfundsGeneralgovernmentSubsectorsTotalAccounting maturity by government sector in 2025DEEU0%10%20%30%40%50%60%70%80%CentralgovernmentState governmentLocal governmentSocial securityfundsGeneralgovernmentSubsectorsTotalProjected accounting maturity by government sector in 2030DEEU 
  
ANNEX 2: TAXATION 

This  annex  provides  an 
indicator-based 
overview of Germany’s tax system. It includes 
information on: (i) the tax mix; (ii) competitiveness 
and  fairness  aspects  of  the  tax  system;  and  (iii) 
tax collection and compliance.  

Germany  has  one  of  the  highest  labour  tax 
burdens  in  Europe,  at  56.5%  of  total  taxes 
is  the  second 
collected  in  2023,  which 
highest  burden  in  the  EU  after  Sweden  (at 
57%)  and  well  above  the  EU  average  of 
51.2%. A significant driver of this elevated labour 
tax burden are social security contributions, which 
made  up  40.2%  of  all  tax  collected  in  2023,  the 
fourth highest social security contributions burden 
in  the  EU,  and  well  above  the  EU  average  of 
32.6%. At the same time, capital taxation accounts 
for 18.3% of all tax collected in Germany, 3.6 pps 
below  the  EU  average.  Looking  at  the  overall  tax 
burden,  it  is  at  39%  of  GDP  and  therefore  at  the 
exact  same  level  as  the  EU  average  in  2023. 
Moreover,  compared  with  2021  and  2022  this 
overall tax burden has decreased (it was 40.3% in 
in  2021).  Germany's  tax-
2022  and  40.7% 
revenue-to-GDP  ratio  remains  close  to  the  EU 
average.  Tax  revenue  (including  social  security 
contributions)  as  a  percentage  of  GDP  decreased 
slightly from 40.3% in 2022 to 39.0% in 2023, the 
same as the EU average for 2023.  

on 

have 

capital 

Taxes 
remained 
underrepresented  in  Germany’s  overall  tax 
mix in recent years. They are at 7.1% of GDP in 
2023, below the EU average of 8.5% in the same 
year.    The  corporate  tax  revenues  are  almost  at 
the EU average level (3.1% of GDP in Germany in 
2023 vs 3.2% of GDP in the EU). 

Both  property  and  environmental  taxes  are 
used  to  a  lesser  extent  in  Germany  than  in 
the  EU  overall.  As  in  previous  years,  property 
taxes as a percentage of GDP in Germany remain 
lower than the EU average. Total taxes on property 
were  equivalent  to  1%  of  GDP  in  2023  (the  EU 
aggregate for 2023 is 1.9%). Environmental taxes 
were  equivalent  to  1.7%  of  GDP  in  Germany  in 
2022, below the EU aggregate of 2% in the same 
year.  Moreover,  Germany  continues  to  grant 
substantial environmentally harmful subsidies (see 
Annex 6). At the same time, the effective carbon-
tax rate in Germany is higher than the EU average 
(EUR  96.90  per  tonne  of  C02  equivalent 
in 
Germany in 2023 vs an EU average of EUR 84.80 
per tonne) (see Annex 6). 

Graph A2.1: Tax revenue shares in 2023 

Source: Taxation Trends Data, DG TAXUD 

Germany  has  one  of  the  highest  statutory 
and  effective  corporate  tax  rates  in  the  EU. 
The country’s tax system is also relatively complex 
(82)  and  German  SMEs  face  one  of  the  highest 
perceived  tax-compliance  costs  in  the  EU  (83).  In 
2024  Germany  ranked  16th  in  investment  as  a 
share  of  GDP  in  the  EU,  slightly  below  the  EU-27 
average (84).  

Germany  passed  the  Growth  Opportunities 
Act (Wachstumschancengesetz) at the end of 
March  2024.  This 
law  aims  to  accelerate 
economic  growth  and  boost  competitiveness.  Its 
focus is: (i) to increase investment and innovation 
by companies; (ii) to simplify the tax system; (iii) to 
reduce the bureaucratic burden on businesses; and 
(iv) to introduce some tax allowances. The Growth 
Initiative  (Wachstumsinitiative)  included  measures 
to  boost  growth  by  increasing  labour  supply  and 
productivity  such  as 
(i)  measures  to  boost 
investment  such  as  accelerated  depreciation;  (ii) 
measures 
(iii) 
the 
measures  to  simplify  the  tax  situation;  and  (iv) 
in  red  tape.  While  these 
overall  reductions 
measures  were  mostly  not  implemented  due  to 
the collapse of the coalition, they could still serve 
as inspiration for future policies addressing similar 
challenges. 

labour  supply; 

to  boost 

(82)  Tax Complexity Index, https://www.taxcomplexity.org/ where 
Germany ranks 17th out of the 27 Member States in the Tax 
Complexity Index. 

(83)  European Investment Bank, EIB investment survey 2024. See 

also Annex 5 on Making Business Easier. 

(84)  EU Commission calculations. 

34 

51.226.921.956.625.118.3Tax revenue shares in 2023, Germany (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital 
 
   
 
 
 
benefit  system  helped  reduce  income  inequality 
(as measured by the Gini coefficient) by more than 
the EU average in 2023 (see Table A13.1). 

Graph A2.2: Tax wedge for single and second 
earners, % of total labour costs, 2024 

Allowance 

Germany  has  been  introducing  R&D  tax 
incentives  gradually  since  2019.   The German 
Research 
Act 
(Forschungszulagengesetz) introduced  a  federal 
R&D  subsidy  in  2019.  Under  the  Act,  a  tax-
free subsidy of 25% of salaries and wages as well 
as  certain  acquisition  and  production  costs  of  a 
depreciable  movable  fixed  asset  (as  of  2024)  for 
certain  R&D  purposes  is  guaranteed  up  to  a  limit 
of 
The  Growth 
Opportunities 
(Wachstumschancengesetz) 
increased  the  research  allowance  rates,  raised 
funding  caps  and  expanded  eligible  costs.    The 
overall effectiveness of these incentives still needs 
to be assessed (see also Annex 1). 

EUR  500 000 per 

year. 

Act 

Germany  ranks  close  to  the  EU  average  in 
venture-capital financing as a percentage of 
GDP.  Germany  does  not  offer  any  specific 
incentives  for  start-ups  or  for  venture-capital 
investments.  The  tax  treatment  of  employment 
stock  options  has  been 
in  2024, 
including by increasing the tax-free amount for all 
employee share plans. 

improved 

The labour tax burden is considerably higher 
and  less  progressive  than  the  EU  average. 
Graph A13.2 shows that the labour tax wedge (85) 
for  Germany  in  2024  was  much  higher  than  the 
EU  average,  not  only  for  single  people  at  the 
average wage level, but also for those earning low 
wages  (50%  and  67%  of  the  average  wage)  and 
high wages (167% of the average wage). The tax 
wedge for second earners at 67% of the average 
wage whose partners are at 100% of the average 
wage  was  clearly  above  the  EU  average.  In 
addition, the difference between the tax wedge for 
these second earners at 67% of the average wage 
and for single people at the same wage level was 
particularly high in Germany, which is indicative of 
the  significant  role  that  the  joint  taxation  system 
for  couples  plays  in  reducing  work  incentives  for 
second  earners.  The  difference  between  the  tax 
wedge  for  high-  and  low-wage  earners  (i.e.  those 
at  167%  and  50%  of 
the  average  wage 
respectively)  is  considerably  lower  for  Germany 
than  for  the  EU  as  a  whole,  indicating  the  low 
progressivity  of  the  labour  tax  system.  The  tax-

(85)  The  tax  wedge  is  defined  as  the  sum  of  personal  income 
social-security 
taxes  and  employee  and  employer 
contributions  net  of  family  allowances,  expressed  as  a 
percentage of total labour costs (the sum of the gross wage 
and social-security contributions paid by the employer). 

The tax wedge for second earners assumes a first earner at 
100% of the average wage and no children. For the full 
methodology, see OECD, 2016, Taxing Wages 2014-2015. 
Source: European Commission 

Germany  performs  relatively  well  on  tax 
compliance.  Total  revenue  from  value  added  tax 
(VAT) was EUR 286 billion in Germany in 2022 (86). 
The  VAT  compliance  gap  was  estimated  at 
EUR 12.9 billion  or  4.3%  of  the  VAT  total  tax 
liability,  a  decrease  of  0.1  percentage  points 
compared with 2021. With an EU  VAT compliance 
gap  of  approximately  7.0%  on  average,  Germany 
ranked  eighth  among  the  EU  Member  States  (i.e. 
19  other  EU  Member  States  have  larger  VAT 
compliance  gaps).  Between  2018  and  2022,  the 
VAT  compliance  gap  decreased  from  9.0%  to 
4.3%. (87) 

Germany has introduced a number of tax-law 
changes  that  took  effect  from  2025.  These 
changes  include:  (i)  a  reform  of  the  property  tax 
system;  (ii)  mandatory  e-invoicing;  (iii)  a  tax-free 
subsidy  for  photovoltaic  systems;  and  (iv)  a 
shorter (eight-year) retention period for accounting 
documents. 

(86)  European  Commission:  Center  for  Social  and  Economic 
Research 
(CASE),  Directorate-General  for  Taxation  and 
Customs  Union,  Oxford  Economics,  Syntesia,  Bonch-
Osmolovskiy,  M.  et  al., VAT  gap  in  the  EU  –  2024  report, 
Poniatowski,  G.(editor),  Publications  Office  of  the  European 
Union, 2024, https://data.europa.eu/doi/10.2778/2476549  

(87)  Ibid. 

35 

40.843.947.949.152.8202530354045505550100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - DESingle earner - EU averageSecond earner -  DESecond earner -  EU average 
 
       
 
Table A2.1:  Taxation indicators 

(1) Forward-looking effective tax rate (KPMG).       
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in 
the EU - 2024 report,  https://data.europa.eu/doi/10.2778/2476549 
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage, 
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
Source: European Commission, OECD 

Graph A2.3: VAT compliance gap (as % of VAT total 
tax liability) 

returns for private individuals (except for the self-
employed),  which  are based  on  existing  electronic 
data  and  certificates  that  have  been  sent  to  the 
tax authorities via ELSTER, the electronic tax return 
gateway in Germany (88). For VAT returns, the pre-
fill  option  is  currently  only  partially  possible. 
Overall,  as  part  of  the  German  KONSENS  (89) 
project,  IT solutions are currently being developed 
to  drive  forward  the  digitalisation  of  the  tax 
the 
administration, 
electronic filing of tax returns. 

including  by  promoting 

The VAT total tax liability is the estimated amount of VAT that 
is theoretically collectable based on the VAT legisation and 
ancillary regulations, assuming full compliance.  
Source: European Commission, Directorate-General for 
Taxation and Customs Union, VAT gap in the EU - 2024 report 

in 

invested 

The  government  has 
IT 
infrastructure  as  part  of  its  broader  digital 
strategy to: (i) reduce manual completion of tasks 
that  can  more  easily  be  completed  electronically 
or  automatically;  (ii)  improve  government  data-
analytics  capabilities;  and 
improve  fraud 
detection.  These  investments  include  modernising 
hardware and software systems, which are crucial 
for  processing  and  managing  tax  data  efficiently. 
Since 2014, the German tax authorities have been 
offering  taxpayers  pre-filled  personal  income  tax 

(iii) 

(88)  Bundeszentralamt für Steuern, Elster, bzst.de 

(89)  steuer-it-konsens.de 

36 

02468101220182019202020212022GermanyEUDEMedian (EU-27)2010202120222023202420102021202220232024Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)36.940.740.339.037.840.239.739.0Taxes on labour (% of GDP)20.622.522.322.019.820.520.120.0of which, social security contributions (SSC, % of GDP)14.915.815.615.712.913.012.712.7Taxes on consumption (% of GDP)10.910.610.59.810.911.210.910.5of which, value added taxes (VAT, % of GDP)6.97.17.36.86.87.37.47.1Taxes on capital (% of GDP)5.47.67.57.17.18.58.78.5Personal income taxes (PIT, % of GDP)8.09.59.59.08.69.69.49.3Corporate income taxes (CIT, % of GDP)2.03.03.13.12.22.93.23.2Total property taxes (% of GDP)0.81.31.21.01.92.22.11.9Recurrent taxes on immovable property (% of GDP)0.40.40.40.41.11.11.00.9Environmental taxes (% of GDP)2.42.21.81.72.52.42.12.0Effective carbon rate in EUR per tonne of CO2 equivalentsNA91.8NA96.9NA86.0NA84.8Tax wedge at 50% of average wage (single person) (*)41.741.341.040.340.833.931.831.531.531.8Tax wedge at 100% of average wage (single person) (*)49.048.148.347.747.940.939.939.940.240.3Corporate income tax - effective average tax rates (1) (*)29.729.729.729.721.319.319.118.9Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)9.59.911.211.38.68.27.97.7Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)2.62.735.532.6VAT gap (% of VAT total tax liability, VTTL) (**)4.44.36.67.0GermanyEU-27Progressivity & fairnessTax administration & complianceBy tax baseSome tax types 
 
   
 
 
 
 
   
 
PRODUCTIVITY 
ANNEX 3: INNOVATION TO BUSINESS  

competition. 

(111.6%)  albeit 

Germany  remains  a  strong  performer  in 
research  and  innovation  (R&I)  but  faces 
growing  global 
The  2024 
European  Innovation  Scoreboard  ranks  Germany 
as  a  ‘strong  innovator’,  with  performance  above 
the  EU  average 
slightly 
decreasing (90).  Germany’s  R&D  intensity  (gross 
domestic  expenditure  on  R&D  as  a  percentage  of 
GDP)  exceeds  the  EU  average,  but  has  stagnated 
since  2018  (at  around  3.1%),  falling  short  of  its 
own target of 3.5% by 2025 (91). Reliance on mid-
tech  sectors  underlines  the  need  to  promote 
disruptive 
the 
commercialisation (bringing to market) of research 
outputs to close the innovation gap with the USA. 
Germany’s  R&D 
is  also  subject  to 
considerable  regional  disparities  (see  Annex  17). 
Despite  solid  performance  in  adopting  digital 
and  medium-sized 
technologies 
enterprises  (SMEs)  and  the  uptake  of  advanced 
technologies  by  firms  in  general  –  contributing  to 
the  EU’s  Digital  Decade 
the 
in 
development  of  the  start-up  environment 
Germany  harbours  potential  for  improvement, 
although recently positive trends can be observed. 

targets (92)  – 

innovation 

accelerate 

intensity 

small 

and 

by 

research  outputs  (as  measured  by  the  share  of 
scientific  publications  within  the  top  10%  most 
cited  publications  worldwide  as  a  percentage  of 
total  publications)  is  just  above  the  EU  average 
(10.2%  vs  9.6%)  and  below  that  of  several  EU 
peers  such  as  Sweden,  Denmark,  Finland  and 
Austria. Public R&D expenditure as a percentage of 
GDP is the fourth highest in the EU (0.92% vs EU 
average of 0.72% in 2023). However, to reach the 
expected 3.5% target it should be increased to at 
least 1.16% (i.e. one third of 3.5%) (94). Increasing 
the  budget  for  the  Excellence  Strategy (95)  could 
further advance scientific excellence in the country 
and  create  a  critical  mass  of  support  for  top-tier 
research (96).  In  addition,  strengthening Germany’s 
research  base  requires  transparent  and  stable 
career  paths  for  young  researchers.  This  makes 
the  ongoing  discussions  on 
the  Temporary 
Contract  Law (97)  and  those  on  the  creation  of 
more  permanent  positions  of  key  importance (98). 
Furthermore, there is a pressing need to make R&I 
funding  more  agile  by  implementing  streamlined, 
improving  programme 
digital  processes  and 
coherence,  guided  by  mission-oriented  R&I 
governance (99). 

Science and innovative ecosystems  

Germany  has  a  strong  public  research  base, 
but  its  scientific  performance  compared  to 
certain  peer  countries  could  be  improved.  Its 
science  system  builds  on  a  well-established 
network  of  public  research  institutions  and  is 
R&I 
supported 
funding 
numerous 
by 
programmes (93).  Nonetheless, 
the  quality  of 

(90)  European Commission, 2024, European Innovation 

Scoreboard (EIS), country profile: Germany, ec.europa.eu. 

(91)  Moreover,  international  competitors  such  as  the  USA  (at 
3.45% in 2023) are rapidly advancing, while others such as 
China  are  catching  up  (2.43%  in  2021).  The  3.5%  R&D 
intensity target was reiterated in Germany’s ‘Future Research 
the  main  strategic 
Innovation  Strategy’ 
and 
document for R&I at national level. 

(2023), 

(92)  The Digital Decade policy programme sets out a pathway for 

the EU’s digital transformation, including concrete 
commitments from Member States to commonly achieve 
objectives (e.g. competitiveness, resilience, sovereignty) and 
digital targets by 2030. 

(93)  Bundesbericht Forschung und Innovation (2024). 

(94)  The literature considers a one third / two third split between 

public and private R&D expenditure as the most suitable mix. 
See for example OECD, 2003, Targeting R&D: Economic and 
Policy Implications of Increasing R&D Spending. 

(95)  The  Excellence  Strategy,  established  in  2005,  supports  top-
tier  research  and  global  competitiveness  at  universities 
through targeted funding. 

(96)  See for example Schubert et al (2024): Research, Technology 
and Innovation Policy Must Focus on the Generation of 
Critical Mass. 

(97)  The German Temporary Contract Law 

(Wissenschaftszeitvertragsgesetz, WissZeitVG) regulates 
fixed-term employment in academia, primarily for doctoral 
and postdoctoral researchers. 

(98)  See for example Expertenkommission Forschung und 

Innovation, 2023, Gutachten zu Forschung, Innovation und 
Technologischer Leistungsfähigkeit Deutschlands 2023, e-
fi.de. 

(99)  Mission-oriented governance is a whole-of-government 
approach that sets bold, time-bound goals to drive 
innovation and tackle societal challenges. See for example 
Expertenkommission Forschung und Innovation, 2025, 
Gutachten zu Forschung, Innovation und Technologischer 
Leistungsfähigkeit Deutschlands 2025, e-fi.de. 

37 

 
 
 
 
 
 
Business Innovation  

rate  suggest 

Germany’s  reliance  on  mid-tech  industries, 
fewer  high-tech  start-ups  and  a  weaker 
innovation  output 
lock-in 
effects  and  signal  difficulties in  adapting  to 
emerging technologies. Business expenditure on 
R&D as a percentage of GDP is well above the EU 
average  (2.12%  vs  1.49%),  but  differs  greatly 
between  regions (100).  Moreover,  it  is  concentrated 
in  large  companies  in  mid-tech  sectors,  such  as 
automotive (101),  and  has  broadly  stagnated  since 
2018 (2.10%). According to the EU Industrial R&D 
Investment  Scoreboard,  7  of  the  10  top  private 
R&D investors in 2023 were the same as in 2003 
(e.g.  Volkswagen,  Siemens,  Bosch),  underlining  a 
heavy  reliance  on  mid-tech  industries  (see  also 
Graph  A3.1) (102).  The  size  of  the  ICT  sector  is 
below the EU average (5% vs 5.5% in gross value 
added in 2021), and its R&D business expenditure 
amounts to 11.4% of total R&D expenditure, which 
is  low  compared  to  other  EU  Member  States (103). 
in 
The  slow  shift  towards  new  tech  fields, 
particular compared to the USA, is also reflected in 
a  steady  decline  in  patenting  activity  which, 
though  still  high  by  average  EU  standards,  has 
decreased  in  recent  years (104).  To  tackle  these 
challenges  and  encourage  a  shift  towards  high-
tech 
innovation, 
Germany  established  the  Agency  for  Disruptive 
Innovation  (SPRIN-D)  in  2019.  Since  2023,  the 
SPRIN-D  Freedom  Act  has  granted  the  agency 
greater  autonomy,  enabling 
to  overcome 
bureaucratic  constraints  like  rigid  procurement 
processes.  While  some  room  for  further  flexibility 

transformative 

fields  and 

it 

(100) In the top-performing regions (Baden-Wurttemberg), 

business R&D expenditure as a % of GDP was 4.63% in 
2021, while in Saxony-Anhalt it was only 0.42%. See Annex 
17 for more information. 

(101) OECD, 2022, Innovation Review: Germany 2022, oecd-

ilibrary.org.  

(102) European Commission, 2023 EU Industrial R&D Investment 

Scoreboard, ec.europa.eu. 

(103) Eurostat, ICT sector size and R&D in ICT sector, all data from 

2021. 

(104) Patent applications filed under the Patent Cooperation Treaty 
per billion of GDP (in purchasing power standards €) stood at 
5.4 in 2021 (EU average 3.2), compared with 6.3 in 2015 
and 7.6 in 2010. Other sources also show a slower increase 
in patents in R&D intensive technologies compared with 
other countries worldwide, see: https://www.e-
fi.de/dashboard/dev/patente/patentintensitaet. 

38 

remains (105),  SPRIN-D  marks  a  positive  step 
towards a more agile R&I landscape. Its impact on 
supporting 
and 
integrating new players in the German R&I system 
will need to be assessed.  

breakthrough 

innovations 

Graph A3.1: Sectoral distribution of R&D 
investment among the world’s top 2 000 R&D 
investors, in Germany (blue) and worldwide (red) 

Source: European Commission, 2024 EU Industrial R&D 
Investment Scoreboard. 

SMEs  are  not  investing  sufficiently  in  R&D, 
while  Germany’s  start-up  rate  in  high-tech 
sectors is decreasing. R&D expenditure by SMEs 
as a percentage of GDP (0.20% in 2021, last data 
available, vs 2022 EU average of 0.40%) remains 
extremely  low,  and  the  declining  share  of  SMEs 
engaged  in  innovation  activities  risks  slowing 
productivity  growth  and  the  broader  adoption  of 
new  technologies (106).  Despite  a  rise  in  the  start-
up rate (2023 and 2024) (107), it remains uncertain 
whether  long-term  stagnation  can  be  overcome 
(see  blue  line,  Graph  A3.2)  and  if  the  decline  in 
high-tech  and  advanced  sectors  can  be  reversed 
(see red and grey lines in Graph A3.2). To promote 
the  innovation  activity  of SMEs  more  broadly,  the 
German  government  significantly  increased  R&D 
tax  allowances  with  its  Growth  Opportunities  Act 
(March  2024).  It  is  important  to  further  fine-tune 
the  scheme  following  the  evaluation  planned  in 
2025. First findings indicate that there is a need to 
increase 
address  administrative  hurdles  and 

(105) Expertenkommission Forschung und Innovation, 2024, 

Gutachten zu Forschung, Innovation und Technologischer 
Leistungsfähigkeit Deutschlands 2024, e-fi.de. 

(106) Hottenrott et al (2024): What’s the State of the Innovation 

Capacity in Germany? 

(107) Recent sources show an uptick in the start-up rate as of late 
2023 (year-to-year growth between 2023 and 2024 11%). 
See Start-up Verband (2025): Startup-Neugründungen in 
Deutschland. 

51%14%7%6%3%3%2%2%15%18%7%19%2%2%2%16%0%20%40%60%Automobiles & partsPharmaceuticals & biotechnologyElectronic & electrical equipmentSoftware & computer servicesChemicalsHealthcare equipment & servicesIndustrial engineeringTechnology hardware &…WorldGermany 
 
   
 
visibility  in  order  to  improve  SME  access  to  the 
scheme (108). 

Graph A3.2: Start-up rate in Germany by economic 
sector (2010-2023) 

Generation  Cloud 
Infrastructure  and  Services. 
Additionally,  cohesion  policy  programmes  include 
several  measures  to  support  SME  innovation  in 
order  to  boost  digitalisation  and  decarbonisation 
of industry. 

in 

effective 

Business-science linkages are strong but are 
skewed  towards 
large  companies,  while 
in  the  commercialisation  of 
challenges 
research  outputs  hinder  broader  economic 
transformation  efforts.  The  number  of  public-
private  scientific  co-publications  as  a  percentage 
of total  publications remains high  and well above 
the  EU  average  (11.8%  vs  7.7% 
in  2023). 
Research and development activities carried out by 
public  research  organisations  and  universities  for 
private companies remain at a very high level and 
are  driven  by  players  such  as  the  Fraunhofer-
Gesellschaft (109).  However,  this  model  has mainly 
been 
incremental 
industries.  Overall, 
innovation  within  existing 
Germany’s 
commercialising 
in 
research  has  been  mixed,  as  illustrated  by  the 
relatively low – and slowly increasing – number of 
academic  spin-offs (110).  Commercialisation  of 
research  and  entrepreneurship  still  plays  a 
subordinate  role  at  Germany  universities  and  is 
not included as a mandatory task in some federal 
states’ higher education laws (111). This is reflected 
in  support  structures  for  commercialisation  such 
as  technology  transfer  offices (112).  These  often 
face  unstable  levels  of  financial  support,  leading 
to limited capacity to advise researchers on topics 
linked  to  technology  transfer (113).  In  addition, 
bureaucratic  hurdles  linked  to  the  transfer  of 
intellectual  property  persist (114).  To  improve  the 

performance 

promoting 

(109) ‘Contractual research’ as measured in public R&D 
expenditure financed by business enterprises as a 
percentage of GDP is the highest in the EU (0.11% vs EU 
average 0.05%). 

(110) OECD, 2022, Innovation Review: Germany 2022, oecd-

ilibrary.org. 

(111) Roessler, Isabel (2024): Third Mission Aspekte in den 

Hochschulgesetzen der Bundesländer. 

(112) A technology transfer office (TTO) facilitates the 

commercialisation of research by connecting universities and 
research institutions with industry, supporting patenting, 
licensing and the creation of spin-offs. 

(113) OECD, 2022, Innovation Review: Germany 2022, oecd-

ilibrary.org. 

(114) See for example Expertenkommission Forschung und 

Innovation, 2024, Gutachten zu Forschung, Innovation und 
Technologischer Leistungsfähigkeit Deutschlands 2024, e-

(1) High-tech encompasses industries with the highest R&D 
intensity and advanced technology industries with moderate 
R&D intensity (see Neuhaeusler et al. (2022) for more 
information). The start-up rate is calculated as the number of 
start-ups in relation to the number of companies. 
Source: Based on the German Commission of Experts for R&I 
(2025). 

investment  under 

The adoption of digital technologies by firms 
is  slowly  gaining  traction,  and  Germany  is 
also  very  active 
in  developing  digital 
technologies  and  infrastructure.  The  country 
performs above the EU average in its level of basic 
digital intensity for SMEs and in the share of firms 
that  have  taken  up  advanced  digital  technologies 
(i.e.  AI,  cloud  or  data  analytics),  although  cloud 
uptake  is  around  the  EU  average.  To  support  the 
further  adoption  and  development  of  digital 
technologies,  Germany  is  making  the  most  of 
national  measures  and 
its 
recovery  and  resilience  plan.  These  initiatives 
range  from 
increasing  the  uptake  of  digital 
technologies  by  SMEs  for  example  via  European 
Digital  Innovation  Hubs,  the  Digital  Hub  Initiative 
and  the  SME  digital  programme  Mittelstand-
Digital,  to  the  development  of  digital  technology 
and 
include 
semiconductors via Important Projects of Common 
European  Interest  (IPCEI)  on  Microelectronics  and 
Communication  Technologies  to  stimulate  the 
design, 
and 
manufacturing  capacities  for  EU  semiconductor 
companies  and  investment  under  the  European 
Chips  Act.  Furthermore,  Germany  is  developing 
interoperable  and  accessible  European  data 
processing  technologies  via  the  IPCEI  on  Next 

infrastructure.  Key  focus  areas 

industrial 

testing 

scale, 

at 

(108) Stifterverband (2023): Drei Jahre Forschungszulage: Ein 

erstes Fazit zur Resonanz. 

39 

1.02.03.04.05.06.07.01011121314151617181920212223Start-up rate overallStart-up rate in high-tech sectorsStart-up rate in advanced tech sectors 
   
 
 
 
for 

commercialising 

environment 
research, 
Germany  has  introduced  several  initiatives  like  IP 
Transfer  3.0  to  streamline  intellectual  property 
transfer and the Start-up Factories programme to 
promote  spin-offs.  Going  forward,  it  is  crucial  to 
swiftly  implement  the  remaining  measures  from 
the  Start-up  Strategy (115)  such  as  those  that 
facilitate  regulatory  sandboxes,  and  to  launch the 
envisaged  Agency  for  Transfer  and  Innovation 
(DATI)  to  provide  a  new  impetus  for  science-
business  collaboration  in  an  agile  manner.  This 
should follow and take into account the dedicated 
expert recommendations (116). 

is  an 

Regulatory  barriers  to  innovation  remain, 
particularly  on  data  regulation.  Inconsistent 
interpretation  of  data  privacy  laws,  such  as  the 
General  Data  Protection  Regulation,  continue  to 
hamper  the  usability  of  public  data  for  research 
purposes.  While  adoption  of  the  Health  Data 
important  step,  other 
Utilisation  Act 
initiatives,  such  as  the  Research  Data  Act,  face 
legal and administrative hurdles in balancing data 
protection  with  open  access.  However,  making 
progress  on  the  provision  and  use  of  data  is 
essential  for  driving  data  applications  and  digital 
transformation (117).  The  proposed  Regulatory 
Sandboxes  Act,  designed  to  formalise  controlled 
testing  of  innovative  technologies,  has  yet  to  be 
adopted.  It  is  essential  that  the  experimentation 
clauses are broadly defined to provide flexibility in 
testing  diverse  innovations,  adapt  to  unforeseen 
changes and ensure a lasting impact (118). 

Financing innovation  

Venture  capital  financing  in  Germany  has 
shown a slight upward trend in recent years, 
but  the market  fails  to  meet  the  demand  of 

fi.de and OECD, 2022, Innovation Review: Germany 2022, 
oecd-ilibrary.org. 

(115) Germany’s Start-up Strategy from 2022 focuses on 

promoting innovation and entrepreneurship through support 
mechanisms like funding and regulatory simplification. 

(116) Empfehlungen der Gründungskommission zum Auf- und 

Ausbau der DATI, 2024. 

(117) Expertenkommission Forschung und Innovation, 2024, 

Gutachten zu Forschung, Innovation und Technologischer 
Leistungsfähigkeit Deutschlands 2024, e-fi.de. 

raising  funds 

young,  innovative  firms.  Seed  funding  has 
stagnated  at  around  0.005%  of  GDP,  while  there 
has  only  been  a moderate  increase  in investment 
in start-up activities, from 0.028% of GDP in 2019 
to  0.036%  of  GDP  in  2023 (119).  The  number  of 
companies that received seed and start-up funding 
decreased in 2023, with the average deal volume 
also showing a downward trend (120). The start-up 
rate is stagnating, but showed a slight increase in 
2023  (see  also  Graph  A3.2) (121).  For  young 
entrepreneurs, 
remains  a  key 
challenge,  with  28%  of  respondents  in  a  KfW 
survey citing this as a barrier, ranking it one of the 
top  5  biggest  obstacles.  Moreover,  the  share  of 
young entrepreneurs who have to rely on their own 
financial  resources  has  risen  significantly,  from 
56%  in  2019  to  69%  in  2023 (122).  While  the 
German  government’s  Start-up  Strategy  and  its 
Future  Fund  aim  to  improve  Germany’s  venture 
capital  system,  a  majority  of  measures  are 
targeted towards firms that already went through 
several  financing  rounds (123).  Given  the  market 
dynamics  described  above,  measures  explicitly 
targeting start-ups’ access to seed and early-stage 
the  German  start-up 
funding  could  benefit 
ecosystem. 

has 

signs 

shown 

funding 

Due  to  recent  reforms  the  market  for  later 
of 
stage 
improvements,  but  a  significant  financing 
gap remains. The amount of capital available for 
later-stage  funding  has  increased  significantly, 
rising from 0.018% of GDP in 2019 to 0.045% of 
GDP in 2023, well above the EU average of 0.03% 
GDP (124),  but  still  below  the  level  of  international 
competitors  such  as  the  USA.  This  indicates  a 
picking  up  of  investment  for  companies  in  more 
mature  stages  of  development.  The  German 
government  has  contributed  to  this  positive  trend 
through initiatives like the High-Tech Gründerfonds 
(HTGF)  Opportunity  and  the  WIN  Initiative,  both 
part  of  the  Start-up  Strategy.  These  programmes 
target  the  funding  gaps  in  the  later  stages  of 
start-up financing, with a focus on technology and 
innovation.  The  HTGF  Opportunity  Fund,  with  a 

(119) OECD, Venture capital investments (market statistics). 

(120) InvestEurope. 

(121) Next Generation: Startup-Neugruendungen in Deutschland, 

2019-2023. 

(122) KfW Entrepreneurship Monitor 2024. 

(123) Die Start-up-Strategie der Bundesregierung. 

(118) Ibid. 

(124) OECD. 

40 

 
 
 
in 

budget  of  EUR  660  million,  supports  successful 
later  financing  stages,  and  an 
scale-ups 
additional  EUR  1.75  billion  has  been  allocated  to 
strategic  sectors  such  as  AI,  clean-tech  and 
biotechnology (125).  Nevertheless,  access  to  larger 
deals  during  later  financing  rounds  remains  the 
decisive  bottleneck  for  start-ups  to  scale  up  in 
Germany.  It  remains  crucial  for  the  German 
government to continue implementing its Start-up 
Strategy  and  ensure  the  continued  flow  and 
absorption  of  funds  for  venture  capital  market 
growth. 

Innovative talent   

The  shortage  of  skilled  workers  affects 
Germany’s innovation capacity. Between 2020 
and 2022, a third of companies reported that skills 
shortages  hindered  their  innovation  efforts (126). 
This bottleneck is also visible in fields such as AI, 
where nearly half of employers in Germany cite a 
lack of skills as a barrier to adopting AI (127). This is 
illustrated by the number of graduates in the field 
of computing per thousand of the population aged 
25-34,  which  remains  below  EU  average  (3.3  vs 
3.6 in 2022). At the same time, the share of STEM 
graduates  is  among  the  highest  in  the  EU  (see 
Annex  12).  While  tertiary  educational  attainment 
remains  low,  Germany  registers  the  highest  rate 
for PhD graduates (1.3 vs EU 0.4), contributing to 
its  innovation  potential.  Germany  updated  its 
‘Skilled Labour Strategy’ in 2022 to attract foreign 
skilled workers and promote life-long learning. 

Entrepreneurship  education  is  not  a  priority 
for schools in Germany, although it is offered 
at higher education levels. In school education, 
there  is  no  standardised  national  or  Laender-
specific  definition  for  entrepreneurship  education. 
While  there  are  some  national  and  Laender 
students’ 
initiatives 
entrepreneurship  skill,  it  is  not  embedded  in 
education  policy  or  in  the  curriculum  across  the 

to  develop 

that  aim 

(125) Zweiter Fortschrittsbericht zur Umsetzung der Start-up-

Strategie der Bundesregierung. 

worse 

performs 

board.  Furthermore,  according  to  Kienbaum (128), 
school 
Germany 
entrepreneurship  education 
than  other  EU 
countries.  The  situation  is  different  in  higher 
education  –  there 
is  a  growing  number  of 
programmes  and  initiatives  that  aim  to  support 
entrepreneurship. 

in 

issued  about  one 

Germany  is  actively  addressing  the  growing 
shortage  of  skilled  workers.  While  having 
workers  with  the  right  skills  was  considered 
important for their business model, nearly 6 in 10 
companies  (54%)  had  issues  retaining  them.  In 
2023, Germany granted approximately 70 000 EU 
Blue  Cards (129).  This  represents  78%  of  the  total 
across  the  EU,  a  clear  indicator  of  the  country’s 
for  highly  skilled 
appeal  as  a  destination 
professionals.  Germany  also  admitted  70%  of 
family  members  of  EU  Blue  Card  holders,  the 
highest proportion in the EU. In the same year, the 
third  of  all  EU 
country 
research (130), 
authorisations 
leading  global 
cementing 
destination 
and 
students 
for 
entrepreneurs.  However, 
improvement in attracting highly educated workers 
and  start-up  founders,  including  by  speeding  up 
administrative  procedures (131).  To  address  these 
legislative 
gaps,  Germany 
requirements  since  2023,  making  it  easier  for 
employers  to  recruit  skilled  workers  from  non-EU 
countries.  Notable  measures 
the 
Recognition of Foreign Qualifications initiative and 
the  Qualified  Professionals  Pathway  for  skilled 
workers. 

its  position  as  a 

study  and 

simplified 

university 

include 

room 

there 

has 

for 

for 

is 

(128) Kienbaum (2018): Entrepreneurship in schools - current 
trends and developments, sustainability of projects, 
transparency and success indicators. 

(129) The EU Blue Card is a fast-track tool for recruiting highly 

skilled non-EU nationals with higher education or equivalent 
experience (Source for data: Eurostat). 

(126) Hottenrott et al (2024): Wie steht es um die 

Innovationsfähigkeit Deutschlands?  

(130) Germany issued 8 813 permits specifically for job-seeking or 

entrepreneurial purposes in 2023 (Source: Eurostat). 

(127) OECD (2024): Artificial Intelligence Review of Germany. 

(131) OECD 2023 Attractiveness Index. 

41 

 
 
 
 
 
 
 
Table A3.1:  Key innovation indicators 

(1) EU average for the last available year or the year with the largest number of country data. 
Source: Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard 

42 

R&D intensity (gross domestic expenditure on R&D as % of GDP)2.822.993.093.083.073.11:2.243.45Public expenditure on R&D as % of GDP0.900.921.031.020.930.92:0.720.64Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 11.210.610.310.2:::9.612.3Researchers (FTE) employed by public sector (Gov+HEI) per thousand active population3.844.34.44.2::4.2:International co-publications as % of total number of publications45.349.853.453.553.954.6:55.939.3Business enterprise expenditure on R&D (BERD) as % of GDP1.922.062.062.062.072.12:1.492.70Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.20.17:0.2:::0.40.3Researchers employed by business per thousand active population4.86.16.66.77::5.7:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)6.86.35.75.4:::2.8:Employment share of high-growth enterprises measured in employment (%)14.7413.5912.30::::12.51:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::77.35:79.8772.91:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%):::::37.08:33.17:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%):::31.83:38.5:38.86:Artificial intelligence adoption% enterprises (EU Digital Decade target by 2030: 75%):::10.56:11.5519.7513.48:Public-private scientific co-publications as % of total number of publications10.110.911.211.311.811.8:7.78.9Public expenditure on R&D financed by business enterprises (national) as % of GDP0.1120.110.1190.11:::0.050.02Total public sector support for BERD as % of GDP:0.081:0.083:::0.2040.251R&D tax incentives: foregone revenues as % of GDP:::0.0010.0040.011:0.1020.141BERD financed by the public sector (national and abroad) as % of GDP :0.081:0.083:::0.10.11Venture capital (market statistics) as % of GDP, total (calculated as a 3-year moving average)0.020.030.050.080.086.40:0.08:Seed stage funding share (% of total venture capital)6.305.306.305.906.406.40:7.30:Start-up stage funding share (% of total venture capital)51.4052.9058.3046.1046.0041.90:44.00:Later stage funding share (% of total venture capital)42.3041.8035.4048.0047.7051.70:48.70:New graduates in science and engineering per thousand population aged 25-3416.716.617.618.518.6::17.6:Graduates in the field of computing per thousand population aged 25-342.22.52.83.13.3::3.6:20222021Germany201220172020Headline indicatorScience and innovative ecosystemsR&D investment & researchers employed in businessesPublic support for business innovationInnovative outputsDigitalisation of businessesAcademia-business collaborationFinancing innovationInnovative talent2023EU average (1)USA2024 
 
 
 
 
 
 
 
 
 
  
 
ANNEX 4: MAKING BUSINESS EASIER 

size, 

Germany  still  has  a  favourable  and  stable 
business  environment  but  faces  various 
structural  challenges.  Germany’s  business 
environment  still  has  many  strengths,  including 
well-developed 
large  market 
the 
infrastructure,  and  highly 
trained  workforce. 
Germany therefore remains an attractive business 
location,  including  for  foreign  direct  investment. 
However,  productivity  and  competitiveness  are 
hampered  by  a  high  administrative  burden  and 
delays in expanding digital networks and services. 
Moreover, the transport infrastructure increasingly 
requires  maintenance  and  upgrading.  Germany  is 
still  lagging  behind  in  the  digitalisation  of  public 
services.  Regulatory  barriers  remain  higher  in 
Germany  than  in  comparable  countries  for  a 
number  of  professions.  Germany  therefore  has 
considerable scope for making business easier and 
reducing administrative and regulatory barriers. 

Investment climate 

The  low  growth  dynamic  is  weighing  on 
investment.  The  challenging  economic  situation 
led  to  further  reductions  in  private  investment  in 
2024.  For  example,  investment  in  equipment  fell 
by  about  6%  in  2024.  The  perceived  investment 
gap  in  Germany  is  higher  than  the  EU  average, 
with 18% of firms reporting underinvestment over 
the  past  three  years  (compared  with  the  EU 
average of 14%). German firms also invest slightly 
less  in  new  products  or  services  than  the  EU 
average  (11%  vs  13%  EU  average)  but  more  in 
replacing  existing  equipment  (58%  vs  52%) (132). 
The  ifo  index  for  investment  expectations  fell 
noticeably  in  2024,  indicating  that  businesses 
have  adjusted  their  investment  plans (133).  The 
foreign direct investment (FDI) stock has gradually 
increased in recent years to around 45% of GDP in 
2022 (134), reflecting Germany’s central role in the 
EU economy and still attractive location for foreign 
direct investment. 

Lack  of  skilled  staff,  uncertainty,  energy 
costs and complexity of business regulations 
are  highlighted  as  investment  obstacles. 
According to the EIB Investment Survey,  the main 
long-term  obstacles  to  investment  reported  by 

(132) European Investment Bank, EIB investment survey 2024. 
(133) ifo Institute, 2024, Investitionserwartungen sinken deutlich. 
(134) Eurostat, data on FDI stock: https://ec.europa.eu/eurostat. 

German  firms  are  the  availability  of  skilled  staff 
(90%),  energy  costs  (83%),  uncertainty  about  the 
future 
(80%),  and  complexity  of  business 
regulations  (82%) (135).  The  availability  of  skilled 
staff 
is  a  key  concern  as  the  working-age 
population is projected to shrink sharply. Moreover, 
PISA  results  show  urgent  need  for  action  (see 
Annexes  10  and  12).  The  share  of  businesses 
facing  acute  labour  shortages  is  higher  than  the 
EU  average  (25.0%  vs  20.2%)  but  has  decreased 
slightly  compared  to  2023  (33.5%).  The  share  of 
businesses  facing  material  supply  constraints 
decreased noticeably in 2024 (13.1% vs 37.5% in 
2023,  see  Table  A4.1) (136).  With  regard  to  energy 
costs, Germany is at a clear disadvantage to North 
America  and  China,  even  though  energy  prices 
have  already  fallen  substantially  since  the  easing 
of  the  energy  crisis.  However,  energy-intensive 
industries in particular are still  feeling the burden 
of  high  energy  costs  (see  also  Annexes  7  and 
8) (137). 

The  challenging  economic  situation  has 
triggered  an  increase  in  the  number  of 
insolvencies.  Overall,  German  SMEs  still  have 
good access to finance, though  companies report 
a  tightening  of  credit  conditions  and  more 
restrictive  bank  lending  due  to  higher  interest 
increased  uncertainty  and  the  general 
rates, 
macroeconomic  situation (138)  (see  Annex  5).  With 
regard to late payments, the business-to-business 
and  public  sector  payment  gaps  are  in  line  with 
the EU average (see Table A4.1). Overall, the share 
of  SMEs 
is 
considerably  below  the  EU  average  (33.7%  vs 
48.7%) (139).  However, 
increased 
noticeably 
the  difficult 
macroeconomic  environment.  In  December  2024, 
insolvencies  were  24%  higher  than  one  year 
earlier  and  54%  above  the  2016-2019  average 
(before COVID-19)  (140).  

insolvencies 
to 

in  2024  due 

experiencing 

payments 

late 

(135) European Investment Bank, EIB investment survey 2024. 
(136) European  Commission,  2025,  Business  and  consumer 

surveys. 

(137) KfW Research, 2024, Germany’s competitiveness – from ‘sick 
man  of  Europe’  to  superstar  and  back:  Where  does  the 
economy stand?. 

(138) KfW, 2024, KfW-ifo-Kredithürde, kfw.de, 

ECB, 2024, Survey on the access to finance of enterprises, 
ecb.europa.eu. 

(139) Intrum, 2024, European payment report 2024. 
(140) Leibniz-Institut  für  Wirtschaftsforschung  Halle  (IWH),  2024, 

Insolvenztrend, iwh-halle.de. 

43 

 
 
 
 
 
Graph A4.1: Making Business Easier: selected 
indicators. 

transport  infrastructure,  for  both  road  and  rail 
transport.  For  example,  it  is  ranked  3rd  with 
Canada  (after  Singapore  and  Switzerland)  out  of 
the  139  countries  covered  by  the  World  Bank 
Logistic  Performance  Index.  However,  the  existing 
road and rail infrastructure is increasingly in need 
of  maintenance  and  upgrading.  According  to  the 
EIBIS  survey (143),  55%  of  German  businesses 
considered the state of transport infrastructure an 
obstacle to investment in 2024 (vs 45% in the EU).  

improvement 

infrastructure  has 

Digital 
substantially 
improved in Germany, but there is still room 
for 
fibre  connectivity. 
in 
Germany  has  made  considerable  progress  in 
digital  infrastructure,  especially  in  the  area  of 
connectivity. Fibre to the premises (FTTP) coverage 
increased  substantially  by  10.5  percentage  points 
to 29.8% in 2023, though this was still well below 
the  EU  average  of  64%.  Coverage  in  rural  areas 
also increased by 8.7 percentage points to 25.6%, 
which  was  much  lower  than  the  EU  average  of 
53%.  The  2023  increase  in  the  coverage  of  very 
high-capacity  networks  to  74.7%  was  more 
moderate  (only  4.6  percentage  points),  but  it  is 
now getting closer to the EU average of 78.8%. As 
regards  mobile  coverage,  overall  5G  coverage 
increased  to  98.1%  (above  the  EU  average  of 
In  total, 
89.3%),  close  to  saturation 
Germany  has  provided  EUR 21 billion  in  funding 
for  fibre  optic  funding  (including  EUR 110 million 
for  the  Gap  Closure  Pilot  Programme).  Regarding 
infrastructures, 
the 
cybersecurity 
is 
enterprises 
increasing. 

of 
awareness 

digital 
in 

resilience 

levels. 

Regulatory and administrative 
barriers 

in 

the 

administrative 

for  a 
German  businesses  are  calling 
and 
reduction 
regulatory  burden.  The  national 
regulatory 
control  council  reports  a  noticeable  increase  in 
compliance costs in the last legislative period (144). 
Efforts to reduce red tape provided only marginal 
relief. 
therefore  calls  for  an  objectively 
measurable  reduction  target  and  a  reform  of  the 

It 

Share of (1) enterprises, (2) average intra-EU exports and 
imports in GDP, (3) firms, (4) SMEs. 
Sources: (1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE 
survey. 

to 

the 

the 

from 

challenging 

Despite 
economic 
environment,  the  number  of  start-ups  has 
increased  in  the  past  year.  Last  year,  2 766 
companies were founded (around 11% more than 
the  previous  year), 
the  2 498  start-ups 
in 
according 
start-up 
data 
association (141).  Most  companies  were  founded  in 
the  IT  sector,  driven  also  by  developments  in  AI. 
Access  to  venture  capital  has  further  improved  in 
recent  years,  but  Germany  still  lags  behind  some 
European  and  international  peers  regarding  the 
availability  of  venture  and  growth  capital  (see 
Annex  3).  Furthermore,  business  dynamism  in  a 
wider  sense  remains  weak.  Firm  entry  rates  are 
below  the  EU  average  and  declined  in  the  last 
years (142). 

Germany’s  transport  infrastructure  is  well-
developed 
requires 
maintenance  and  upgrading.  By  international 
standards,  Germany  has  a  very  well-developed 

increasingly 

but 

(141) Start-up-Verband, 2024, Anstieg der Startup-Gründungen um 

11 % gegenüber 2023. 

(142) Eurostat: Business Demography Statistics 

(143) European Investment Bank, EIB investment survey 2024. 
(144) National Regulatory Control Council, 2024, Annual Report, 

normenkontrollrat.bund.de  

44 

36.512.113.120.651.547.916.61041.624.50102030405060from private entitiesfrom public entitiesMaterial shortages as afactor limiting productionEU Trade IntegrationRegulation as a majorobstacle to investment(4) Late payments(3) Shortages(2) SingleMarket(1) RegulatoryburdenShare (%)EU27DE 
      
 
 
“one  in,  one  out”  scheme.  Moreover,  business 
surveys  indicate  a  view  that  the  bureaucratic 
burden  in  Germany  is  high.  According  to  the  EIB 
Investment  Survey, 
the  burden  of  business 
regulation was reported as an obstacle by 82% of 
businesses in 2024, which was considerably higher 
than the EU average of 66% (145) (see  also Annex 
6).  

The  federal  and  regional  governments  have 
taken  steps  to  reduce  red  tape,  but  there  is 
still  scope  for  further  progress.  Germany  has 
taken  several  measures  to  improve  the  business 
environment,  including  under  Germany’s  recovery 
and resilience plan (146), such as the modernisation 
of  registers  and  implementation  of  the  Online 
Access  Act  (see  also  Annex  6).  The  federal  and 
regional authorities agreed to streamline planning 
and  permitting  procedures (147).  The 
fourth 
Bureaucracy  Relief  Act  adopted  In  September 
2024 provided some limited relief, i.a. by reducing 
the retention period for accounting documents and 
abolishing several written-form requirements. (148)  

Germany  has  a  complex  tax  system.  The 
German  tax  system  is  considered  to  be  quite 
complex  and  burdensome (149)  (see  also  Annex  2). 
Taxes are levied by the federal government, states 
and  municipalities,  while  the  responsibility  for 
collecting  taxes  is  largely  devolved  to  regional 
administrations (150). A reduction in the complexity 
of the tax system would make operating easier for 
businesses,  particularly  SMEs.  For  example,  value 
added  tax  (VAT)  rates  were  reduced  for  certain 
products and services for perfectly sound reasons 
but dealing with different VAT rates also made life 
more  complicated  for  many  businesses.  The  fact 
that  different  assessment  bases  and  calculations 
are used for trade tax and corporate tax also adds 
complexity. 

Digitalisation 
in 
remains  a 
Germany,  despite  positive  developments  in 
digital  public  services  and  e-government. 
Germany is still lagging behind in the digitalisation 

challenge 

(145) European Investment Bank, EIB Investment Survey 2024. 
(146) European  Commission,  2024,  Germany’s 

recovery  and 

resilience plan. 

(147) Bundesregierung,  „Pakt  für  Planungs-,  Genehmigungs-  und 
Umsetzungsbeschleunigung“,  2025,  Beschleunigungspakt 
zwischen Bund und Ländern. 

(148) Deutscher  Bundestag,  2024,  Bürokratieentlastungsgesetz  IV 

passiert Bundestag.  

of  public  services  in  the  context  of  the  Digital 
Decade  targets.  Germany’s  provision  of  online 
public services has been stagnating and the take-
up  of  digital  public  services  is  low.  Germany  is 
nevertheless making progress (for example, in the 
implementation  of  e-IDs).  Overall,  Germany  still 
has 
the 
digitalisation  of  public  services  in  line  with  its 
Digital Decade targets (151) (see also Annex 6).  

considerable  scope 

to  accelerate 

Single market  

Germany  has  an  open  and  diversified 
economy but is particularly vulnerable due to 
its strong export orientation. With an exports-
to-GDP  ratio  of  about  47%  in  2024,  German 
businesses  have  a  strong export  orientation  (both 
within  the  single  market  and  beyond).  Two  thirds 
of  German  firms  are  engaged  in  international 
trade (152).  The  US  overtook  China  as  Germany’s 
largest  trading  partner  in  2024.  Trade  between 
Germany  and  the  US  reached  EUR 255 billion  in 
2024  (a  year-on-year  increase  of  0.8%),  while 
trade  with  China  decreased  by  2.9% 
to 
EUR 247 billion.  Other  important  trading  partners 
include  France,  Italy, the Netherlands,  Austria  and 
Poland  (153).  Intra-EU  trade  represented  21.4%  of 
GDP  in  2023,  which  is  below  the  EU  average. 
Motor  vehicles  are  Germany’s  most  important 
export  goods  (17.3%  of  total  exports  in  2023), 
followed  by  machinery  (14.4%)  and  chemical 
products 
(9.0%).  Recently,  Germany’s  export-
oriented industry has been particularly affected by 
increased 
in  global  demand  and 
a  decline 
competition for some of its key export products. 

Regulatory  restrictiveness  remains  high  in 
several  professions.  The  overall  regulatory 
framework  provides  favourable  conditions  for 
trade in services, but restrictions remain regarding 
the  movement  of  people  and  the  registration  of 
businesses (154).  Moreover,  Germany’s  relatively 
good  performance  in  the  economy-wide  Product 
Market  Regulation 
indicator  hides  an  uneven 
performance  in  various  sectors  and  regulatory 

(151) European  Commission,  2024,  Report  on  the  state  of  the 

Digital Decade 2024. 

(152) European Investment Bank, EIB investment survey 2024. 
(153) German  Federal  Statistical  Office,  2024,  Foreign  trade  - 

(149) European Commission, 2022, Tax compliance costs for SMEs. 
(150) OECD, 2024, Tax Administration 2024. 

German Federal Statistical Office. 

(154) OECD, Services Trade Restrictiveness Index (STRI), 2024. 

45 

 
 
 
a 

based on a single bid was 20% in 2024 (improving 
from 24% in 2023). The rate of direct awards was 
7%  in  2024,  in  line  with  the  EU  average  (see 
Table A4.1). This is also corroborated by the OECD 
indicator  on public  procurement (160).  In  November 
2024,  the  federal  government  launched  a  reform 
to simplify, further digitalise and accelerate public 
procurement  procedures (161).  The  reform  package 
documentation 
including 
requirements  should  reduce  red  tape  by  around 
EUR 1.3 billion  annually.  It  also  aims  to  further 
strengthen 
public 
strategic 
procurement.  In  2023,  a  national  notification 
service 
awards  was 
created (162),  which  centralises  data  on  tenders 
from  different  platforms  and  makes  Germany’s 
transparent  by 
procurement  processes  more 
publishing  data  on  awarded  contracts  using  a 
standard format.  

reduction 

contract 

public 

use 

the 

for 

of 

in 

Germany  supports  a  strategic  use  of  public 
procurement. Public procurement is estimated to 
be about 15% of German GDP and about 35% of 
total government expenditure (163). Policy tools and 
strategies aim to support strategic procurement at 
different  levels.  For  example,  Germany  supports 
innovation in public procurement with the KOINNO 
competence  centre (164)  and  services  aimed  at 
risks  of  awarding 
reducing 
innovative 
compliance  with 
procurement  law.  Barriers  are  mainly  a  lack  of 
knowledge  and  capacity  at  local  procurer  level. 
Better  data  gathering  and  monitoring  could  also 
encourage  a  wider  uptake  of  sustainable,  social 
and innovative procurement practices.  

the  perceived 
contracts 

in 

to 

the 

According 

areas (155). 
European 
Commission (156)  and  the  OECD (157),  regulatory 
barriers  remain  high  in  Germany  for  architects, 
civil  engineers,  accountants,  tax  advisers,  patent 
and  trademark  agents,  and  lawyers  –  despite 
some  recent  reforms  on  company  ownership  and 
multidisciplinary  partnerships  in  tax  and  legal 
professions.  Exclusive  rights  to  provide  tax  advice 
and  legal  services  remain.  Reducing  restrictive 
regulation  in  services  while  safeguarding  quality 
standards and consumer interests could help boost 
competition and productivity (158). 

in 

improve 

The  conformity  and  transposition  of  single 
market directives could be improved. Germany 
ranks  20th  and  below  the  EU  average 
in 
transposing EU directives into national law. It also 
ranks  low  as  regards  overdue  transpositions. 
Germany  could  also 
terms  of 
transposing  directives  correctly.  In  addition,  the 
number of pending infringement cases is high and 
the  average  duration  of  infringement  proceedings 
is  also  above  the  EU  average.  Problematic  areas 
include direct taxation, road and rail transport, and 
services  and  professions (159).  In  2024,  Germany 
resolved 87.3% of the SOLVIT cases it handled as 
lead  centre  (above  the  EU  average  of  84.9%). 
Germany’s  SOLVIT  centre  was  understaffed  for 
most part of the reporting period, but the situation 
had improved by September 2024. 

Public procurement  

and 

simplify 

taken  steps 

to 
its 
Germany 

further 
Germany  has 
public 
modernise 
procurement 
a 
decentralised  procurement  system  and  most 
procurement  is  done  at  local  and  regional  levels. 
Indicators suggest overall a good performance. For 
example,  the  percentage  of  contracts  awarded 

system. 

has 

(155) OECD,  2024,  Product  Market  Regulation 

indicator, 

Germany_PMR country note. 

(156) European  Commission,  2021,  Communication  on  updating 
the  reform  recommendations  for  regulation  in  professional 
services, COM(2021)385, 9/7/2021. 

(157) OECD,  2024,  Product  Market  Regulation 

indicator, 

Germany_PMR country note. 

(158) European  Commission,  2021,  Communication  on  updating 
the  reform  recommendations  for  regulation  in  professional 
services, COM(2021)385, eur-lex.europa.eu. 

(159) European 

Commission,  2024, 

and 
Competitiveness  Scoreboard,  Country  data:  Germany  |  The 
Single Market and Competitiveness Scoreboard. 

Single  Market 

(160) OECD, 2024, Product Market Regulation indicators. 
(161) Bundesregierung, 2024, Transformation des Vergaberechts. 
(162) Der 
der 

Beauftragte 
Informationstechnik, 
Beschaffungsamt des BMI, 2024, bescha.bund.de. 

Bundesregierung 

für 
cio.bund.de.  

2024, 

(163) OECD, 2021, Public procurement. 
(164) BMWK,  2024, 
Competence 

Procurement - KOINNO. 

Center 

for 

Innovative 

46 

 
 
 
Table A4.1:  Making Business Easier: indicators. 

* Change in methodology in 2024: reporting late payments from public and private entities separately. 
**The 2024 data on single bids is provisional and subject to revision. Due to missing data, the EU average of direct awards data is 
calculated without Romania.  
Sources: (1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports, (5) Intrum Payment Report, (6) SAFE survey, 
(7) OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space (PPDS). 

47 

POLICY AREA20202021202220232024EU-27 average13.455.977.237.513.110.010.023.538.833.525.020.22.63.54.74.33.52.315.617.519.321.424.413.4-74.970.174.7-78.8-15.419.329.8-64.0-86.593.298.1-89.3Regulatory environment31.529.026.136.151.524.520.511.712.314.114.615.624.110.612.614.815.615.1from public or private entities in the last 6 months35.033.433.233.7--from private entities in the previous or current quarter----36.547.9from public entities in the previous or current quarter----12.116.618.620.522.521.120.641.60.0530.0400.0400.0400.0440.0500.60.41.01.01.00.81.82.21.91.81.20.987.888.684.995.087.384.948.047.040.039.032.024.41920252420-666577.0GermanyINDICATOR NAMEInvestment climateShortagesMaterial shortage, firms facing constraints, %1Labour shortage, firms facing constraints, %1Vacancy rate, vacant posts as a % of all available ones (vacant + occupied)2InfrastructureTransport infrastructure as an obstacle to investment, % of firms reporting it as a major obstacle3VHCN coverage, %4FTTP coverage, %45G coverage, %4Reduction of regulatory and administrative barriersImpact of regulation on long-term investment, % firms reporting business regulation as a major obstacle3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment5Payment gap - public sector, difference in days between offered and actual payment5Share of SMEs experiencing late payments, %*6Single MarketIntegrationEU trade integration, % (Average intra-EU imports + average intra EU exports)/GDP2EEA Services Trade Restrictiveness Index7ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, % resolution rate per country8Number of pending infringement proceedings8Competition and transparency in public procurementSingle bids, % of total contractors**8Direct awards, %**8Public procurement 
 
 
       
 
ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE 

from 

strong 

benefit 

A  significant  share  of  Germany’s  relatively 
high  net  savings  has  consistently  been 
invested  abroad,  as 
subdued  private 
investment  and  moderate  public  deficits 
have resulted in structural net lending to the 
rest  of  the  world.  German  businesses  rely 
heavily  on  internal  funding  and  bank  financing. 
Small  and  medium-sized  enterprises  (SMEs),  in 
banking 
particular, 
relationships, low debt-servicing costs, and tailored 
financial  services.  There  is  limited  reliance  on 
alternative  forms  of  financing  such  as  capital 
markets.  German  households'  strong  savings 
culture  fosters  risk-averse  behaviour,  favouring 
bank  deposits  over  equities.  This  constrains  the 
participation  of  retail  investors  in  the  equity 
market.  Recent  national  policy  efforts,  including 
legislative  measures 
the  draft  Future 
Financing Act II, aim to address these gaps by both 
supporting  market-based  financing  for  start-ups 
and increasing the engagement of retail investors 
in capital markets. 

like 

Availability and use of domestic 
savings  

consistently 

consumption, 

The German economy invests a large part of 
its  relatively  high  net  savings  abroad.  In  the 
past decade, the private savings ratio, net of fixed 
capital 
fluctuated 
around  its  ten-year  average  of  9.5%  of  GDP, 
reaching  a  high  of  12.2%  in  2021  (see  Graph 
A3.1).  The  net  private  investment  ratio,  which 
reflects  the  private  sector's  net  contribution  to 
capital  accumulation,  was  significantly  lower,  in 
particular  in  2023  and  2024.  The  government 
budget has been in deficit from 2020 until  2024, 
averaging  0.5%  of  GDP  during  the  same  period 
and 2.8% over the last 5 years.  The public deficit 
was  thus  well  below  the  substantial  surpluses  in 
net  domestic  savings  and  net  investment.  As  a 
result,  Germany  has  consistently  demonstrated 
structural  net 
foreign  countries, 
averaging  7%  of  GDP,  with  a  peak  of  8.8%  in 
significant  portion  of 
2016.  Therefore,  a 
Germany’s  net  savings—after  accounting  for  the 
necessary  investments  to  maintain  its  existing 
capital  structure—has  been  used  to  finance 
projects abroad. 

lending 

to 

48 

Graph A5.1: Net savings-investment balance in 
Germany 

Source: AMECO 

Graph A5.2: International investment position of 
Germany 

Source: ECB 

As  a  net  creditor  to  the  rest  of  the  world, 
Germany  has  built  up  substantial  foreign 
assets  and  maintains  a  positive  net 
international  investment  position.  As  of  Q3-
2024,  Germany’s  total  external  assets  amounted 
to  275%  of  GDP,  while  its  liabilities  to  foreign 
investors stood at 199% of GDP, resulting in a net 
international investment position (NIIP) of 76% of 
GDP  (see  Graph  A3.2).  Although  the  stock  of 
official foreign reserve assets (8% of GDP)  plays 
only  a  minor  role,  the  largest  contribution  to  the 
positive  NIIP 
portfolio 
investments,  which  reached  103%  of  GDP  in  Q3-
2024.  This  underlines 
the  high  degree  of 
Germany’s integration into global capital  markets. 
While Germany is a significant recipient of foreign 
capital, it remains primarily a net capital exporter, 
particularly through direct investments abroad. 

comes 

from 

net 

-15-10-5051015202530352017201820192020202120222023% of GDPPrivate investment, netLending to the governmentPrivate saving, netPrivate saving, gross-400-200020040020172018201920202021202220232024-Q3% of GDPOther investment, LiabilitiesPortfolio Investment, LiabilitiesForeign Direct Investment, LiabilitiesOfficial reserve assetsOther investment, AssetsPortfolio Investment, AssetsForeign Direct Investment, AssetsNIIP 
 
  
 
  
 
 
Structure of the capital markets and 
size of the financial sector  

The  German  stock  and  bond  markets  are 
relatively  small  compared  to  the  size  of  the 
German  economy.  While  Deutsche  Börse  is  the 
second-largest  stock  exchange  group  in  the  EU, 
equity markets in Germany remain modest in size. 
At  the  end  of  2023,  the  market  capitalisation  of 
listed  equities  stood  at  just  49%  of  GDP,  rather 
low  compared  to  other  EU  countries  with  more 
developed  capital  markets  (see  Graph  A3.3). 
Reflecting  a  broader  European  trend,  the  number 
of  listed  companies  has  declined  in  recent  years, 
and  several  prominent  German  firms  have  opted 
to  list  on  foreign  stock  exchanges.  The  volume  of 
outstanding  debt  securities  reached  95%  of  GDP, 
also  moderate  by  European  standards,  with 
government  bonds  accounting  for  the  bulk  of 
issuances.  However,  these  figures  do  not  fully 
capture the particular structure of German capital 
markets,  which  offer  companies  a  broad  array  of 
financing 
atypical 
instruments—many  of  which  are  not  officially 
traded on secondary markets—such as promissory 
notes (Schuldscheine) and various forms of loans. 
This  diversity  enables  firms  to  access  tailored 
financing solutions that suit their specific needs. 

domestic 

purely 

and 

in 

the 

lies 

The  German  financial  sector  continues  to  be 
predominantly  bank-based,  with  banks 
remaining  the  largest  component,  followed 
by investment funds. As of 2023, the size of the 
banking  sector  stood  at  246%  of  GDP,  slightly 
below  the  EU  average  of  257%.  German  banks 
play  a  pivotal  role  in  financing  the  domestic 
economy.  A  key  strength  of  the  German  banking 
long-standing  and  close 
sector 
relationships  that  banks  maintain  with  their 
corporate clients through the so-called house-bank 
model. Most SMEs rely on a single credit institution 
throughout  their  lifecycle,  which  provides  a  full 
range  of 
services—from 
commercial  to  investment  banking.  Germany  also 
hosts  a  robust  asset  management  industry,  with 
total  assets  reaching  69.2%  of  GDP  in  Q3-2024. 
The  German 
sector  has 
demonstrated  resilience,  successfully  navigating 
the  challenges  of  the  COVID-19  crisis.  With  the 
industry  has 
exception  of  2018, 
experienced  steady  growth.  The  insurance  sector, 
with  total  assets  amounting  to  60%  of  GDP  at 
end-2023,  is  both  technically  sophisticated  and 

investment 

the  fund 

financial 

tailored 

fund 

well-diversified, featuring a competitive landscape 
with domestic and international providers. German 
insurers  operate  under  three  distinct  forms:  (i) 
commercial  insurance  companies,  (ii)  non-profit 
(iii)  public-sector 
mutual  associations,  and 
recent 
insurance 
consolidation, 
insurance  market 
remains  the  least  concentrated  in  the  EU.  It  is 
characterised by a large number of providers, few 
intense 
listed,  and 
of  which  are  publicly 
competition  within 
same  geographical 
the 
markets.  Germany  hosts  two  of  the  three  world 
largest re-insurance companies. 

entities.  Despite 
the  German 

some 

Graph A5.3: Capital markets and financial 
intermediaries in Germany 

Source: ECB, EIOPA, AMECO 

Resilience of the banking sector  

The  German  banking  sector  demonstrates 
high  resilience  to  risks.  Historically,  Germany's 
aggregate  capital  adequacy 
ratio  has  been 
relatively  higher  compared  to  other  European 
countries.  German  banks’  overall  capitalization 
further  strengthened  to  20.3%  in  2023,  slightly 
above the EU  average of 20.1% (see Table A3.1). 
This improvement was due to the accumulation of 
high-quality  loss-absorbing  capital,  with  the  CET1 
ratio  increasing  from  15.9%  in  2022  to  17.4%  in 
Q3-2024,  significantly  above  the  EU  average  of 
16.6%.  Banks’  profitability  measures  in  terms  of 
Return  on  Equity  in  Germany  improved  markedly 
to  6.8%  in  Q3-2024  but  remained  below  the  EU 
average of 10%. 

49 

Non-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds050100150200250300Listed equity                     Bonds                        Assets by sector% of GDP 
  
According  to  the  2023  EU-wide  stress  tests, 
German  banks  would  remain  stable  even  in 
the  event  of  a  severe  economic  downturn. 
Additionally,  the  Bundesbank  conducted  stress 
tests for roughly 1,200 less significant institutions 
(LSIs)  in  2024  in  Germany,  representing  about 
91%  of  all  credit  institutions  and  approximately 
40% of the aggregate total assets in Germany. In 
the  worst-case  scenario,  the  tested  banks  still 
maintained  an  average  CET1  ratio  of  14.5%,  well 
above  regulatory  requirements.  By  December 
2023,  the  average  MREL  level  of  German  banks 
stood  at  40.2%  of  Total  Risk  Exposure  Amount 
(TREA), surpassing the binding target of 28.1%. To 
further  bolster  the  banking  sector's  resilience, 
BaFin  decided  to  maintain  the  countercyclical 
capital  buffer  rate  at  0.75%  for  Q1-2025, 
effective  from  1  February  2025,  and  the  sectoral 
systemic 
loans  secured  by 
residential real estate at 2.0%. 

risk  buffer  on 

Recently, banks' balance sheets have started 
to show signs of deterioration, albeit from a 
very  low  base,  primarily  due  to  economic 
challenges. Credit quality remains robust, with an 
aggregate  non-performing  loan  (NPL)  ratio  of 
1.4% in Q3-2024, below the EU average of 1.9%,. 
However,  leading  indicators,  such  as  the  recent 
uptick  in  bankruptcies  to  the  highest  level  since 
2011,  suggest  a  deterioration  in  asset  quality  in 
the future. In fact, in 2024, the corporate NPL ratio 
increased  by  0.5  percentage  points, 
already 
reaching 3.4%, bringing it close to the EU average. 
Since late 2022, the NPL ratio for loans secured by 
commercial real estate has increased significantly, 
important 
particularly 
institutions (SIs), partly due to their high exposure 
to the US commercial real estate market. Over the 
past 18 months, the NPL ratio for these loans has 
level, 
nearly  doubled  from  a  previously 
according  to  BaFin,  with  the  aggregate  NPL  ratio 
for commercial real estate loan portfolios reaching 
4.47%  in  Q3-2024.  The  commercial  real  estate 
sector  continues  to  face  significant  challenges, 
with 
loans 
deteriorating.  While  commercial  real  estate  prices 
have  recently  stabilized,  transaction  volumes 
remain  low,  and  further  price  declines  cannot  be 
ruled  out.  As  a  result,  risks  associated  with  the 
commercial  real  estate  sector  are  elevated. 
However,  according  to  the  German  Financial 

credit  quality  of 

systemically 

related 

among 

low 

the 

Stability  Committee  (165)  these  risks  appear  to  be 
manageable for the financial system as a whole. 

German  banks  maintain  strong 
liquidity 
positions,  although  slightly  below  the  EU 
average.  The  liquidity  and  structural  adequacy 
between assets and liabilities have improved, with 
the  Loan-to-Deposit  ratio  at  96%  in  Q3-2024, 
down from 102% in 2014. The Liquidity Coverage 
Ratio stood at 147.6% for SIs and 187.5% for LSIs 
in  Q3-2024,  both  below 
the  EU  average. 
Additionally,  the  Net  Stable  Funding  Ratio  for 
German  banks  in  Q3-2024  was  126.2%,  below 
EU's  138.1%.  According 
to  Deutsche  Bank 
research(166),  German  households  added  almost 
EUR 100  bn  to  their  deposits  in  2024,  with  a  net 
increase  of  EUR  97  bn,    returning  to  pre-2021 
deposit growth levels. 

Resilience of the non-bank financial 
intermediaries  

Germany’s non-bank financial intermediaries 
(NBFIs) remain broadly solvent and resilient, 
but  ongoing  outflows  from  open-ended  real 
estate  funds  and  risks  in  the  commercial 
property  market  reveal 
lingering  sector 
vulnerabilities.  According  to  the  Bundesbank’s 
2024  Financial  Stability  Review,  the  NBFI  sector 
continued  to  expand  significantly  over  the  last 
years. In Germany, NBFIs hold approximately 40% 
of  total  financial  system assets,  which  represents 
an  increase  of  15  percentage  points  since  2009, 
slightly  above  the 
in  the  European 
increase 
financial  system.  In  this  regard,  Germany’s  asset 
management  sector,  which  plays  a  central  role  in 
non-bank  intermediation,  remains  highly  solvent 
and  does  not  currently  pose  risks  to  financial 
stability. 

Commercial  real  estate  market  continues  to 
pose  significant  risks.  The  German  real  estate 
price index slightly recovered in 2024 (up by 1.8% 
year-on-year).  For  the  first  time  since  mid-2022, 
prices  for  commercial  properties  recorded  a 

(165) German Financial Stability Committee communication of 19 

December 2024, 

(166) Deutsche Bank Research, German Monitor Household Finance 
29 November 2024, Heike Mai (author) «German households 
(re-)turn to interest-earning assets». 

50 

 
 
the 

positive trend. Nonetheless, liquidity risks in open-
ended  real  estate  funds  remain  a  key  financial 
stability  concern.  According  to  data  from  Barkow 
Consulting,  open-ended  retail  real  estate  funds  in 
Germany experienced sustained net outflows, with 
seventeenth 
December  2024  marking 
consecutive  month  of  withdrawals.  Total  net 
outflows  reached  EUR  5.9  bn  in  2024,  putting 
pressure on fund managers to liquidate assets and 
thus potentially amplifying declines in commercial 
property  valuations.  However,  the  structure  of 
open-ended  retail  real  estate  funds  in  Germany 
includes  mitigating  features  such  as  mandatory 
minimum  holding  periods  and  redemption  notice 
requirements,  which  help  to  reduce  short-term 
liquidity  stress.  In  addition,  Germany  has  a  high 
share  of  single-investor  specialised  funds,  which 
are typically less exposed to liquidity risks. 

German 
insurers  remain  generally  well 
capitalised  and  profitable,  operating  in  a 
competitive  market  environment.  They  also 
report  the  highest  average  Solvency  Capital 
Requirement (SCR) ratio in the EU (320% at year-
end 2023), well above the regulatory minimum of 
100%. However, German insurers’ exposure to real 
estate  remains  significant,  albeit  spread  across  a 
diverse  range  of  assets.  Among  other  risks,  this 
poses  a  major  challenge  in  adequately  valuing 
these  holdings  under  changing  market  conditions. 
In addition, the high degree of illiquidity associated 
with real estate investments could further amplify 
vulnerabilities, especially in severe stress scenarios 
where  insurers may  be  forced  to liquidate  assets. 
Moreover,  EIOPA  has  identified  medium  to  high 
insurance  protection  gaps  against  climate  risks  in 
Germany,  particularly  for  flood  and  coastal  flood 
risks. 

Sources of business funding and the 
role of banks 

German  firms  rely  less  on  external  funding 
than  the  EU  average,  with  most  external 
funding  sourced  from  banks.  At  the  end  of 
2023,  external  financing  was  equivalent 
to 
147.8%  of  Germany’s  GDP.  In  contrast,  the  EU 
average  for  non-financial  corporations’  (NFCs) 
external  financing  reached  188%  of  GDP.  This 
suggests  that  German NFCs  have strong  financial 

profiles  and  solid  solvency.  Germany’s  NFCs  also 
face the lowest debt-servicing costs in the EU (167). 
Although  external  funding  plays  a  limited  role  for 
German businesses overall, a larger share (39.1%) 
of external funding comes from banks than is the 
case  in  other  EU  Member  States  (EU  average: 
30.5%).  This reflects the relatively  easy access to 
bank  credit  for  companies,  including  SMEs,  fewer 
of which report access to finance as their primary 
problem compared with SMEs in most EU Member 
States (168). In fact, Germany has one of the lowest 
shares of finance-constrained firms in the EU. The 
to  be 
banking 
adequately  meeting  funding  needs.  In  addition, 
SMEs  in  Germany  do  not  typically  rely  on  capital 
markets  for  financing,  even  though  the  German 
capital  markets  offer  a  broad  range  of  financing 
instruments, such as a popular type of promissory 
note  (the  Schuldscheine,  new  issuance  of  which 
totalled  EUR 20.7 bn  in  2024  (169))  and  various 
types of loans.  

currently  appears 

system 

Graph A5.4: Composition of NFC funding as a % of 
GDP 

(1) The sum of the libilities only reflects the total for the NFC 
liabilities considered. Reference period 2023. 
Source: Eurostat and FISMA E2 calculations 

The  banking  sector  plays  a  crucial  role  in 
financing  businesses  in  Germany.  The  greater 
reliance on banks by German businesses can also 
be  attributed  to  specific  domestic  cultural  and 
historical  factors.  Traditionally,  the banking  sector 
has  been  central  to  financing  the  economy, 
fostering  long-term  customer  relationships  with 

(167) Source: 2025 European Semester: Alert Mechanism Report. 

(168) Source: 2024 SAFE Access to Finance Monitor. 

(169) Source: LBBW Research, ‘Der Schuldscheinmarkt zeigt sich 

resilient’, January 2025. 

51 

050100150200250DEEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equity 
  
 
is  particularly 

banks  maintain 

NFCs.  Germany’s  banking  system,  with  1 403 
important  for  the 
institutions, 
Mittelstand, the backbone of the German economy. 
German 
long-term 
relationships  with  NFCs,  especially  SMEs,  through 
‘house-bank’  model,  according  to  which 
the 
businesses  receive 
tailored  financial  services 
throughout  their  lifecycle  from  one  single  bank, 
contributing to smooth access.   

close, 

The  underperformance  of  growth  in  bank 
credit  to  NFCs  in  Germany  is  mostly  due  to 
economic stagnation rather than obstacles to 
credit  access.  New  corporate  lending  slowed 
following the start of the ECB’s tightening cycle in 
July  2022  and  remained  weak  throughout  2024. 
Persistently  weak  private  investment  and  high 
funding  costs  have  been  the  primary  drivers 
behind  reduced  loan  demand.  Since  late  2022, 
German  enterprises  have  cut  back  not  only  on 
borrowing from banks but also on other sources of 
funding,  such  as  through  debt  securities,  shares, 
and  other  equity  instruments.  Bank  credit  to 
German  NFCs  grew  only  0.5%  year-on-year  in 
November  2024.  Overall,  Germany’s  mild 
recession  has  significantly  dampened  credit 
demand.   

Companies 

favourable. 

The  outlook  for  bank  credit  in  Germany  is 
moderately 
are 
expected  to  continue  relying  on  banks  for  both 
short-  and  long-term  financing.  Credit  conditions 
should gradually improve later this year, driven by 
economic  growth  and  anticipated  ECB  rate  cuts. 
While  the  banking  sector  remains  stable  with  low 
levels of non-performing loans, it faces challenges 
such  as  low  profitability  and  modest  capital 
buffers. Recent stress tests revealed vulnerabilities 
in  some  institutions,  which  could  lead  to  tighter 
lending conditions if they worsen. Rising corporate 
insolvencies also increase the risk of loan defaults, 
prompting banks to reassess credit risks (170). Even 
without  defaults,  lending  standards  are  expected 
to  tighten,  as  reflected  in  the  latest  ECB  Bank 
Lending  Survey,  which  shows  a  rise  in  rejected 
loan applications, especially for SMEs. 

German  companies  maintain  conservative 
investment  strategies  despite  accessible 
bank  financing.  Most  German  SMEs  do  not 
appear to face significant constraints to financing 
their  investments.  According  to  the  2024  EIB 

(170) BaFin: ‘Risks in BaFin's Focus 2025’, January 2025. 

52 

Investment  Survey,  76%  of  German 
firms 
considered their investment activities over the past 
three years to be adequate, slightly  below the EU 
average of 80%. Most German firms are however 
focused  on  replacing  existing  capacity  instead  of 
investing in the development of new products and 
services.  Business  enterprise  spending  on  R&D 
remains  low,  and  the  diffusion  of  technology  is 
limited.  In  the  early  2000s,  Germany’s  corporate 
sector  shifted  from  being  a  net  debtor  to  a  net 
saver.  This  trend  of  positive  financing  balances 
indicates  that  German  companies  have  prioritised 
innovative 
building 
investments. In fact, the savings-investment gap in 
Germany has not changed fundamentally in recent 
years,  despite  increasing  investment  needs.  In 
particular,  alternative  forms  of  financing,  often 
used 
remain 
underdeveloped. 

equity  over 

innovative 

increasing 

scale-ups, 

by 

is  especially 

relevant  considering 

There  is  potential  for  German  companies, 
particularly  start-ups,  to  increase  their  use 
of market funding to meet investment needs. 
This 
that 
Germany  has  one  of  the  highest  needs  of  both 
current  investments  and  planned  investments  to 
address  climate  change  and 
reduce  carbon 
emissions. The limited reliance of German SMEs on 
capital  markets  also  points  to  a  lack  of  funding 
opportunities  for 
innovative 
projects,  which  are  typically  difficult  to  finance 
internally.  Furthermore,  the  German  economy 
includes  a  significant  share  of  capital-intensive 
sectors,  which  tend  to  have  greater  financing 
needs,  particularly  for  R&D  spending,  investments 
in tangible assets, and other long-term projects.   

riskier  or  more 

Capital markets and the participation 
of retail investors 

Germany faces declining interest in its stock 
market and a concerning trend of innovative 
firms listing their shares abroad. Germany, the 
world's fourth-largest economy, accounts for 4.3% 
of  the  world’s  total  GDP  but  accounts  for  only 
2.4%  of  global  stock-market  capitalisation.  Its 
largest  stock  exchange,  Deutsche  Börse,  is  the 
second-largest stock exchange group in the EU by 
market capitalisation (EUR 2.1 trillion). However, it 
the  pan-European 
trails  significantly  behind 

 
 
2024, 

reflecting 

financial  market  Euronext  (EUR 6 trillion)  (171). 
Deutsche  Börse’s  market  capitalisation  relative  to 
Germany's  own  GDP  remains  modest.  The  total 
number  of  listed  companies  on  Deutsche  Börse 
declined  from  497  in  December  2023  to  477  in 
diminishing 
December 
attractiveness  for  the  regulated  market.  Even 
more concerning, however, is the growing trend of 
cross-border 
listings  by  German 
companies outside the EU in recent years. Notably, 
firms 
innovative  and  R&D-intensive 
sectors  increasingly  opt  to  go  public  outside 
Germany,  and mainly  outside the  EU.  This  shift  is 
the cause of significant alarm, as it often leads to 
companies  relocating  high-value  activities  and 
investments  to  countries  with  larger  investment 
volumes and specialised investor funds.  

IPOs  and 

in  highly 

of 

households 

The  aversion  to  risk  and  equity  by  German 
households poses an additional challenge for 
financing  investment.  Only  about  17%  of  all 
Germans hold equities (172). The number of private 
individuals  investing  in  shares  or  equity  funds 
decreased  over  the  last  years  to  12.1  million  in 
2024. This trend is mirrored in both the financing 
patterns  of  German  NFCs  and  the  savings 
behaviour 
(households 
disproportionately  favour  bank  deposits  rather 
than  other  forms  of  investment).  The  share  of 
bank  deposits  in  German  households’  financial 
assets is equivalent to 42% of GDP, above the EU 
average  of  35%  of  GDP.  According  to  a  survey 
conducted by the German Association of Banks in 
January  2025  (173),  when  asked  about  their 
preferred 
respondents 
indicated they would invest in real estate, followed 
by  43%  in  overnight  deposits,  41%  in  gold,  and 
40%  each  in  mutual  funds  and  equities.  The 
survey  also  revealed  a  high  and 
increasing 
preference  for  safe  investments.  Only  19%  of 
respondents (down from 33% in the previous year) 
indicated they would be willing to take on greater 
investment  risk  in  exchange  for  potentially  higher 
returns. Finally, the lack of a funded, capital-based 
pension  scheme  supplementing  the  existing  pay-
as-you-go  scheme  negatively  affects:  (i)  the 
sustainability and adequacy of pensions; (ii) overall 

investments,  47%  of 

(171) Source: FESE Monthly Statistics, December 2024. 

(172) Source: Deutsches Aktieninstitut, 2024. 

(173) https://bankenverband.de/wirtschaft/praeferenzen-der-

deutschen-bei-der-geldanlage-20242025. 

investment in equity in Germany; (iii) the access to 
finance of German companies; (iv) and growth and 
innovation in Germany. 

Graph A5.5: Composition of HH financial assets per 
capita and as a % of GDP 

Source: Eurostat. 

financial 

literacy  of  households, 

Recent  policy  initiatives  in  Germany  aim  to 
increase  both  market-based  financing  for 
start-ups  and  retail  participation  in  capital 
markets. In addition to ongoing efforts to improve 
the 
the 
government  has  introduced  legislative  measures 
to  achieve  these  objectives.  The  Future  Financing 
Act,  adopted  in  2023,  aims  to  promote  access  to 
capital  markets  for  start-ups  and  SMEs.  The 
Second  Future  Financing  Act,  proposed  in  2024, 
comprises  a  comprehensive  package  of measures 
to support future-oriented investments.  

The role of domestic institutional 
investors 

The  German  investment  funds  market  has 
seen robust growth in recent years driven by 
the  growing  popularity  of  exchange-traded 
funds  (ETFs)  among  younger  investors.  The 
German  fund  market  is  the  largest  in  the  euro 
area  in  terms  of  total  fund  ownership,  with 
EUR 3.04  trillion  in  assets  at  the  end  of  2024, 
accounting  for  16%  of  total  assets  held  by 
investment  funds  in  the  euro  area  (174).  It  is  also 
the second-largest market in the world in terms of 

(174) Source: ECB: Assets and liabilities of euro area investment 

funds (other than money market funds).  

53 

050100150DEEUper capita (000 EUR)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
 
 
  
 
assets  under  management  (175).  Over  the  past 
decade, the German investment-fund industry has 
experienced  robust  growth,  with  assets increasing 
by  approximately  8%,  significantly  outpacing  the 
growth  observed  in  other  major  European  fund 
markets  (176).  ETF  savings  plans  have  become 
particularly  popular  among  younger  investors: 
nearly half of all ETF savers in Germany are under 
40  years  old,  compared  with  only  one  in  four 
investors  in  actively  managed  funds  (177).  Assets 
under  management  in  Germany  are  allocated  in 
line  with 
investors'  risk  appetite  and  return 
expectations.  According  to  a  2023  survey  by  the 
BVI-German  Investment  Funds  Association,  bonds 
were  the  largest  asset  class  held  by  German 
investors,  accounting  for  42%  of  total  German 
fund  assets.  Equities  also  played  a  substantial 
role, comprising 37% of the total value of German 
fund assets. Directly held real estate accounted for 
13%,  while  smaller  shares  of  assets  were 
allocated  to  private-equity  and  venture-capital 
investments.  German  asset  managers  display  a 
marked  preference  for  cross-border  investments 
compared  with  their  EU  peers.  In  2023,  they 
allocated  approximately  20%  of  their  equity 
holdings  and  27%  of  their  bond  holdings  to 
domestic 
remainder 
allocated abroad (178).   

investments,  with 

the 

The 
investment  portfolios  of  German 
insurers  are  predominantly  composed  of 
direct and indirect bond holdings. The German 
insurance  sector,  which  is  the  second-largest 
insurance  market  in  the  EU,  primarily  invests  in 
corporate  bonds  and  covered  bonds,  which 
together  accounted  for  30%  of  their  asset 
allocation  in  mid-2024.  These  investments  are 
made  either  indirectly  through  debt  funds    or 
directly,  respectively  at  14%  and  16%  of  their 
asset  allocation  (179).  Equity  investments  also 
account for a substantial share of their portfolios, 
with  direct  investments  in  equity  accounting  for 
21%  of 
insurance-fund  assets.  When 
combined  with  investments  in  equity  funds,  the 

total 

(175) Source: EFAMA ‘Asset Management in Europe’ report, 16th 

edition, December 2024). 

(176) Source: BVI: ‘Portfoliomanagement in Deutschland im 

Überblick’.  

(177) Source: Deutsches Aktieninstitut. 

share  of  equity  holdings  rises  to  29.4%,  which  is 
above  the  EU  average  of  27%  (180).  However,  the 
allocation  of  assets  to  private-equity  funds  is 
negligible (0.8%).  

Germany’s  pension-fund  industry  follows  a 
conservative  investment  strategy.  As  of  end-
2024,  62%  of  total  assets  were  in  undertakings 
for collective investment in transferable securities 
(UCITS)  and  30%  in  corporate  and  government 
debt. Equity investments remain low, totalling only 
EUR  3.6  billion  in  2017—well  behind  other  major 
EU markets. Pension fund involvement in start-ups 
and venture capital is also limited, with only 13% 
of  commitments  to  such  funds  from  2007  to 
2020,  compared  to  19%  in  the  Baltics  and  over 
20% in Nordic countries (181). 

The depth of available venture and 
growth capital 

Germany's  underdeveloped  venture-capital 
and  private-equity  market  falls  short  in 
financing 
innovative  firms  and  essential 
investments  in  digitalisation  and  climate 
action.  The  average  value  of  annual  private-
equity  and  venture-capital  investment  relative  to 
nominal GDP is still very modest in Germany. This 
investment declined slightly to 0.3% in 2023 from 
its  peak  of  0.6%  in  2021  (EU  average  :  0.4%  in 
2023).  Venture-capital  investments  in  Germany 
are far below leading EU Member States, some of 
whom  achieved  investment  amounts  in  venture 
capital  equivalent  to  0.8%  of  their  GDP  in  2023. 
This  underdeveloped  market  for  venture  and 
growth  capital  holds  firms  back  from  securing 
adequate  financing,  limiting  their  potential  to 
thrive  and  adapt  in  a  challenging,  transformative 
environment. Below-average follow-up investment 
in established SMEs underscores Germany’s start-
up sector’s reliance on foreign investors (182). 

(180) Source: European Commission: Overview of CMU indicators – 
2024 update, indicator 12 ‘Equity holdings of insurers’. 

(181) Source: Closing the gaping hole in the capital market for EU 

(178) See Exhibits 4.4 and 4.5 in EFAMA Asset Management in 

start-ups – the role of pension funds – CEPS.  

Europe, facts and figures December 2024. 

(179) EIOPA Statistics. 

(182) Institut der deutschen Wirtschaft Köln ‘Eine Agenda für mehr 

private Investitionen’, January 2025. 

54 

 
 
 
 
Financing the green transition  

Financial literacy  

Public  and  private  investments  are  vital  for 
Germany’s  green  transition  and  climate 
goals.  Germany’s  Climate  Change  Act  targets  a 
65%  greenhouse-gas  (GHG)  reduction  by  2030 
and  neutrality  by  2045.  Despite  a  30.7% 
emissions  drop  since  2005,  major  public  and 
private  investment  is  still  needed  to  meet  these 
goals.  Germany's  recovery  and  resilience  plan 
emphasises the green transition, allocating  49.5% 
of  its  funding  to  climate-related  measures,  well 
above the Recovery and Resilience Fund target of 
37%.  Despite  substantial  public  spending  and 
green  transition  efforts,  mobilising  private  capital 
remains key to meeting ambitious targets.  

Improving  public  financial  literacy  remains 
key to advancing Germany's capital markets. 
The  underdeveloped  equity  culture  in  the  country 
highlights  the  need  for  additional  initiatives  by 
both the public and private sectors. Although levels 
of  financial  knowledge  among  adults  in  Germany 
are among the highest of all OECD countries (with 
an  average  score  of  85/100,  compared  with  the 
OECD  average  of  67/100) (183),  significant  gaps 
remain in specific areas and among certain target 
groups.  In  response,  the  German  Ministry  of 
Finance  and  the  Ministry  of  Education  and 
Research  launched  a  financial  education  initiative 
in  March  2023,  aiming  to  develop  a  national 
financial  education  strategy.  In  September  2024, 
the  government  received  the  OECD's  proposal  for 
this strategy.  

Table A5.1:  Financial indicators 

 (1) Annualised data. 
Credit growth and pension funds EU data refers to the EA average 
Source: AMECO, Eurostat, ECB, EBA, EIOPA 

(183) Source: OECD/INFE 2023 International Survey of Adult 

Financial Literacy. 

55 

20172018201920202021202220232024-Q3EUTotal assets of MFIs (% of GDP)231.5226.6235.1259.3249.5265.5246.5240.9248.4Common Equity Tier 1 ratio15.915.715.516.015.715.917.017.416.6Total capital adequacy ratio18.818.418.118.818.518.819.820.320.1Overall NPL ratio (% of all loans)1.81.41.21.21.11.11.31.41.9NPL (% loans to NFC-Non financial corporations)4.12.72.32.52.22.22.93.43.5NPL (% loans to HH-Households)1.81.71.31.41.31.21.31.52.2NPL-Non performing loans coverage ratio56.556.657.553.252.747.744.944.042.1Return on equity12.92.42.12.24.04.35.76.810.0Loans to NFCs (% of GDP)25.626.427.128.928.429.327.927.330.0Loans to HHs (% of GDP)48.648.949.653.252.551.148.647.544.5NFC credit annual % growth4.35.35.13.95.210.91.00.20.8HH credit annual % growth3.23.94.44.75.14.30.60.50.7Stock market capitalisation (% of GDP)58.147.654.256.862.747.249.352.069.3Initial public offerings (% of GDP)0.190.200.020.140.580.000.06-0.05Market funding ratio54.153.652.050.751.049.949.5-49.6Private equity (% of GDP)0.360.350.440.430.540.390.31-0.41Venture capital (% of GDP)0.040.040.060.050.110.080.06-0.05Financial literacy (composite)------48.5-45.5Bonds (as % of HH financial assets)2.42.22.11.81.61.82.6-2.7Listed shares (as % of HH financial assets)5.34.45.15.56.65.86.2-4.8Investment funds (as % of HH financial assets)10.39.510.410.412.111.612.2-10.0Insurance/pension funds (as % of HH financial assets)33.633.833.932.430.728.227.6-27.8Total assets of all insurers (% of GDP)66.364.467.772.869.855.455.155.454.8Pension funds assets (% of GDP)--17.318.819.117.017.017.123.41-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States.Banking sectorNon-banks sector 
 
 
 
 
 
 
 
 
 
  
 
 
ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK 

in 

role 

Germany’s  institutional  framework  plays  a 
the  country’s 
influencing 
key 
competitiveness.  Although  the  government  is 
issues  of  bureaucracy, 
actively  addressing 
innovation  and 
fragmentation,  and  embracing 
digitalisation in public administration, progress has 
been  uneven.  Efforts  to  make  government  more 
agile,  citizen-focused  and  efficient  are  underway. 
Germany continues to lag in terms of digitalisation 
of  public  services,  particularly  when  measured 
against  the  Digital  Decade  targets.  The  justice 
system continues to operate efficiently. 

Graph A6.1: Trust in justice, regional / local 
authorities and in government 

(1) EU27 from 2019; EU28 before 
Source: Standard Eurobarometer surveys 

Public perceptions 

Trust  varies  across  Germany’s  public 
in  the  national 
institutions.  Although  trust 
government  has  declined,  trust  in  regional  and 
local authorities has increased to 70%, well above 
the EU average. Trust in the judicial system is also 
about 
A6.1).  When 
high 
(Graph 
improvements 
in 
can 
that 
Germany’s  public  administration,  57%  of  citizens 
pointed to less bureaucracy (EU: 52%) and 41% to 
more transparency about decisions and the use of 
public  money  (EU:  44%)  (184).  Moreover,  citizens 
clearer 
think 

that  more  digital 

services, 

increase 

asked 

trust 

(184) Understanding Europeans’ views on reform needs - April 
2023 - - Eurobarometer survey, Country Fact Sheet. 

56 

information  about  procedures  and  services,  and 
more  channels  for  direct  communication  would 
improve 
public 
administration.  Germany  is  perceived  to  have  a 
high  quality  of  government,  however  there  is 
significant regional disparity (185).  

interactions 

their 

with 

Quality of legislation and regulatory 
simplification 

Germany’s overall performance in developing 
and  evaluating  legislation  is  above  the  EU 
average. Performance in regulatory tools like ex-
impact  assessment,  public  consultation 
ante 
practices  and  reviews  of  existing  regulations  is 
broadly  similar  for  primary  laws  and  subordinate 
regulations. The implementation of these rules has 
been  weakened  in  the  past  years,  though  (186). 
There  is  scope  to  improve  the  requirements 
governing  the  methodology,  systematic  adoption 
and  above  all,  the  transparency,  oversight  and 
quality  controls  of  public  consultations  for  both 
primary and secondary legislation (Graph A6.2).  

Graph A6.2: Indicators of Regulatory Policy and 
Governance (iREG) 

Source: OECD (2025), Regulatory Policy Outlook and Better 
Regulation across the European Union 2025 (forthcoming) 

(185) Inforegio - European Quality of Government Index 

(186) Nationaler Normenkontrollrat/Bundesministerium der Justiz, 

2024, Gute Gesetze. Digitale Verwaltung. Weniger 
Bürokratie. Momentum nutzen, Wirkung steigern (Annual 
NKR report 2024, pp. 43), www.normenkontrollrat.bund.de. 

00.10.20.30.40.50.60.70.80.9AutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSummerWinterSummerWinterSpringAutumnSpringAutumn2014201520162017201820192020202220232024Justice,  legal system EU27Justice,  legal system DERegional or local public authorities EU27Regional or local public authorities DEGovernment  EU27Government  DE0.00.51.01.52.02.53.03.54.0Primary lawsSubordinateregulationsPrimary lawsSubordinateregulationsPrimary lawsSubordinateregulationsDE_StakeholderengagementDE_Regulatory ImpactAssessmentDE_Ex-post evaluation oflegislationMethodologySystematic adoptionTransparencyOversight and quality control2021EU-27 
 
   
 
     
 
 
Table A6.1:  Selected indicators on administrative burden reduction and simplification 

(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation. 
Source: OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025 (forthcoming). 

regulation 

Germany  has  established  mechanisms  for 
simplifying 
identifying 
administrative  burdens  when  developing  and 
evaluating  legislation.  An  example  is  the  ‘one-in, 
one-out’ rule (Table A4.1 and Annex 4).  

and 

Germany’s  licensing  system  is  aligned  with 
most,  but  not  all,  best  practices (187).)  The 
2023  OECD  product  market  regulation  indicators 
show that although  the government keeps an up-
to-date  inventory  of  all  permits  and  licences 
required/issued to businesses by public bodies, the 
inventory  is  not  available  online  for  consultation. 
Furthermore,  there  is  no  requirement  for  the 
government  to  regularly  assess  whether  such 
licences and permits are still required or should be 
withdrawn (see also Annex 4). 

Social dialogue 

Social  dialogue  in  Germany  has  a  strong 
tradition.  The  cooperation  between  employers 
and employees, employers' associations and trade 
unions  aims  at  resolving  conflicts  of  interest 

(187) OECD product market regulation (PMR) indicator. 

through  consensus  politics.  The  social  partnership 
takes place at a wide variety of levels, starting at 
the  company  level.  The  social  partners  work 
together  constantly  on  a  wide  variety  of  regional 
levels, at the federal level, as well as the European 
level  -  in  the  form  of  joint  positions,  initiatives, 
actions or social dialogue.(188) 

is  protected 

Collective  bargaining  as  a  special  form  of 
social  partnership 
in  the 
constitution.  This  includes  the  right  to  form 
employers'  associations  and  trade  unions,  as  well 
as  the  right  to  conduct  collective  bargaining  and 
conclude 
Collective 
agreements  are  still  the  defining  parameter  of 
industrial  relations in  Germany.  In  the majority  of 
companies, collective agreements apply directly or 
indirectly by reference to the collective agreement 
in the employment contract.  

agreements. 

collective 

(188) For  an  analysis  of  the  involvement  of  Germany’s  social 
partners at national level in the European Semester and the 
Recovery  and  Resilience  Facility,  see  Eurofound  (2025), 
National-level  social  governance  of  the  European  Semester 
and the Recovery and Resilience Facility. 

57 

Ex ante impact assessment of legislationEx post evaluation of legislationIdentify and assess the impacts of the baseline or ‘do nothing’ option.Is required to consider the consistency of regulations and address areas of duplication.Identify and assess the impacts of alternative non-regulatory options.Is required to contain an assessment of administrative burdens.Quantify administrative burdens of new regulations.Is required to contain an assessment of substantive compliance costs.Quantify substantial costs of compliance of new regulations.Compares the impact of the existing regulation to alternative options.Assess macroeconomic costs of new regulations. Periodic ex post evaluation of existing regulations is mandatory.Assess the level of compliance.Government uses stock-flow linkage rules when introducing new regulations (e.g., one-in one-out).Identify and assess potential enforcement mechanisms.A standing body has published an in-depth review of specific regulatory areas in the last 3 years.In the last 5 years, public stocktakes have invited businesses and citizens to assess the effectiveness, efficiency, and burdens of legislation.When developing new legislation, regulators are required to …Yes /  For all primary laws For major primary laws For some primary lawsNo / Never 
 
 
 
   
 
Table A6.2:  Key Digital Decade targets monitored through the Digital Economy and Society Index 

Source:  State of the Digital Decade report 2024 

Digital public services 

Germany  has  faced  difficulties  in  moving 
public  services  online,  with  little  progress 
made  in  recent  years.  In  2023,  the  availability 
of digital public services for businesses was rated 
at  78.6,  below  the  EU  average  of  85.4.  Similarly, 
digital  public  services  for  citizens  scored  75.8, 
compared  to  an  EU  average  of  79.4.  However,  in 
terms  of  access  to  e-health  records  Germany 
scored  87,  above  the  EU  average  of  79  (Table 
A6.2). 

The  take-up  of  digital  public  services  in 
Germany  is  low.  Only  63.9%  of  individuals  use 
e-government  services,  compared 
to  an  EU 
average  of  74.7%.  Additionally,  Germany  has  the 
second lowest proportion of eID users in the EU at 
9.04%, well below the EU average of 41.1%. This 
can  be  attributed 
in 
digitalising  public  services(189).  Germany  has  not 
yet  set  up  and  notified  eID  schemes  for  legal 
persons  under  the  eIDAS  Regulation(190).  This 
means 
cannot 
authenticate  themselves  to  access  public  services 
provided by  other  Member  States, including those 
enabled by the Once-Only Technical System(191). 

its  slow  progress 

businesses 

German 

that 

to 

German 

The 
Act 
Online 
(Onlinezugangsgesetz)  is  a  major  ongoing 

Access 

(189) European Commission, Digital Decade 2024: Country reports. 

step  towards  digitalising  the  administration. 
This  reform  effort  is  funded  by  the  recovery  and 
resilience  plan.  In  addition,  Germany  is  working 
under  the  EU  Technical  Support  Instrument  to 
harmonise the IT infrastructure of Germany’s 294 
rural  districts.  This  is  expected  to  facilitate  data 
exchange  and  improve  collaboration  within  the 
public  administration  in  the  delivery  of  online 
services. 

Germany  is  now  closer  to  being  ready  for 
seamless,  automated  exchange  of  authentic 
documents  and  data  across  the  EU.  It  has 
completed  its  first  transactions  using  the  Once-
Only  Technical  System,  part  of  the  EU  Single 
Digital  Gateway,  and  is  ready  to  roll  out  services 
for citizens and business (192).  

Some  German  authorities  have  started 
deploying  AI  in  public  services.  For  example, 
the  AI  Lab  at  the  Federal  Environment  Agency 
(Umweltbundesamt)  has  been  using  data  science 
methods  and  technologies  to  make  it  easier  to 
review  and  perform  a  cross-scale  analysis  of 
complex environmental data. 

Civil service  

The German civil service is facing a range of 
challenges.  The  share  of  civil  servants  with 
higher  education  qualifications  is  below  the  EU 
average (DE 46.5%, EU 54%)(193) and continues to 

(190) European Commission, eIDAS Dashboard. 

(192) European Commission, Once-Only Technical System 

(191) European Commission, The Once Only Principle System: A 

breakthrough for the EU’s Digital Single Market. 

Acceleratormeter. 

(193) Eurostat. Eurostat, 2025, EU Labour Force Survey. 

58 

Digital Decadetarget by 20302022202320242024EU-27Digitalisation of public services176787679100Score (0 to 100)20212022202320232030280817985100Score (0 to 100)202120222023202320303na708779100Score (0 to 100)20212022202320232030Digital public services for businessesAccess to e-health recordsGermanyEU-27Digital public services for citizens 
 
 
 
  
 
drop  since  2021.  This  translates  in  shortage  of 
professionals and insufficient skills among staff to 
meet  growing  demands  on  public  services. 
Demand  for  digital  skills  is  putting  additional 
pressure  on  an  already  strained  workforce.  At the 
same  time,  participation  of  civil  servants  in  adult 
training  lags  behind  (Graph  A6.3).  Reforms  are 
also  underway  at  federal  and  state 
levels. 
However,  efforts  to  address  these  trends,  as  well 
as  the  overall  aging  of  civil  service  have  been 
hindered by fragmented human resource data and 
planning, as well as lack of a coordinated strategy 
on  recruitment,  mobility,  training  or  performance 
assessment.  

Graph A6.3: Participation rate of 25-64 year olds 
in adult learning (%) by occupation 

Plans  to  strengthen  the  liability  of  legal  persons 
and  corporate  sanctions  for  foreign  bribery  have 
not advanced over several years (196). In Germany, 
17%  of  companies  (EU  average  27%)  think  that 
corruption  has  prevented  them  from  winning  a 
public  tender  or  a  public  procurement  contract  in 
practice  in  the  last  three  years  (197).  Proposals  to 
modernise public procurement rules are still under 
preparation. 
pharmaceutical 
industries and construction were also identified as 
the  most  affected  sectors  by  corruption-related 
crimes,  while  the  business  sector  and  public 
administration  represented  the  preferred  targets, 
with  74.3%  of  all  corruption  cases  occurring  in 
these  sectors  (198). Overall,  however,  Germany 
provides  an  effective  response  in  preventing  and 
fighting corruption (199).  

The  medical, 

Like  most  Member  States,  Germany  has 
implemented  a  public  register  for  lobbyists, 
but  concerns  remain  regarding  secondary 
activities  of  members  of  Parliament.  Certain 
prohibitions  are  in  place  for  remunerated  lobby 
activities  of  members  of  Parliament.  However, 
there  is  no  requirement  to  disclose  potential 
conflicts of interest, especially in respect of private 
companies  (200).  In  addition,  there  have  been  no 
transparency  over 
developments 
increase 
federal 
financial  and  business 
ministers and other high-level officials (201).  

interests  of 

to 

Source: European Commission, based on the Labour Force 
Survey 

Justice 

Integrity 

A lower percentage of companies than the EU 
average consider corruption to be a problem. 
In  Germany,  47%  of  companies  consider  that 
corruption is widespread (EU  average 64%), while 
only  20%  consider  that  corruption  is  a  problem 
when  doing  business  (EU  average  36%)  (194). 
Moreover,  40%  of  companies  believe  that  people 
and businesses caught for bribing a senior official 
are appropriately punished (EU average 31%) (195). 

(194) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024).   

(195) Ibid. 

The  justice  system  is  continuing  to  operate 
efficiently  overall.  The  disposition  time  in  civil 
and  commercial  cases  at  first  instance  increased 
slightly  (from  241 days  in  2022  to  249 days  in 
2023).  In  administrative  cases,  the  disposition 
time  remains  higher,  but  it  has  continued  the 
positive  downward  trend  seen  in  recent  years 

(196) See the 2024 country-specific chapter for Germany of the 

Rule of Law Report, p. 14. 

(197) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024).   

(198) BKA - Meldungen - Bundeslagebild Korruption 2023 

veröffentlicht.  

(199) See the 2024 country-specific chapter for Germany of the 

Rule of Law Report, pp. 14-15. 

(200) Ibid., pp. 18-19. 

(201) Ibid., p. 19. 

59 

02468101214161820DEEU-27DEEU-27DEEU-27DEEU-272021202220232024Public administration and defence; compulsory social securityHigh-skilled occupationsMedium-skilled occupationsUnskilled occupationsArmed forcesTotal economy 
     
 
 
(391 days in 2023, compared to 408 days in 2022 
and  422 days  in  2021).  The  clearance  rate  also 
remains  high  (109%  in  2023).  The  quality  of  the 
justice  system  is  considered  to  be  good  overall, 
including  in  the  area  of  digitalisation.  There  is 
significant  use  of  digital  technologies  in  courts, 
including  for  secure  remote  working,  electronic 
case  allocation  and  case  management  systems, 
distance communication technology and the use of 
in  core  activities.  However, 
AI  applications 
concerning  the  resources  of  the  judiciary,  certain 
challenges 
judicial 
independence, no systemic deficiencies have been 
reported. (202) 

regards 

remain. 

As 

(202) For more detailed analysis of the performance of the justice 
system  in  Germany,  see  the  upcoming  2025  EU  Justice 
Scoreboard and the 2024 Rule of Law Report. 

60 

 
 
 
SUSTAINABILITY 
ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION 

transformation. 

Germany’s industry is undergoing a profound 
transformation,  taking  efforts  to  remain 
competitive in a low-carbon setting. Germany 
is a key supplier of several  net zero technologies, 
supported  by  a  robust  policy  framework  including 
research  and  innovation.  German  manufacturing 
imports  of  critical  raw 
depends  heavily  on 
materials.  Its  automotive  sector  is  undergoing  a 
profound 
Energy-intensive 
industries have also been facing challenges. While 
the CO2  emissions intensity  of manufacturing  has 
improved, a broader shift to clean energy has yet 
to take place. Germany has put in place policies to 
support the decarbonisation of industry,  but more 
is  needed.  Despite  positive  trends,  there  is  room 
for  accelerating  the  circularity  transition  and 
improving  pollution  prevention  too.  This  annex 
reviews  the  areas  in  need  of  urgent  attention  in 
Germany’s  clean  industry  transition  and  climate 
mitigation, looking at different dimensions. 

Strategic autonomy and technology 
for the green transition  

Net zero industry 

the  EU 

cumulative 

Germany  is  a  key  supplier  of  wind  turbine 
components,  batteries  and  electrolysers 
within  the  EU.  The  ongoing  restructuring  of  the 
solar PV industry has hit German companies hard, 
resulting  in  Germany  losing  its  leading  rolein  the 
sector. 
capacity 
Germany’s  manufacturing 
amounts to between 7.8 and 11.2 GW/y (36-53% 
of 
capacity),  primarily 
concentrated  in  modules  and  cells  (203).  The 
country hosts the EU’s only solar-grade polysilicon 
supplier. Germany is also a major supplier of wind 
turbine  components,  particularly  nacelles  and 
blades. It also accounts for about 18% of battery 
cell  manufacturing  capacity  in  the  EU.  Its  largest 
facility  has  an  estimated  capacity  of  at  least  50 
GWh/y. Lastly, Germany hosts the largest installed 
electrolyser  manufacturing  capacity  among  EU 
Members, with a manufacturing capacity between 

(203) European Commission: Directorate-General for Energy, 2025, 
The net-zero manufacturing industry landscape across the 
Member States, Europa.eu. 

3.3  and  3.5  GW/y  (59-63%  of  the  overall  EU 
capacity) for electrolysers.  

Germany  can  build  upon  its  technological 
expertise  to  expand  carbon  capture  and 
storage  manufacturing,  as  reflected  in  the 
recently  adopted  Carbon  Contract  for  Difference 
schemes,  the  revised  Carbon  Dioxide  Storage  Act 
and  an  upcoming  carbon  management  strategy. 
However,  challenges  such  as  high  capital  and 
operational  costs  remain,  together  with  concerns 
about  long-term  regulatory  stability  and  public 
acceptance. 

role 

capacity 

tech  manufacturing 

is 
Clean 
supported  by  a  broad  policy  framework.  Its 
industrial  strategy (204)  plays  a  key 
in 
diversifying value chains for net zero technologies 
and  developing  production  capacities  in  Germany 
and  the  EU.  It  envisages  the  use  of  additional 
qualitative  criteria  covering  CO2  intensity  and 
industry  resilience  in  public  procurement.  The 
permitting of new production facilities for net zero 
technologies  is  relatively  swift,  taking  11  months 
on average.  

instruments  exist  to  encourage 
Several 
investment  in  net  zero  technologies.  Key 
among  them  is  the  legal  framework  amending 
State  aid  rules  (BKR-Bundesregelung),  which  has 
provided EUR 3 billion of subsidies up to 2025. For 
the  wind  turbine  sector,  a  recent  guarantee 
scheme  by  the  European  Investment  Bank  and 
Deutsche Bank is set to derisk investment.  

research 

supporting 

Germany  has  a  robust  sectoral  policy 
framework 
and 
development  in  net  zero  technology.  For 
example,  an  overarching  strategy  on  battery 
research  –  the  Dachkonzept  Batterieforschung  – 
has  measures  to  foster  collaboration  between 
industry;  scale  up 
research 
production  processes;  develop  an  ecosystem  for 
innovation;  and  support  young  scientists  (205) 

institutions  and 

(204) BMWK, 2023, Industriepolitik in der Zeitenwende, 

Publikationsportal. 

(205) European Commission, Joint Research Centre, Bielewski, M., 

Pfrang, A., Quintero Pulido, D., Bobba, S., Schade, B., 
Georgakaki, A., Letout, S., Mountraki, A. and Ince, E., Clean 
Energy Technology Observatory: Battery Technology in the 
European Union - 2024 Status Report on Technology 
Development, Trends, Value Chains and Markets, 

61 

 
 
 
 
 
 
 
 
working  on  battery  cell  research.  Furthermore, 
Germany has announced a Wind Industry Package 
containing  measures  to  address  (cyber)  security, 
international  level  playing  field,  resilience  and 
financing.” Building upon these examples, a further 
policy framework targeting additional technologies 
such as solar could be developed.  

Transforming the car industry 

its 

industry  – 

The  automotive 
largest 
industry sector – is facing strong competition 
and significant challenges in the transition to 
electric  vehicles.  The  sector  is  undergoing  a 
profound  transformation,  driven  by  the  shift 
towards  electric  vehicles  and  away  from  internal 
intense 
It 
combustion  engines. 
competition  from  China,  which  has  become  the 
leading  car-exporting  country.  According  to  a 
recent study for the industry association VDA (206), 
the transformation may result in a further loss of 
around 140 000 jobs by 2035, in professions such 
as  metalworking  or  mechanical  engineering. 
However, in  other  areas  new  jobs  will  be  created, 
for  example  in  electrical  engineering  or  plastics 
processing.  

facing 

is 

Germany  has  the  largest  number  of  planned 
sustainable  aviation  fuels  (SAF)  production 
facilities  among  Member.    Germany  currently 
has only one operating plant producing sustainable 
aviation  fuels  (SAF)  with  used  cooking  oil  as 
primary  feedstock,  processed  in  a  co-processing 
unit(207).  However,  it  has  the  largest  number  of 
planned  SAF  production  facilities  among  Member 
States. A significant proportion of these are still at 
an  early  stage  of  development,  and 
include 
feasibility  studies,  pilot  plants  and  research 
projects  aimed  at  promoting  the  viability  of  more 
advanced  technologies  The  country  is  aiming  to 
establish  Power-to-Liquid  (PtL)  as  the  dominant 
technology 
for  producing  SAF  domestically. 
However, significant investments are still required 
for the sector to grow.  

Critical raw materials  

digital 

transitions. 

Manufacturing depends heavily on imports of 
critical  raw  materials  needed  for  the  green 
and 
Germany's 
manufacturing  is  heavily  reliant  on  critical  raw 
materials  such  as  lithium,  cobalt  and  rare  earths, 
which are essential for the production of high-tech 
products,  including  electric  vehicles,  wind  turbines 
and  electronics.  This  presents  big  challenges  for 
sustainability  and  resilience,  such  as  supply  chain 
risks,  environmental  degradation,  and  social 
concerns.  With  37.5%  of  material 
in 
manufacturing production stemming from imports 
in  2023  (EU  average:  22%  (208)),  Germany  is 
particularly vulnerable to supply chain disruptions.  

inputs 

is 

implementing  policies 

Germany 
to 
strengthen  supply  chains  and  promote  the 
uptake  of  circular  solutions  for  critical  raw 
materials.  The  government  encourages  the  de-
risking  and  diversification  of  German  industry, 
notably  for  strategic  value  chains,  and  has 
implemented  various  policy  measures  aimed  at 
reducing  reliance  on  imports  and  promoting  the 
use  of  recycled  materials.  For  example,  a  raw 
materials  agency  has  been  set  up,  tasked  with 
coordinating  supply  chain  management.  On  the 
supply  of  lithium  specifically,  a  domestic  mining 
project is underway. The recycling rate for e-waste, 
a key source of critical raw materials, is above the 
EU average, and stood at 85.5% in 2022 (209). The 
reuse and recycling rate for end-of-life vehicles is 
slightly  below  the  EU  average  (86%  vs.  89%  in 
2022)  (210).  This  points  to  the  need  to  avoid  the 
loss of critical raw materials, especially as the car 
industry shifts to battery-electric vehicles. 

Publications Office of the European Union, Luxembourg, 
2024, https://data.europa.eu/doi/10.2760/4852968, 
JRC139392. 

(206) Prognos, 2024, Automobilindustrie im Wandel: Wie sich die 

Beschäftigung verändert 

(207) European Union Aviation Safety Agency (EASA), 2024, State 

of the EU SAF market in 2023, Link. 

(208) Statistics | Eurostat 

(209) Statistics | Eurostat 

(210) Statistics | Eurostat  

62 

 
 
 
 
Climate mitigation 

Industry decarbonisation 

(as  opposed 

Manufacturing  is  relatively  greenhouse  gas 
emission-efficient, with a very high share of 
energy-related  emissions 
to 
emissions  from  industrial  processes  and  product 
use). Nearly a quarter of its total  greenhouse gas 
from  manufacturing (211). 
emissions 
Germany’s  manufacturing  is  about  20%  more 
emissions efficient than the EU overall, with 220 g 
CO2eq of emissions per euro of gross value added 
(GVA),  ranking  Germany  sixth  best  in  the  EU  (EU: 
270 g/€).  

come 

Between  2017  and  2022,  the  emission 
intensity of Germany’s industry has declined 
less  than  in  the  EU  overall:  in  Germany  the 
decrease  was  by  about  14%,  against  20%  in  the 
EU overall. In 2023 in Germany’s overall industrial 
greenhouse emissions, the share of energy-related 
industrial  process-
emissions  (as  opposed  to 
related ones) was at 69%, the highest in the EU.  

The  greenhouse  emissions 
intensity  of 
manufacturing  has  improved,  but  a  shift  to 
clean  energy  has  yet  to  take  place.  Between 
2017  and  2022,  the  energy-related  greenhouse 
Germany’s 
intensity 
gas 
manufacturing  industry  declined  by  8%,  half  as 
much  as  in  the  EU  overall  where  it  declined  by 
16%(212). 
In  the  same  period,  the  share  of 

emissions 

of 

in 

electricity  and 
final  energy 
renewables 
consumption in manufacturing was broadly stable 
at  around  39%,  while  the  energy  intensity  of 
manufacturing improved by 11%, to 0.8 GWh/€ in 
2022.  The  emissions 
industrial 
processes  and  product  use  declined  by  18%,  less 
than in the EU overall where it declined by 23 %. 

intensity  of 

Graph A7.1: GHG emission intensity of manu-
facturing and energy-intensive sectors, 2022 

Source: Eurostat. 

for  12% 

of  Germany’s 

Energy-intensive 

industries  have  been 

While  relatively  emissions-efficient,  energy-
intensive 
facing 
industries (213) 
challenges. 
accounted 
total 
manufacturing  gross  value  added  (GVA)  in  2022. 
Among  them,  the  manufacture  of  basic  metals 
(which  accounted  for  about  2%  of  manufacturing 
production)  recorded  a  particularly  high  emission 
intensity  of  production,  with  3.9 kg  CO2eq/€  of 
GVA, significantly above the weighted EU average 
of  3.5 kg  (214).  While  having  eased  since  2023, 
electricity prices for industry remain high (215). This, 
and global competition more broadly, put pressure 
In  Germany, 
on  energy-intensive 

industries. 

(211) In  2023.  Manufacturing  includes  all  divisions  of  the  “C” 
section  of  the  NACE  Rev.  2  statistical  classification  of 
economic  activities.  In  the  remainder  of  this  section,  unless 
indicated  otherwise,  data  on  manufacturing  refer  to  the 
divisions  of  the  NACE  section  C  excluding  division  C19 
(manufacture  of  coke  and  refined  petroleum  products),  and 
the  year  2022.  The  source  of  all  data  in  this  section  is 
Eurostat;  data  following  the  UNFCCC  Common  Reporting 
Framework (CRF) are from the European Environment Agency 
(EEA), republished by Eurostat. 

(212) For the GHG emissions intensity of GVA related to energy use 
and  industrial  processes  and  product  use  respectively,  GHG 
emissions  are  from  inventory  data  in  line  with  the  UNFCCC 
Common  Reporting  Format  (CRF),  notably  referring  to  the 
source sectors CRF1.A.2 –  fuel combustion in manufacturing 
industries  and  construction  and  CRF2  –  industrial  processes 
and  product  use.  The  CRF1.A.2  data  broadly  correspond  to 
the NACE C and E sectors, excluding C-19. GVA data (in the 
denominator  for  both  intensities)  are  aligned  with  this 
sectoral  coverage.  Therefore,  they  are  not  fully  consistent 
with the data referred to in other part of this section. 

(213) Notably,  the  manufacture  of  paper  and  paper  products 
(NACE  division  C17),  of  chemicals  and  chemical  products 
(C20),  “other”  non-metallic  mineral  products  (C23;  this 
division includes manufacturing activities related to a single 
substance of mineral origin, such as glass, ceramic products, 
tiles,  and  cement  and  plaster),  and  basic  metals  (C24).  To 
date,  these  industries  are  energy-intensive  –  i.e.  consuming 
much  energy  both  on  site  and/or  in  the  form  of  purchased 
electricity  –  and  greenhouse  gas  emissions  intensive,  in 
various combinations. 

(214) This  is  in  contrast  with  the  GHG  emissions  intensity  of  the 
manufacture  of  non-metallic  mineral  products,  which  in 
Germany at 1.7 kg/€ is far below the weighted EU average of 
2.5 kg.  Likewise,  the  manufacture  of  chemicals  in  Germany 
also  has  a  relatively  low  GHG  emissions  intensity  in  EU 
comparison, 0.7 kg/€. 

(215) Also  vis-à-vis  the  US  and  China,  see  Prognos  (2023), 
Energiepreise  für  die  Industrie  im  internationalen  Vergleich. 
For a detailed analysis of energy prices, see Annex 8 on the 
affordable energy transition 

63 

00.511.522.533.544.5C-C19C17C20C23C24KG CO2eq / €GermanyEU-27 
 
   
 
production  in  these  sectors  has  declined  by  up  to 
20% since 2021 (216). 

Graph A7.2: Manufacturing industry production: 
total and selected sectors, index (2021 = 100), 
2017-2023 

Source: Eurostat 

Germany has put in place policies to support 
the  decarbonisation  of  industry  but  much 
more  is  needed.  To  address  these  challenges, 
German policymakers have implemented a number 
of  support  measures, 
including  funding  for 
research and development (for example, the FONA 
research  for  sustainability  initiative);  subsidies  for 
clean  technologies  (e.g.  through  carbon  contracts 
for  difference  and  tax  incentives  for  low-carbon 
the  expansion  of 
investments);  support  for 
electrolyser  capacity  in  line  with  the  national 
hydrogen  strategy;  the  promotion  of  energy 
efficiency;  and  the  development  of  lead  markets 
for climate-friendly products. However, because of 
the magnitude of the challenge, further efforts are 
still  needed 
the 
decarbonisation  of  manufacturing,  particularly  in 
energy-intensive sectors.  

to  support 

investment 

in 

Reduction  of  emissions  in  the  effort  sharing 
sectors  

To  attain  its  2030  target  for  the  effort 
sharing  sectors,  Germany  needs  to  swiftly 
implement  further  climate 
specify  and 
mitigation  policies(217).  GHG  emissions  from 

(216) Source: Eurostat.  

(217) The national greenhouse gas emission reduction target is set 
out 
(the  Effort  Sharing 
(EU)  2023/857 
Regulation).  It  applies  jointly  to  buildings  (heating  and 

in  Regulation 

64 

Germany’s  effort  sharing  sectors  in  2023  are 
expected  to  have  been  20.9%  below  those  of 
2005,  significantly  short  of  its  effort  sharing 
target  of  a  50%  reduction.  By  2030,  current 
policies  are  projected  to  reduce  them  by  39.8 % 
relative  to  2005  levels;  additional  policies  under 
Germany’s  final  updated  national  energy  and 
climate  plan  are  projected  to  achieve  a  reduction 
of  a  further  percentage  point.  This  results  in  a 
sizeable shortfall against Germany’s effort sharing 
target  of  a  50%  reduction,  of  9.2  percentage 
(218).  Swift  and  steady  adoption  and 
points 
implementation  of  further  climate  mitigation 
measures will be critical. While Germany could use 
domestic  flexibilities  available  under  the  Effort 
Sharing Regulation, this would not be sufficient to 
close the gap to target. 

Graph A7.3: Greenhouse gas emissions in 
effort sharing sectors, 2005 and 2023 

Source: European Environment Agency 

from 

is  needed 

to  curb 
Significant  effort 
greenhouse  gas  emissions 
road 
transport and buildings. Germany's emissions in 
the effort sharing road transport sector decreased 
by  1.41%  in  2023  compared  to  2022,  which  is  a 
slower rate of reduction than needed to meet the 
2030  target.  Sales  of  electric  cars  in  Germany 
decreased  in  2024,  with  only  around  380 600 
newly  registered  e-vehicles,  almost  27.5%  less 

cooling); road transport, agriculture; waste; and small industry 
(known as the effort sharing sectors. 

(218) The  emissions  from  effort  sharing  sectors  for  2023  are 
based on approximated inventory data. The final data will be 
established 
review. 
Projections  on  the  impact  of  current  policies  (“with  existing 
measures”,  WEM)  and  additional  policies  (“with  additional 
measures”,  WAM)  as  per  Germany’s  final  updated  national 
energy and climate plan. 

in  2027  after  a  comprehensive 

7075808590951001051101152017201820192020202120222023ManufacturingManufacture of paper and paper productsManufacture of chemicals and chemical productsManufacture of other non-metallic mineral productsManufacture of basic metals05010015020025030035040045050020052023MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
       
 
 
       
 
than  in  2023.  Electric  vehicles  accounted  for 
13.5%  of  all  new  registrations (219),  not  sufficient 
to meet the country's climate targets.  

The transport sector is still heavily reliant on 
fossil  fuels,  with  a  high  share  of  diesel  vehicles 
on  its  roads.  Since  2016,  the  government  has 
disbursed  around  EUR  10  billion  to  support  the 
purchase  of  about  2.1  million  electric  vehicles, 
including up to 560 000 electric vehicles under the 
recovery  and 
funding 
programme  decisively  contributed  to  promoting 
electric  mobility,  but  it  was  phased  out  by  end-
2023.  

resilience  plan.  The 

remain 

regarding 

Challenges  also 
the 
charging  infrastructure  and  grid  integration. 
In  early  2024,  about  123 500  public  charging 
points were in operation, but more will be needed 
in the future (220). Moreover, the industry's reliance 
imported  battery  cells  and  other  critical 
on 
components 
regarding 
competitiveness and strategic dependencies.  

concerns 

raises 

In  the  buildings  sector,  effort  sharing 
emissions  decreased  by  7  % 
in  2023 
compared  to  2022.  However,  the  building  stock 
has a large share of old, inefficient buildings, that 
require  significant  investments  to  renovate.  The 
renovation  rate,  with  about  1%  of  buildings 
renovated  each  year,  is  not  sufficient  to  meet 
Germany’s climate targets.  

Sustainable industry 

Circular economy transition 

the  circularity 
trends, 
Despite  positive 
transition  could  be  accelerated.  Standing  at 
14%  in  2023,  Germany’s  circular  material  use  is 
above  the  EU  average  but  far  behind  that  of  EU 
leaders. Resource productivity, too, was above the 
EU  average  in  2023,  with  EUR  3.04  per  kg  of 
material 
resource 
productivity  has  been  constantly  improving  over 
the  past  decade.  This  helps  minimise  negative 

consumed. 

Germany’s 

environmental impacts and reduce dependence on 
volatile  raw  material  markets.  Germany  adopted 
its  first  comprehensive  national  circular  economy 
strategy (221)  in  December  2024.  Its  goal  is  to 
reduce  raw  material  consumption  by  examining 
production  and  consumption  over  the  entire  life 
cycle of a product and identifying opportunities for 
conserving  resources  through  resource  efficiency 
and  circularity  in  all  phases.  Germany’s  resource 
efficiency  programme  ProgRess  III (222)  already 
includes  118  measures  aiming 
increase 
circularity.  The  measures  follow  the  value  chain 
from  raw  material  extraction,  product  design  and 
production  to  consumption,  waste  prevention  and 
waste  recovery. The overarching goal  of ProgRess 
is  to  make  the  extraction  and  use  of  natural 
the 
resources  more  sustainable  and  meet 
country’s responsibility to future generations. 

to 

Germany 
in  waste 
is  a  top  performer 
management  but  produces  far  more  waste 
than the EU average. With 606 kg of waste per 
capita produced in 2022, Germany is far above the 
EU average of 513 kg. Still, with a recycling rate of 
69%, Germany ranked first in the EU for municipal 
waste  recycling.  It  is  on  track  to  meet  the  2025 
recycling and the 2035 landfilling targets. In 2021, 
at 48%, its recycling rate for plastic packaging was 
In  2022,  87%  of 
above 
construction  and  demolition  waste  was  recycled, 
excluding backfilling, far above the EU average of 
78%. At the same time, at 14.5 tonnes per person, 
Germany’s material  footprint  is  on  a  par  with the 
EU-27 average. 

the  EU  average. 

is 

in 

the 

transition, 

investment 

insufficient.  Germany 

circularity 
Current 
transition 
is 
estimated (223)  to  need  additional  investments  of 
at  least  EUR  6.2  billion  per  year  for  the  circular 
for  waste 
economy 
management.  To  close  the  circular  economy 
investment  gap  to  attain  policy  targets  that  are 
not  yet  budgeted,  EUR  1.5  billion  is  needed  for 
recent  initiatives  on  the  circular  economy  such  as 
eco-design  for  sustainable  products;  packaging 
waste;  labelling  and  digital  tools;  critical  raw 

including 

(221) Nationale Kreislaufwirtschaftsstrategie Deutschland, Link. 

(222)ProgRess III, 2nd update, Link. 

(219) BMWK, 2023, Umweltbonus endet mit Ablauf des 17. 

Dezember 2023, bmwk.de. 

(220) Nationale Leitstelle Ladeinfrastruktur, 2024, 

Studie_Ladeinfrastruktur-2025-2030_Neuauflage-2024.pdf. 

(223)Estimates  from  2024.  Source:  Waste  management  and 
circular  economy  expenditure  tracking  in  the  EU  funds,  EIB 
projects  and  in  the  national  expenditure  (Eurostat).  Datasets: 
environmental  protection  expenditure  accounts  (env_epi)  and 
circular economy private investments (cei_cie012). 

65 

 
 
 
cause  all  surface  waterbodies  in  Germany  to  fail 
to achieve good chemical status. 

The costs of pollution remain far higher than 
the  investment  in  pollution  prevention  and 
control. For 2021, about 32 000 deaths per year 
were  attributed  to  fine  particulate  matter  (PM2.5) 
pollution;  9 500  deaths  to  nitrogen  dioxide,  and 
3 300  to  ozone  (O3) (226).  The  costs  from  all 
pollutants  are  estimated  at  EUR 95 billion (227).  In 
contrast,  to  meet  its  objectives  for  pollution 
prevention and control and address the health and 
economic  costs  of  pollution,  Germany  needs  to 
spend  an  additional  EUR 9.4 billion  per  year 
(0.24%  of  GDP),  mostly  for  measures  on  clean 
air (228). 

materials  recycling  and measures  proposed  under 
the amended the Waste Framework Directive.  An 
additional  EUR  4.3  billion  is  needed  to  unlock 
Germany’s circular economy potential (224). 

Zero pollution industry 

reduction  commitments  under 

Germany  has  made  considerable  progress  in 
is  now 
reducing  air  pollution,  which 
decoupled  from  GDP  growth.  The  2020-2029 
emission 
the 
national  air  pollution  control  programme  have 
been met, and the country  is on track to meet its 
commitments for 2030 onwards as well. In 2023, 
the  limits  for  nitrogen  dioxide  (NO2)  set  by  the 
Ambient Air Quality Directive (225) were breached in 
only two air quality zones, down from 26 in 2016. 
Between  2010  and  2022,  nitrogen  oxide  (NOx) 
emissions  decreased  by  35 %.  The  main  reason 
for  the  failure  to  meet  NOx  limit  values  is  diesel 
vehicle  traffic.  With  EUR  24  in  damage  to  health 
and  the  environment  per  thousand  EUR  of  GVA, 
Germany 
ranked  seventeenth  among  EU 
Members  on  the  emissions  intensity  of  industrial 
activity.  However,  within  the  EU,  the  damage  to 
health and environment due to the main industrial 
air pollutants is the highest in Germany in absolute 
terms.  Most  emissions  to  air  come  from  the 
energy  sector;  emissions  of  NOx,  sulfur  dioxide 
and heavy metals come mainly from the minerals 
industry.  

is 

Water  pollution  from  industry  is  decreasing, 
but  the  accumulation  of  toxic  substances 
puts  chemical  pressure  on  surface  water 
industrial 
bodies.  Between  2010  and  2022, 
releases of pollutants to water decreased by 38% 
for  heavy  metals  (Cd,  Hg,  Pb  and  nickel),  by  27% 
for  nitrogen,  by  28%  for  organic  carbon  and  by 
38%  for  phosphorus.  Germany  has  the  second 
highest  absolute  amount  of  emissions  of  heavy 
metals  into  water  in  the  EU,  but  occupies  only 
18th position for emissions intensity (below the EU 
average).  Key  emitters  of  heavy  metals  and 
nitrogen into water  are the chemical  industry and 
the  energy  sector.  Pulp  and  paper  manufacturing 
is  the  largest  emitter  of  organic  carbon.  Two 
ubiquitous  and  persistent  bio-accumulative  and 
toxic substances (brominated ethers and mercury) 

(224) European Commission, DG Environment, Environmental 

investment needs & gaps assessment programme, 2025 
update. Expressed in 2022 prices. 

(225) Ambient Air Quality Directive (EU) 2008/50, Link. 

(226)  Latest  available  annual  estimates  by  the  European 
Environment Agency, Link. In terms of years of life lost, this 
implies  333 000  years  for  PM2.5,  98 900  for  NO2,  and 
36 000 for O3. 

(227)  For 2021, value of statistical life method. Source: EEA, 

2024, The costs to health and the environment from 
industrial air pollution in Europe – 2024 update, Link.  

(228)  European Commission, DG Environment, Environmental 

investment needs & gaps assessment programme, 2025 
update. Expressed in 2022 prices. 

66 

 
 
 
 
Table A7.1:  Key clean industry and climate mitigation indicators: Germany 

Source:  Net zero industry: European Commission: The net-zero manufacturing industry landscape across Member States: final 
report, 2025. Automotive industry transformation: Eurostat. Critical raw materials: Eurostat. Climate mitigation: See 
footnotes in the "climate mitigation" section; reduction of effort sharing emissions: EEA greenhouse gases data viewer; European 
Commission, Climate Action Progress Report, 2024. Sustainable industry: Years of life lost due to PM2.5: Eurostat and EEA, 
Harm to human health from air pollution in Europe: burden of disease status, 2024. Air pollution damage: EEA, EU large industry 
air pollution damage costs intensity, 2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10, 
PAH, SOX. Water pollution intensity: EEA, EU large industry water pollution intensity, 2024. Releases into water covered from 
cadmium, lead, mercury, nickel. Other indicators: Eurostat. 

67 

Strategic autonomy and technology for the green transitionNet zero industryOperational manufacturing capacity 2023- Solar PV (c: cell, w: wafer, m: module), MW1600-2500 (c), 250 (w), 900-8500 (m)- Electrolyzer, MW3300-3500- Wind (b: blade, t: turbine, n: nacelle), MW450-500 (b), 11400-17750 (n),3800-4200 (5)- battery, MWh55000-60000Automotive industry transformation201720182019202020212022202320182021Motorisation rate (passenger cars per 1000 inhabitants), %561567574580583578588539561New zero-emission vehicles, electricity motor, %0.731.051.756.6513.5817.7518.431.038.96Critical raw materials201720182019202020212022202320182021Material import dependency, %40.041.439.740.038.837.524.222.6Climate mitigationTrendIndustry decarbonisation201720182019202020212022202320172022GHG emissions intensity of manufacturing production, kg/€0.260.250.240.250.240.220.210.340.27Share of energy-related emissions in industrial GHG emissions32.633.633.532.831.831.431.044.842.5Energy-related GHG emissions intensity of manufacturing150.6143.0142.5148.7146.7138.5-158.4132.9and construction, kg/€Share of electricity and renewables in final energy consumption39.740.040.339.139.439.839.443.344.2in manufacturing, %Energy intensity of manufacturing, GWh/€0.940.910.890.950.890.830.781.291.09Share of energy-intensive industries in manufacturing production11.97.3GHG emissions intensity of production in sector [...], kg/€- paper and paper products (NACE C-17)0.750.690.680.710.720.81--0.730.68- chemicals and chemical products (NACE C20)0.710.700.680.680.700.74--1.251.26- other non-metallic mineral products (NACE C23)1.771.711.751.921.761.73--2.532.24- basic metals (NACE C24)3.052.862.872.873.823.89--2.793.49Reduction of effort sharing emissions20182019202020212022202320182023GHG emission reductions relative to base year, % -16.7-18.5-20.9- domestic road transport6.45.7-5.5-6.6-4.6-5.91.45.2- buildings-24.9-21.1-20.9-22.7-28.1-33.121.432.92005202120222023TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %484.7403.8395.0383.4-50.0-10.2-9.2Sustainable industryTrendCircular economy transition20182019202020212022202320182021Material footprint, tonnes per person16.216.015.315.415.914.514.715.0Circular material use rate, %12.0      12.4      12.8      12.2      12.5      13.9      11.611.1Resource productivity, €/kg2.7        2.9        2.9        3.0        3.4        3.8        2.12.3Zero pollution industryYears of life lost due to PM2.5, per 100,000 inhabitants604      429      348      393      535      -702571Air pollution damage cost intensity, per thousand € of GVA    24.0          27.5      Water pollution intensity, kg weighted by human factors per bn € GVA    0.3   0.9GermanyEU-27GermanyEU-27GermanyEU-27 
 
 
   
 
ANNEX 8: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  enhancing 
energy  competitiveness  and  affordability, 
while advancing the transition to net zero. It 
examines  the  measures  and  targets  proposed  in 
the  final  (draft)  updates  to  the  national  energy 
and climate plans (NECPs) for 2030. 

Graph A8.1: Retail energy price components for 
household and non-household consumers, 2024 

Germany has made significant progress in its 
clean energy transition, with a complete exit 
from  nuclear  in  2023  and  with  its  phasing-
down  of  coal  (with  a  complete  phase-out 
planned  for  2038).  Further  electrification  of  its 
energy  system  is  required  to  achieve  80%  in 
renewables  electricity  by  2030  (up  from  57.5% 
achieved  in  2024)(229).  Germany  has  accelerated 
renewables 
but 
consumers  (households  and  industry)  are  still 
facing  one  of  the  highest  electricity  prices  in  the 
EU. Germany must continue expanding its grid and 
using  its  energy  system  more  efficiently  by 
increasing flexibility. 

considerably, 

deployment 

Energy prices and costs 

In  2024,  German  retail  electricity  prices  for 
households  were  the  highest  in  the  EU 
despite  a  slight  decline  compared  to  2023. 
Households  gas  retail  prices  have  experienced  a 
modest  increase  year  on  year  and  were  slightly 
above the EU average in 2024.  

Non-household  consumers  also  experienced 
significantly  higher  electricity  prices  than 
the  EU  average  in  2024,  with  almost  a  30% 
price  premium  and  the  third  highest  price  in  the 
EU,  like  for  households.  By  contrast,  gas  retail 
prices  were  more  aligned  with  the  EU  average  in 
2024.  

(229) Yearly electricity data, Ember. 

68 

(i) For household consumers, consumption band is DC for 
electricity and D2 for gas. Taxes and levies are shown 
including VAT. 
(ii) For non-household consumers, consumption band is ID for 
electricity and I4 for gas. Taxes and levies are shown 
excluding VAT and recoverable charges, as these are typically 
recovered by businesses. 
Source: Eurostat 

zone 

Wholesale  electricity  prices  in  the  German-
Luxembourgish 
were 
bidding 
78.4 EUR/MWh  in  2024(230),  below  the  EU 
average of 84.7 EUR/MWh, largely attributed 
to  a  significant  share  of  renewables  in 
Germany’s  electricity  mix  (57.5%  in  2024). 
But  within  the  broader  Central  Western  European 
(CWE)  region,  Germany  experienced  price  spikes 
during spring and summer, and this occurred amid 
rising natural gas costs. The situation worsened in 
autumn  and  winter,  as  the  region  was  hit  by  the 
“Dunkelflaute”.  Germany’s  solar  production  fell  by 
11.7%  in  December  2024,  and  its  wind  energy 
output  plummeted  by  21.6%  from  October  to 
December 2024, compared to 2023. This decrease 
in renewable generation created a demand-supply 
gap,  which  was  worsened  by  limited  non-fossil 
flexibility.  While  this  gap was  partially  covered  by 
increased electricity imports(231) from neighbouring 
countries 
in  the  CWE  region,  the  remaining 
shortfall  was  largely  addressed  by  ramping  up 
natural  gas  and  coal-fired  generation  units,  with 
increases  in  November  2024  of  11%  and  1.8%, 
respectively,  compared  to  the  same  period  in 

(230) Fraunhofer (ENTSO-E data). 

(231) From October to December 2024, Germany’s electricity trade 
balanced moved from net exports of 2.1 TWh to net imports 
of 4.4 TWh. 

 
 
 
 
 
 
 
2023. As a result, prices surged, particularly during 
peak  demand  hours  in  the  evening,  with  an 
average  of  176  EUR/MWh  in  November  and 
December  2024(232),  a  60%  increase  over  the 
same period in 2023(233).  

Graph A8.2: Monthly average day-ahead wholesale 
electricity prices and European benchmark 
natural gas prices (Dutch TTF) 

(i) the Title Transfer Facility (TTF) is a virtual trading point for 
natural gas in the Netherlands. It serves as the primary 
benchmark for European natural gas prices. 
(ii) CWE gives average prices in the central-western European 
market (Belgium, France, Germany, Luxembourg, the 
Netherlands and Austria). 
Source: S&P Platts and ENTSO-E 

Flexibility and electricity grids 

capacity  fulfilment  is  below  the  70%  minimum. 
EU Member States should ensure that a minimum 
of  70%  of  technical  cross-border  capacity  is 
available  for  trading.  To  address  this,  Germany  is 
implementing an action plan until the end of 2025 
to strengthen its internal electricity grid. 

In  2024,  the  electricity  interconnection  level 
was  10.6%,  slightly  declining  as  renewables 
outpace  interconnector  expansion.  Germany 
aims  to  meet  a  15%  interconnection  target  by 
2030,  with  ongoing  transmission  and  distribution 
grid  expansion.  In  2024,  128  expansion  projects 
covering  16 800 km(237)  were  planned,  including 
several  projects  of  common  interest  (PCIs).  Of 
these,  15%  were  operational,  28%  under 
construction  and  49%  in  the  permitting  process. 
Legislative  changes 
like  amendments  to  the 
Energy  Industry  Act  and  the  Network  Expansion 
Acceleration  Act  have,  along  with 
the  EU 
Emergency  Regulation,  expedited  permitting  and 
allowed the construction of 1 700 km of new lines 
in 2024 (vs 1 000 km in 2023). Grid reinforcement 
and  digitalisation  are  crucial  for  electrifying 
buildings and transport. 

Germany  is  developing  a  9 000 km  hydrogen 
core  network,  consisting  of  40%  new  and 
involving 
60%  repurposed  pipelines  and 
EUR 18.9 billion  in  planned  investments.  The 
network  will  connect  industrial  centres,  ports  and 
energy sites, enhancing links with EU neighbours. It 
aims  to  be  operational  by  2032,  with  some 
pipelines ready as early as this year. 

Germany is increasing its cross-border trade 
capacity  and  belongs  to  the  Core (234)  and 
Hansa (235) 
regions 
(CCRs) (236).  The  Hansa  CCR  generally  has  high 
capacity,  but  the  Core  CCR  has  reduced  trade 
capacities.  Germany’s  current  cross-border  trade 

calculation 

capacity 

(232) Fraunhofer  (ENTSO-E  data):  Gas  prices  at  peak  demand 
hours  from  17:00  to  18:00  on  average  in  November  and 
December  2024  compared  to  November  and  December 
2023. 

(233) Yearly  electricity  data,  Ember  (consumption  and  generation 

data throughout the paragraph). 

(234) Core  is  the  capacity  calculation  region  (CCR)  which  covers 
Belgium,  Czechia,  Germany,  France,  Croatia,  Hungary,  the 
Netherlands,  Austria,  Poland,  Romania,  Slovenia,  Slovakia 
(and, once connected, Ireland).  

(235) The Hansa CCR includes Denmark, Germany, the Netherlands, 

Poland and Sweden. 

(236) A  CCR  is  a  group  of  countries  that  calculate  cross-border 

electricity trade flows together. 

69 

Germany’s transmission grid is challenged by 
a  geographical  mismatch,  with  high  wind 
generation  in  the  north  but  major  demand 
centres  in  the  south  and  west.  In  2023, 
Germany  had  to  pay  60%  of  the  EU’s  congestion 
management expenses (about EUR 2.5 billion) and 
had  to  curtail  10.5 TWh  of  renewable  energy. 
Negative  electricity  prices  further  highlight  the 
in 
need 
consumption patterns. 

flexibility  and  shifts 

for  system 

In  2023,  Germany  launched  its  electricity 
storage  strategy  to  support  the  market-
driven  expansion  of  electricity  storage.  This 
strategy  addresses issues  like licensing, grid  fees, 
and  connection  acceleration.  The  final  updated 

(237) Netzausbau - Prognose zum Stromnetzausbau. 

 
 
 
 
NECP  highlights  a  need  to 
increase  storage 
currently  has  non-fossil 
capacity.  Germany 
flexibility:  17.7 GWh  of  operational  electricity 
storage, 13.4 GWh of battery storage and 10 GWh 
of pumped storage hydropower. Two new pumped 
storage  plants  are  planned  as  PCIs:  one  on  the 
German-Austrian border and the other in southern 
Thuringia. 

The  regulatory  framework  is  a  barrier  to 
demand-side  flexibility  and  storage  because 
of  disincentives  in  the  grid  fee  structure. 
These  disincentives  include  discounts  for  large 
consumers  with  steady  demand  (i.e. industry). 
Germany has launched a working group to address 
this and created a roadmap for the ramping-up of 
dynamic  tariffs.  Demand  response  and  storage 
can  play  a  part  in  the  provision  of  ancillary 
services and congestion management. Aggregators 
can  enter  Germany’s  day-ahead  and  intraday 
markets. 

Smart  meters  are  crucial  for  demand 
flexibility,  but  Germany’s  roll-out  has  been 
delayed  by  legal  and  bureaucratic  hurdles. 
Germany plans to address this by implementing a 
statutory  timetable  with  binding  targets.  This  will 
enable consumers to use smart metering systems 
more easily already in 2025. 

The  household  retail  energy  market 
is 
market-based  and  features  dynamic-price 
contracts.  In  2023,  99%  of  households  had 
market-based  fixed-price  contracts.  Households 
are  increasingly  becoming  prosumers.  11.9%  of 
households  generate  electricity  via  photovoltaic 
systems (238)  but  only  1%  use  smart  meters. 
942 registered 
were 
functioning  as  citizen  or 
renewable  energy 
communities  in  2023.  The  average  minimum  fee 
to become a member was EUR 545 (239). 

cooperatives 

energy 

In  2023,  electricity  accounted  for  21.7%  of 
final energy consumption (FEC) (below the EU 
average  of  22.9%)  and  this  share  has 
remained 
last 
decade (240),  partly  due  to  an  unfavourable 

largely  stagnant 

in  the 

(238) ACER Market Monitoring report 2023. 
(239) Energy communities repository: Barriers and action drivers for 
the  development  of  different  activities  by  renewable  and 
citizen energy communities. 

(240) The  CAGR  (compound  annual  growth  rate)  was  0.1% 
between  2013  and  2023.  The  minimum/maximum  shares 

70 

ratio 

price 

to  cost-effectively  decarbonise 

electricity-to-gas 
that 
cost-
disincentivizes  electrification  and 
effective  decarbonization.  Electricity  accounts 
for  20.5%  and  33.1%  of  households’  and 
industry’s FEC respectively (see also Annex 7). The 
transport sector’s FEC remains negligible at 2.9%. 
Further progress in electrification across sectors is 
required 
the 
economy  and  bring  the  benefits  of  affordable 
renewable  generation  to  consumers.  In  2024’s 
second  semester,  Germany  had  the  highest 
household  electricity  prices 
in  the  EU,  with 
electricity  costing  3.2  times  more  per  unit  than 
gas. 
retail 
electricity prices were among the highest in the EU 
(€0.21/kWh),  with  an  unfavourable  electricity-to-
gas  price  ratio  of  3.5  (EU  average:  3.3).  These 
price-differentials  between  gas  and  electricity 
discourage electrification. (241) 

For  energy-intensive 

industries, 

Renewables and long-term contracts 

Germany’s legal framework has enabled it to 
significantly  accelerate  renewable  energy 
installations in the past two years, achieving 
record levels of permitting for wind and grid 
projects. Challenges nevertheless remain, such as 
the  need  to  fully  digitalise  the  permit-granting 
process. 

In  2024,  renewable  energy  sources  (RES) 
accounted  for  57.5%  of  the  electricity  mix 
(vs the EU’s overall RES share of 47%)  – an 
increase  on  53%  in  2023 (242).  Germany  had 
about  190  GW  of  renewables (243)  installed  in 
2024, including nearly 100 GW of solar (+16.2 GW 
in 2024), 63.5 GW of onshore wind (+2.5 GW) and 
9.2 GW  of  offshore  wind  (+0.7 GW).  Germany 

were  21.3%  and  22.3%,  respectively.  Source:  Final  energy 
balances, Eurostat. 

(241) Analysis based on Eurostat data for the second semester of 
2024. For household consumers, consumption band is DC for 
electricity and D2 for gas, which refer to medium-sized 
consumers and provide an insight into affordability. For non-
household consumers, consumption band is ID for electricity 
and I4 for gas, referring to large-sized consumers, providing 
an insight into international competitiveness (price used for 
the calculation excludes VAT and other recoverable 
taxes/levies/fees as non-household consumers are usually 
able to recover VAT and some other taxes). 

(242) Yearly electricity data, Ember. 
(243) Bundesnetzagentur (publication date: 8 January 2025). 

 
 
 
 
published  a  schedule  for  significant  auction 
volumes for onshore and offshore wind and solar 
PV  on 
the  Union  Renewable  Development 
Platform (244). 

Graph A8.3: Germany's installed renewable 
capacity (left) and electricity generation mix 
(right) 

“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Ember 

317 power  purchase  agreements 
(PPAs) 
(totalling  15 800 MW)  were  signed  in  2024, 
making  Germany  the  biggest  PPA  market  in 
Europe (together with the Netherlands, Spain 
and the United Kingdom) (245). In 2024, Germany 
was the first Member  State to launch funding via 
carbon  contracts  for  difference  for  SMEs  and 
larger industrial corporations in order to fund and 
drive forward the decarbonisation of industry (246).  

Energy efficiency  

Germany  improved  energy  intensity  in  2023 
and  reduced  energy  consumption.  Primary 
energy  consumption  (PEC)  dropped  by  8.5%  to 
238.4 Mtoe  and  final  energy  consumption  (FEC) 
decreased by 5.0% to 187 Mtoe. FEC decreased in 
all  sectors  compared  with  2022:  by  8.3%  in 
residential,  by  5.6%  in  industry,  by  3.4%  in 
services  and  by  2.4%  in  transport.  The  recast 
Energy  Efficiency  Directive (247)  requires  Germany 
to  reach  a  PEC  of  194.2 Mtoe  and  a  FEC  of 
155.5 Mtoe  by  2030.  To  meet  these  targets, 
Germany  is  implementing  measures  like  a  low-

(244) Member  States  overview  |  Union  Renewable  Development 

Platform. 

(245) European PPA Market Outlook 2024, Pexapark. 
(246) BMWK,  2024,  Carbon  contracts  for  difference  announced, 

bmwk.de. 

fare  public  transport  ticket,  an  updated  building 
efficiency law and carbon neutral data centres. 

to 

steps 

build 
taken 
Germany  has 
infrastructure 
high-efficiency 
for 
cogeneration or efficient district heating and 
cooling  from  waste  heat  and  renewables, 
including  in  the  industrial  sector.  To  address 
heating and cooling, key measures include the Law 
on 
network 
decarbonisation,  along  with  an  updated  building 
efficiency law. Germany has not yet submitted its 
full heating and cooling assessment as required by 
Article  25(1)  of  the  recast  Energy  Efficiency 
Directive (248),  but  it  plans  to  do  so  by  the  end  of 
2025. 

Planning 

Heat 

heat 

and 

target 

reduction 

Germany  would  benefit  from  an  increase  in 
efforts  in  the  residential  sector  to  meet  its 
2030 
energy 
consumption  in  buildings.  Residential  FEC  went 
up  by  3.6%  from  2018  to  2022,  but  2023  data 
indicate  that  it  is  now  back  to  2018  levels. 
However, Germany’s national long-term renovation 
strategy  aims  to  reduce  PEC  in  buildings  by  39% 
between 2018 and 2030.  

for 

Germany has one of the lowest rates of heat 
pumps  per  household.  There  was  a  59% 
increase  in  heat  pump  sales  in  2023,  but  sales 
dropped  back  sharply  in  2024.  Electricity  was  3.4 
times  more  expensive  than  gas  in  2023,  but 
slightly  fell  back 
to  being  3.3 times  more 
expensive  in  the  first  half  of  2024.  This  price 
difference  means  that  heat  pumps  save  energy 
but  do  not  offer  significant  financial  savings. 
However,  Germany’s  updated  Building  Energy  Act 
(Gebäudeenergiegesetz),  which 
requires  new 
buildings to use heating systems that are at least 
65%  powered  by  renewables  from  January  2024 
onward, is expected to increase the uptake of heat 
pumps. 

Germany has a national financing framework 
for energy efficiency that mainly consists of 
grants  and  mixed  schemes. 
It  continued 
implementing  several  key  financial  measures  in 
2024 
(e.g. the  Federal  Subsidy  for  Efficient 
Buildings  and  the  Federal  Funding  for  Efficient 
Heating  Networks).  This  framework  supports 
various  sectors,  including  SMEs.  As  part  of  its 
recovery  and  resilience  plan  (RRP),  Germany  aims 

(247) Energy Efficiency Directive (EU) 2023/1791, eur-lex. 

(248) Energy Efficiency Directive (EU) 2023/1791, eur-lex. 

71 

 
 
 
 
added 

335 000 individual 

to  fully  renovate  at  least  40 000 housing  units 
renovation 
and 
measures  in  2024,  focusing  on  building  energy 
renovation  with  a  budget  of  EUR 6.2 billion. 
Germany  should  maintain  funding  stability  for 
renovation programmes and address the shortage 
of skilled workers. 

2030 represented 0.20% of Germany’s GDP(253) in 
2023,  below  the  EU  weighted  average  of  0.49%. 
Tax  measures  accounted  for  90%  of  this  volume, 
income/price  support  and  direct  grants 
while 
represented  9.5%  and  0.5%, 
respectively. 
Additionally,  Germany’s  Effective  Carbon  Rate 
averaged  EUR 96.85  per  tonne  of  CO₂  above  the 
EU weighted mean of EUR 84.80 (254)(255). 

Security of supply and diversification 

Germany  has  successfully  diversified  away 
from  Russian  gas.  Since  the  end  of  2022, 
pipeline  gas  (from  Belgium,  the  Netherlands  and 
Norway)  and  LNG  (mainly  from  the  US)  by 
regasification 
floating  storage 
commissioning 
units  (FSRUs)  helped  to  replace  the  Russian  gas 
dependence.  The  State-owned  company  Deutsche 
in 
Energy  Terminal  operates 
Brunsbüttel,  Wilhelmshaven  (two  locations)  and 
Stade  (with  a  total  capacity  of  up  to  22 bcm  per 
year). Two other FSRUs are privately run in Mukran 
(with a total capacity of up to 13.5 bcm per year). 
Two more FSRUs are set to become operational in 
2025 in Stade and Wilhelmshaven. 

four  FSRUs 

Despite  progress  in  renewables,  the  overall 
energy mix in 2023 remained heavily reliant 
on  fossil  fuels.  Oil  accounted  for  37%  of  gross 
inland consumption, natural gas for 25% and coal 
for 17% (249). Renewables (and biofuels) accounted 
for  19% (250).  This 
the 
importance  of  Germany’s  ongoing  efforts  in  its 
energy  transition  to  diversify  its  energy  sources 
and strengthen energy security. In 2023, 21.6% of 
gross final  energy consumption in  Germany came 
from  renewable  sources,  up  by  0.75 percentage 
point compared to 2022(251).  

reliance  underscores 

Fossil fuel subsidies 

In  2023,  environmentally  harmful  (252)  fossil  fuel 
subsidies  without  a  planned  phase-out  before 

(249) Electricity  and  heat  are  excluded  to  avoid  double-counting 

focusing on primary energy sources. 
(250) Gross inland consumption (Eurostat). 
(251) Gross final energy consumption (Statistics | Eurostat). 
(252) Direct fossil fuel subsidies that incentivise maintaining or 
increasing in the availability of fossil fuels and/or use of 
fossil fuels. 

(253) Numerator is based on volumes exchanged with the German 
authorities. For all Member States, it includes public R&D 
expenditures for fossil fuels as reported by the IEA (Energy 
Technology RD&D Budgets) and excludes, for methodological 
consistency, excise tax exemption on kerosene consumed in 
intra-EU27 air traffic. 

(254) OECD,2024, Pricing Greenhouse Gas Emissions 2024 

(255) The Effective Carbon Rate is the sum of carbon taxes, ETS 
permit prices and fuel excise taxes, representing the 
aggregate effective carbon rate paid on emissions. 

72 

 
 
 
 
 
 
Table A8.1:  Key Energy Indicators 

Source: Eurostat, ENTSO-E, S&P Platts 

73 

20212022202320242021202220232024Household consumer - Electricity retail price (EUR/KWh)0.3214          0.3317              0.4075              0.3948          0.2314              0.2649          0.2877          0.2879          Energy & supply [%]25.0%39.3%48.9%41.9%36.6%54.3%55.6%47.8%Network costs24.1%24.2%23.0%29.1%26.7%25.3%24.8%27.2%Taxes and levies including VAT50.9%36.5%28.1%29.1%36.7%20.3%19.6%25.0%VAT16.0%15.9%16.0%16.0%14.5%13.4%13.8%14.6%Household consumer - Gas retail price0.0666          0.0857              0.1195              0.1216          0.0684              0.0948          0.1121          0.1128          Energy & supply44.4%55.8%63.2%57.8%43.7%61.0%64.5%53.9%Network costs23.4%17.6%16.6%16.3%22.5%17.3%17.1%18.3%Taxes and levies including VAT32.1%26.6%20.3%25.9%33.8%21.7%18.4%27.8%VAT15.9%12.8%6.5%12.3%15.5%11.6%10.2%13.6%Non-household consumer - Electricity retail price0.1672          0.2039              0.2136              0.2115          0.1242              0.1895          0.1971          0.1661          Energy & supply25.2%52.0%54.6%49.1%43.0%66.5%63.0%55.8%Network costs15.6%13.1%16.2%21.6%15.8%10.7%11.9%15.5%Taxes and levies excluding VAT51.4%22.5%15.8%15.9%30.4%9.9%11.2%15.4%Non-household consumer - Gas retail price0.0336          0.0637              0.0730              0.0596          0.0328              0.0722          0.0672          0.0517          Energy & supply56.8%70.7%72.5%62.9%66.2%77.3%77.3%68.7%Network costs7.8%4.5%5.2%6.6%7.7%3.8%5.3%7.1%Taxes and levies excluding VAT23.2%13.2%16.8%20.0%12.5%6.1%7.3%11.6%Wholesale electrity price (EUR/MWh)96.6234.595.578.6111.0233.299.184.7Dutch TTF (EUR/MWh)n/an/an/an/a46.9123.140.534.420172018201920202021202220232024Gross Electricity Production (GWh)653,723        640,468            606,917            575,462        592,799           578,949        511,881        -Combustible Fuels404,286     385,445         334,214         302,330     332,188        333,345     273,470     -Nuclear76,324       76,005           75,071           64,382       69,130          34,709       7,216         -Hydro26,155       23,863           25,671           25,275       24,972          23,576       25,337       -Wind105,693     109,951         125,894         132,102     114,169        124,816     140,538     -Solar39,401       43,459           44,383           49,496       50,472          61,022       63,576       -Geothermal163             178                197                231             244                206             195             -Other Sources1,701         1,567             1,487             1,646         1,624            1,275         1,549         Gross Electricity Production [%]Combustible Fuels61.8%60.2%55.1%52.5%56.0%57.6%53.4%-Nuclear11.7%11.9%12.4%11.2%11.7%6.0%1.4%-Hydro4.0%3.7%4.2%4.4%4.2%4.1%4.9%-Wind16.2%17.2%20.7%23.0%19.3%21.6%27.5%-Solar6.0%6.8%7.3%8.6%8.5%10.5%12.4%-Geothermal0.0%0.0%0.0%0.0%0.0%0.0%0.0%-Other Sources0.3%0.2%0.2%0.3%0.3%0.2%0.3%-Net Imports of Electricity (GWh)-52,459-48,736-32,667-19,029-18,575-27,2569,225-As a % of electricity available for final consumption -9.9%-9.3%-6.4%-3.9%-3.6%-5.6%2.0%-Electricity Interconnection [%]8.9%10.5%10.9%11.4%11.0%11.5%11.2%10.6%Share of renewable energy consumption - by sector [%]Electricity34.6%37.6%40.6%44.2%44.0%48.0%52.3%-Heating and cooling13.4%14.2%14.5%14.5%15.5%17.4%17.1%-Transport7.0%7.9%7.6%10.0%8.1%10.1%11.9%-Overall15.5%16.7%17.3%19.1%19.3%20.8%21.6%-20202021202220232020202120222023Import Dependency [%] 63.7%63.4%68.6%66.4%57.5%55.5%62.5%58.3%of Solid fossil fuels 44.1%47.8%50.4%49.2%35.8%37.2%45.9%40.8%of Oil and petroleum products 96.5%95.6%96.9%93.7%96.8%91.7%97.8%94.5%of Natural Gas 89.1%90.7%105.9%93.7%83.6%83.6%97.6%90.0%Dependency from Russian Fossil Fuels [%]of Natural Gas 65.2%65.4%29.6%0.0%41.0%40.9%20.7%9.3%of Crude Oil34.0%34.1%25.4%0.3%25.7%25.2%18.4%3.0%of Hard Coal48.1%52.6%30.5%1.9%49.1%47.4%21.5%1.0%2017201820192020202120222023Gas Consumption (in bcm)95.0               94.7                  95.6                  92.9               99.0                  87.2               80.1               Gas Consumption year-on-year change [%]8.1%-0.3%0.9%-2.8%6.5%-11.9%-8.1%Gas Imports - by type (in bcm)118.7             88.3                  94.8                  80.4               84.8                  87.7               71.6               Gas imports - pipeline118.7             88.3                  94.8                  80.4               84.8                  87.7               65.1               Gas imports - LNG0.00.00.00.00.00.06.5Gas Imports - by main source supplier [%]Norway9.4%2.8%2.8%20.5%19.1%31.6%41.4%Netherlands0.0%0.0%0.0%12.7%0.0%0.0%24.7%Belgium0.0%0.0%0.0%0.0%0.0%0.0%20.8%Russia52.3%48.8%48.8%65.2%65.4%29.6%0.0%GermanyEU 
 
      
 
ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

to 

Action  on  climate  change  adaptation  and 
preparedness  in  Germany  is  critical  as  the 
country  faces  mounting  economic  impacts 
from  extreme  weather  events.  The  severe 
floods  in  July  2021  and  heatwaves  in  2022  had 
severe  impacts  on  people,  the  economy  and 
ecosystems.  These  events  highlight  the  urgent 
need 
implement  and  sufficiently  finance 
national  and  sub-national  measures  to  tackle 
climate-related threats. Despite efforts to improve 
water  quality,  only  a  marginal  improvement  has 
been observed, with a significant share of surface 
and  groundwater  bodies  failing  to  meet  good 
chemical status due to pollutants such as nitrates. 
The  concerning  state  of  nature  and  biodiversity 
loss  poses  a  threat  to  ecosystem  services,  which 
are essential for maintaining economic stability in 
sectors such as agriculture and fisheries, requiring 
additional  action.  To  meet  the  2030  target, 
additional efforts are needed in the land use, land-
use change and forestry sector.  

Climate adaptation and preparedness 

Germany is exposed to extreme precipitation, 
large-scale  floods,  heatwaves  and  droughts. 
Climate  risks  have  a  direct  effect  on  Germany’s 
economy and society, as the severe flood events in 
Germany demonstrated in July 2021. These floods 
caused over 180 fatalities and economic losses of 
up  to  around  EUR  33 billion  (256).    Between  1980 
and  2023,  Germany  recorded  104 544  fatalities 
and  EUR 180.4 billion  in  economic  losses  caused 
by  weather  and  climate-related  extreme  events. 
Only  30%  of  the  economic  damages  over  this 
period  were  insured  (257).  The  gap  in  insurance 
coverage is particularly  wide for river and coastal 
floods.  

Climate-change related risks in Germany are 
caused  by  a  mix  of  negative  impacts  from 
heat, droughts and natural disturbances.  The 
impacts  in  Germany  differed  by  region.  Notably, 
less  water  availability  and  lower  ground  water 
levels  have  affected  agricultural  yields  and 
forests,  further  exacerbated  by  bark  beetles  and 

by  an  increasing  number  of  wildfires  in  north-
eastern  Germany.  Between  2006  and  2023,  663 
hectares  burned  in  forest  fires  each  year  on 
average.  This  is  also  reflected  in  the  increased 
impact of droughts on ecosystems. For example, in 
2022,  18%  of  land  in  Germany  was  affected  by 
drought. 
alter 
ecosystems  both  on  land  and  in  the  oceans, 
leading  to  shifts 
in  biodiversity  and  species 
migrating from southern to northern regions (258). 

temperatures 

Rising 

also 

fatalities 

The economic and societal impacts of  higher 
temperatures  and  extreme  weather  events 
due  to  climate  change  are  significant. 
Heatwaves have a significant impact on Germany. 
In  2022,  heatwaves  led  to  approximately  8 200 
(259).  By  mid-century, 
heat-related 
Germany  forecasts  a  high  risk  from  climate 
change  affecting  agriculture,  forests,  fisheries, 
coastal protection, water management and human 
health (260). Existing measures can mitigate but not 
fully  eliminate  this  risk.  Almost  all  sectors  are 
reliant  on  natural  resources  and  ecosystems. 
Sectors  such  as  agriculture,  fisheries  and  forestry 
are  particularly  affected.  In  recent  decades,  dry 
and  hot  periods  have  already  caused  significant 
disruptions  in  power  supply  and  yield  losses  in 
agriculture. The number of hot days above 30°C is 
rising  substantially (261),  despite  wide  fluctuations 
between 
affecting 
vulnerable groups. The impacts of  climate change 
are  expected  to  fundamentally  affect  public 
health, 
in 
Germany,  at  both 
local  and  country-wide 
levels (262). 

infrastructure  and 

disproportionately 

the  economy 

years, 

preparedness 

climate 
National  policy  measures  on 
adaptation 
have 
and 
strengthened  in  recent  years,  but  additional 
level  are  also 
measures  at  municipal 
required. Germany has made significant progress 
in  climate  adaptation  and  has  been  proactive  in 

(258)DAS, 2024, Deutsche Anpassungsstrategie an den 
Klimawandel, p. 19 ff., Link. 

(259)Nature Medicine, 2023, Heat-related mortality in Europe 
during the summer of 2022, Link. 

(260)DAS, 2024, Deutsche Anpassungsstrategie an den 
Klimawandel, Figure 2, Link. 

(256)Bundesministerium des Innern und für Heimat, 2022, 
Abschlussbericht Hochwasserkatastrophe-Final, Link. 

(261)Umweltbundesamt, 2024, Environmental Indicators: Hot 
days, Link. 

(257)EEA, 2024, Economic losses from weather- and climate-
related extremes in Europe, Link. 

(262)Metis Institut für Strategie und Vorausschau, 2025, National 
Interdisciplinary Climate Risk Assessment, Link. 

74 

 
 
 
 
 
 
addressing  climate-related  threats.  The  federal 
government  has  improved  its  risk  and  impact 
assessments.  It  revised  the  national  adaptation 
strategy  in  2024,  which  includes  an  adaptation 
action  plan  outlining  over  180  specific  measures 
instruments.  The  plan  was 
and  around  90 
developed  with 
input  from  a  comprehensive 
climate  impact  and  risk  analysis.  The  strategy 
identifies 33 measurable goals to take precautions 
against  extreme  weather  events  such  as  heat, 
drought, heavy rain and flooding. One of the goals 
identified is to increase the reach of national early 
warning systems (263), as the 2021 floods revealed 
technical gaps. 

Climate adaptation action is implemented at 
sub-national  level.  Municipalities  and  Länder 
have  been  closely  involved  in  the  analysis  and 
development  of  the  strategy.  They  are  obliged  to 
incorporate  climate  adaptation  in  their  urban 
planning  and  to  identify  adaptation  measures  at 
sub-national 
level.  Some  municipalities  have 
already  taken  some  measures,  especially  heat-
related  measures  such  as  drinking  fountains  or 
fresh  air  corridors  and  de-paving  urban  areas. 
However,  the  strategy  relies  heavily  on  active 
participation from the Länder and municipalities to 
achieve 
Key 
challenges  remain  to  close  funding  gaps  and  to 
ensure comprehensive local planning of adaptation 
concepts, particularly in smaller municipalities. 

implementation. 

widespread 

Water resilience 

third 

Water quality in Germany has only improved 
marginally,  and  concerns  remain  for  surface 
water  bodies.  Germany’s 
river  basin 
management  plan  (2022-2027)  under  the  Water 
Framework  Directive  shows  that  the  ecological 
status  and  potential  of  surface  water  bodies  has 
only slightly improved since the second plan, with 
only  9.3%  classified  as  having  good  or  better 
ecological  status/potential.  In  addition,  none  of 
Germany’s  surface  water  bodies  have  a  good 
chemical status, mainly due to substances emitted 
during  fossil  fuel  combustion  and  industrial  use. 
Even with future measures, Germany only expects 
3%  of  its  water  bodies  to  achieve  good  chemical 

status by 2027 and 4% by 2045. The quantitative 
status  of  groundwater  bodies  has  slightly 
deteriorated  since  the  second  plan,  with  95.2% 
reported  to  have  a  good  quantitative  status.  The 
chemical  status  of  groundwater  bodies  has 
improved slightly, with 67.3% classified as having 
a  good  chemical  status.  Diffuse  agricultural 
pollution  is  the  most  significant  form  of  pressure 
on  both  surface  and  groundwater  bodies  with 
nitrates  being  the  worst  pollutant,  causing  failure 
to achieve good chemical status in groundwater.  

At  country  level,  Germany  does  not  face 
water stress, although there are regional and 
seasonal  differences.  The  Water  Exploitation 
Index Plus (WEI+) was 3.6 % in 2022, which is far 
below the 20% generally taken to be an indication 
of  water  scarcity.  Nevertheless,  Germany  has 
experienced  climate-change  induced  water  loss 
from soils and vegetation and record-low levels of 
groundwater  bodies  throughout  different  regions. 
Although  water  abstraction  is  not  identified  as  a 
significant  form  of  pressure,  several  studies 
indicate  emerging  water  scarcity  issues  (264).  This 
should  not  be  underestimated  -  with  almost  half 
of  the  water  used  by  the  manufacturing  sector, 
scarcity  issues  could  have  an  impact  on Germany 
as  an  industry  and  business  location.  A  national 
water  strategy  was  adopted  in  2023  (265)  with 
targets  for  2050,  including  restoring  forests  and 
green  spaces,  and  guidelines  to  regulate  water 
distribution in the event of regional shortages. 

Germany is almost 100% compliant with the 
requirements  of  the  Urban  Wastewater 
Treatment  Directive.  Almost  all  German 
households  are  connected  to  the  public  sewage 
system. A major challenge for the future will be to 
eliminate  micropollutants  in  waste  water,  which 
have  so  far  not  been  taken  into  account. The 
annual  water 
reach  an 
estimated  EUR 19.4  billion  (in  2022  prices)  in 
Germany 
(see  Graph  A9.2).  This  comprises 
investment needs both for the water industry and 
for water protection and management. The current 
level  of  financing  is  around  EUR 15.6  billion, 
leaving  a  gap  of  about  EUR 3.7  billion  per  year 
(0.1%  of  gross  domestic  product),  with  over  half 
related  to  waste  water  (EUR 2.7  billion  per  year). 
Of  the  total  financing, the  EU multiannual  budget 

investment  needs 

(263) DAS, 2024, Deutsche Anpassungsstrategie an den 

Klimawandel, p. 75 ff., Link. 

(264) Heinrich-Böll-Stiftung, 2025, Wasseratlas, Link. 

(265) BMUV, Wasserstrategie, Link. 

75 

 
 
 
of climate change, such as regulating water cycles, 
maintaining soil health and sequestering carbon.  

Nature  degradation  creates  significant  risks 
to  the  economy  and  to  competitiveness  for 
Germany.  Although  overall  Germany  has  a  level 
of  dependency  on  ecosystem  services  below  the 
EU  average,  several  sectors  such  as  agriculture, 
fisheries,  construction  and  water  utilities  (see 
Graph  A9.1)  are  particularly  dependent  on 
ecosystem  services  as  100%  of  the  gross  value 
added  generated  by  these  sectors  is  directly 
dependent on ecosystem services. This means that 
failure  to  maintain  the  capacity  of  ecosystems  to 
deliver  services  could  entail  significant  costs  or 
even  stop  production  in  these  sectors.  Protecting 
and restoring key ecosystems would help maintain 
the long-term competitiveness of these sectors. 

provides  a  very  small  share  (0.4%,  mostly  under 
cohesion  policy),  with  a  similarly  small  share  of 
European Investment Bank financing (0.9%). About 
98.8% of financing for water comes from national 
sources.   

Biodiversity and ecosystems 

land-use 

Despite  Germany’s  strong  commitment  to 
protecting  the  environment  and  biodiversity, 
the  state  of  its  nature  and  ecosystems 
remains a concern and reduces the country’s 
climate and economic resilience. Germany has 
two  main  types  of  ecosystems:  agroecosystems, 
which  cover  50.3%  of  the  country,  and  forest 
ecosystems,  covering  29.9%  (266).  High  livestock 
density, 
intensification  and  climate 
change significantly affect these ecosystems. With 
38.5% of 
land  currently  designated  as 
protected areas (Natura 2000 and other nationally 
designated 
is 
significantly  above  the EU  average  of  26.1%  for 
protected  areas.  Although  not  all  of  these  areas 
are  meeting  the  criteria  for  the  EU  biodiversity 
strategy target to protect 30% of land at EU level 
by  2030,  they  nevertheless  make  a  significant 
contribution  towards  this  target.  With  45.4% of 
marine  waters  protected, Germany also  exceeds 
the EU-27 average of 12.1%. 

areas),  Germany 

protected 

its 

The  overall  conservation  status  of  habitats 
and species improved slightly during the last 
reporting  period  (2013-2018),  but  the  share 
of  habitats  and  species  in  bad  conservation 
status increased. In Germany, 29.7% of habitats 
are  in  a  good  conservation  status,  above  the  EU 
average  of  14.7%.  However,  the  proportion  of 
habitats  in  a  bad  conservation  status  (37.4%),  is 
also  above  the  EU  average  of  35.8%.  25.7 %  of 
protected  species  were  assessed  as  having  good 
conservation status, compared to 24.6 % reported 
under  the  previous  reporting  period.  Nevertheless, 
the  EU  average  is  27.5%  and  the  proportion  of 
species in a bad conservation status is 33.1%, well 
above the EU average of 20.6%. This situation has 
implications  for  Germany’s  climate  resilience,  as 
the loss of biodiversity impairs ecosystems’ ability 
to  provide  services  that  help  mitigate  the  effects 

(266) Statistisches Bundesamt, 2023, Link. 

76 

 
 
Graph A9.1: Direct dependency(1) on ecosystem 
services(2) of the gross value added generated by 
economic sector in 2022 

Graph A9.2: Investment needs and gaps in EUR 
million, in 2022 constant prices 

(1) Dependency based on the sector’s own operations, 
excluding value chain operations within countries and across 
international value chains. A high dependency indicates a high 
potential exposure to nature-related shocks or deteriorating 
trends, which means that the disruption of an ecosystem  
service could cause production failure and severe financial 
loss. 
(2) Ecosystem services are the contributions of ecosystems to 
the benefits that are used in economic and other human 
activity, including provisioning services (e.g. biomass 
provisioning or water supply), regulating and maintenance 
services (e.g. soil quality regulation or pollination), and cultural 
services (e.g. recreational activities). 
Source: Hirschbuehl et al., 2025, The EU economy's 
dependency on nature, Link. 

Germany  requires  EUR 5.67  billion  of  investment 
per  year  to  effectively  protect  and  restore  its 
natural  capital,  mitigate  the  impacts  of  climate 
change and preserve the country's rich biodiversity 
(see Graph A9.2). The current level of financing for 
biodiversity  and  ecosystem  conservation 
in 
Germany is around EUR 5 billion, leaving a gap of 
EUR 638 million. 

Source: European Commission, DG Environment, 
Environmental investment needs & gaps assessment 
programme, 2025 update. 

Sustainable agriculture and land use 

Germany’s carbon removals fall short of the 
level  of  ambition  needed  to  meet  its  2030 
target  for  land  use,  land-use  change  and 
forestry  (LULUCF).  Germany’s  LULUCF  sector 
has  generated  strong  emissions  since  2018,  a 
worrying  trend.  To  meet  its  2030  LULUCF  target, 
additional  carbon  removals  of  -3.8  million  tonnes 
of CO2 equivalent (CO2eq) are needed with respect 
to  the  2016-2018  level  (267).  The  latest  available 
projections indicate a gap of 7.5 million tonnes of 
(268).  Therefore, 
CO2eq 
additional  measures  need  to  be  applied  to  reach 
the  2030  target. The  rewetting  of  peatlands  and 
expansion  of  carbon  farming  practices  such  as 
agroforestry  have  the  potential  to  reverse  the 
trend  of  falling  net  carbon  removals.  Adaptation 
and restoration measures in forests would need to 
be  strengthened  after  forests  became  a  net 

the  2030 

target 

to 

(267) In line with Regulation (EU) 2023/839. 

(268) Climate Action Progress Report 2024, COM/2024/498. 

77 

0%20%40%60%80%100%AgricultureForestryFishery and acquacultureMining and metalsConstructionWater utilitiesHealthcare deliveryAviation travel and tourismFood beverages and tobaccoSupply chain and transportPublic services and othersElectricityChemical and materials industryElectronicsOil and gasReal estateHeat utilitiesAutomotiveRetail consumer goods and…Information technologyBanking and capital marketsInsurance and asset…Digital communicationsHighMediumLow - 5,000 10,000 15,000 20,000 25,000BiodiversityWaterBaselineGap 
   
   
 
emitter in the 2017-2022 period, according to the 
latest Federal Forest Inventory (269).  

German agriculture is a source of greenhouse 
gas  emissions  and  has  a  significant  impact 
on  air,  water  and  soils,  although  a  positive 
trend  can  be  observed.  In  2022,  agriculture 
generated a total of 53 million tonnes of CO2eq, a 
slight decrease since 2018, accounting for around 
8% of the country's total emissions. This includes 
35  million  tonnes  of  CO2eq  from  livestock  (also 
decreasing  since  2018).  The  size  of  utilised 
agricultural area (UAA) in Germany has decreased 
slightly  over  the 
last  decade  from  16 699 
thousand  hectares  in  2013  to  16 585  in  2023. 
This  is  partly  due  to  the  difficult  economic 
situation  faced  by  many  agricultural  holdings.  A 
further  reduction  in  greenhouse  gas  emissions  is 
needed to reach the national target for 2030 laid 
down in the German Climate Protection Law (270).  

An  analysis  of  Germany’s 
river  basin 
management  plan  identified  nutrients  from 
agriculture  as  a  major  form  of  pressure  for 
groundwater/surface  water  affecting  the 
good  status.  This  is  one  of  the  main  factors  for 
not  meeting  the  Water  Framework  Directive’s 
objectives.  According  to  data  from  the  Nitrates 
Directive,  almost  27%  of  groundwater  monitoring 
stations  in  Germany  recorded  average  nitrate 
concentrations  above  50 mg/l  between  2016  and 
2019, exceeding the healthy threshold for human 
consumption. However, the gross nitrogen balance 
on agricultural land in Germany is improving, with 
38.8 kg  of  nitrogen  per  hectare  per  year in  2021, 
almost  18 kg  less  than  in  the  previous  year. 
Although  the  livestock  density  index  was  0.98  in 
2020, which is above the EU average of 0.75 (on a 
downward  trend),  ammonia  emissions  have  been 
on a downward trend during the last decade from 
537 000  tonnes  in  2012  to  411 000  tonnes  in 
2022. In 2021, pesticides were detected in 27% of 
surface  water  bodies,  close  to  the  EU  average  of 
29%.   

carbon 

Germany 

integrated 

had  landscape  features  such  as  woods  and  non-
productive  grasslands,  slightly  below  the  EU 
average  of  5.6%.  Organic  farming,  which  reduces 
the  use  of  synthetic  fertilisers  and  pesticides, 
made  up  almost  9.8%  of  Germany’s  agricultural 
land  in  2022,  a  more  than  70%  increase  since 
2012,  but  still  below  the  EU  average.  Still, 
Germany  has  the  ambitious  objective  to  reach 
30%  of  UAA  under  organic  farming  by  2030. 
(CAP) 
Germany’s  common  agricultural  policy 
strategic plan allocates approximately 30% (271) of 
its  budget  to  measures  that  tackle  environmental 
and  climate-related  challenges.  As  agricultural 
emissions  mainly  stem  from  soil  and  manure 
management, 
several 
measures  in  its  CAP  strategic  plan  to  protect  soil 
content.  This 
organic  matter  and 
contributes  to  climate  change  mitigation  and 
should  improve  water  quality  and  biodiversity. 
Over 40% of UAA in Germany is set to receive CAP 
support  for  biodiversity  conservation,  such  as 
measures  to  maintain  landscape  features  or  set 
aside  non-productive  areas  on  arable  land.  In 
addition,  around  30%  of  UAA  is  to  be  put  under 
commitments for improvement of the soil quality, 
for example by including leguminous crops in crop 
rotation,  and  to  improve  the  quality  of  water 
bodies  by  reducing  the  use  of  fertilisers  and 
pesticides.  This  includes  CAP  support  for  organic 
farming.  The  CAP  strategic  plan  also  supports 
investment  in,  for  example,  the  restoration  of 
habitats,  sustainable  management  of  water 
resources,  and  flood  and  coastal  protection.  The 
bioeconomy,  encompassing  the  production  and 
processing  of  biological  products,  contributed 
EUR 135  billion  of  added  value  to  the  country's 
gross  domestic  product  in  2021  (272).  Agriculture 
generated EUR 23.9 billion, while the food industry 
generated EUR 44.4 billion.  

Germany  is  transitioning  to  a  sustainable 
food  system  by  implementing  policies  to 
reduce 
of 
environmental 
agriculture. In 2022, 5.4% of its agricultural land 

impact 

the 

(269) Bundesministerium für Ernährung und Landwirtschaft, 2024, 

(271) At a glance: Germany’s CAP strategic plan; p. 7, Link. 

Vierte Bundeswaldinventur 2022, Link. 

(272) European Commission, 2023, EU Bioeconomy Monitoring 

(270) Bundes-Klimaschutzgesetz, Link. 

System dashboards, Link. 

78 

 
 
 
Table A9.1:  Key indicators on progress on climate adaptation, preparedness and environment 

(1)  The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System. 
(2) Scale: 0 (no protection gap) – 4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes. 
(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented 
warming demands unprecedented action, The Lancet Public Health. 
(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given 
territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than 
40% indicate situations of severe water scarcity. 
(5) European Commission, 2024, 7th Implementation Report from the Commission to the Council and the European Parliament on 
the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third River Basin 
Management Plans and Second Flood Risk Management Plans). 
(6) For this indicator, the EU average includes figures for the UK under the previous configuration, EU-28. 
(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards. 
(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources 
(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO3/L to avoid threats to human health. 
(9) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2024 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 – Annex IIa. 
Source: Eurostat, EEA. 

79 

Climate adaptation and preparedness:20182019202020212022202320182021Drought impact on ecosystems19.9517.7215.480.118.170.236.772.76[area impacted by drought as % of total]Forest-fire burnt area (1)663                    663              663           663           663          663          [ha, annual average 2006-2023]Economic losses from extreme events10 145              8 247           1 607        38 744      11 014     2 163       24 142       62 981       [EUR million at constant 2022 prices]Insurance protection gap (2)----1.38         1.38         [composite score between 0 and 4]Heat-related mortality (3)67                      67                67             67             67            [number of deaths per 100 000 inhabitants in 2013-2022]Sub-national climate adaptation action24                      24                24             24             24            24            4144[% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:20182019202020212022202320182021Water Exploitation Index Plus, WEI+ (4)4.24.03.23.03.6-4.54.5[total water consumption as % of renewable freshwater resources]Water consumption5 476                 5 342           4 511        4 892        4 738       -           [million m3]Ecological/quantitative status of water bodies (5)[% of water bodies failing to achieve good status]Surface water bodies---89%---59%Groundwater bodies---5%---93%Biodiversity and ecosystems:20182019202020212022202320182021Conservation status of habitats (6)29.7-----14.7-[% of habitats having a good conservation status]Common farmland bird index------72.274.42000=100Protected areas---3739--26[% of protected land areas]Sustainable agriculture and land use:20182019202020212022202320182021Bioeconomy's added value (7)112 545            122 719       120 749    132 071    634 378     716 124     [EUR million]Landscape features----5              -[% of agricultural land covered with landscape features]Food waste--131131129-[kg per capita]Area under organic farming7.37.89.69.79.87.99-[% of total UAA]Nitrogen balance77.953.456.238.8--[kg of nitrogen per ha of UAA]Nitrates in groundwater (8)27.126.425.024.2--[mgNO3/l]Net greenhouse gas removals from LULUCF (9)760                    2 462-           5 798        2 622        4 382       -           256 077-     240 984-     [Kt CO2-eq]GermanyEU-27GermanyEU-27GermanyEU-27GermanyEU-27 
 
  
 
FAIRNESS 
ANNEX 10: LABOUR MARKET 

labour 

growth 

demand 
and 

transformation  may 

flattened 
Weakening 
employment 
increased 
unemployment  as  the  German  economy 
continued  contracting.  The  deterioration  of  the 
labour  market  is  expected  to  be  contained  as 
economic growth resumes and ageing continues to 
weigh  on  labour  supply.  At  the  same  time, 
structural 
to  an 
increased  need  for  changing  jobs.  Better  tapping 
the  unused  labour  market  potential  of  some 
groups,  including  of  second  earners,  a  substantial 
number  of  whom  are  women,  people  with  a 
migrant  background  and  people  with  low-level 
qualifications  is  key  to  reducing  the  negative 
impact  of  severe  labour  and  skills  shortages  to 
growth,  competitiveness  and  innovation  and  meet 
the skilled labour demand linked to the green and 
digital transition. 

lead 

Graph A10.1: Key labour market indicators (2024) 

Source: Eurostat, LFS [lfsi_emp_a, une_rt_a, edat_lfse_20, 
une_ltu_a] 

The  labour  market  remains  resilient,  despite 
a  challenging  economic  context,  with  high 
levels  of  tightness  and  declining  hours 
worked  per  capita.  Even  as  the  economy 
stagnated,  81.3%  of  the  of  the  population  (age 
group  20-64)  was  employed  in  2024,  showing 
good  progress  being  made  towards  achieving  the 
83%  national 
for  2030.  The 
unemployment  rate  increased  by  0.3  percentage 
points (pps) on an annual basis, but remained well 

target 

set 

below the EU average (3.4% vs EU: 5.9% in 2024). 
Furthermore,  both  youth  unemployment  and  the 
share  of  young  people  aged  15-29  not 
in 
(NEET) 
education  or 
employment, 
remained  well  below  the  respective  EU  averages 
(6.6%  vs  EU:  14.9%  and  8.5%  vs  EU:  11%  in 
2024).  The resilience of the labour market reflects 
in  manufacturing 
that  even 
industries has declined, it continued to increase in 
public services, education and health.  

if  employment 

training 

investment 

competitiveness, 

Persistent  labour  shortages  pose  challenges 
for 
and 
innovation, weighing on prosperity and social 
systems.  After  having  increased  between  2011 
and  2022,  the  number  of  open  job  positions 
decreased  by  29%  since    2022.  Around  one  third 
of  companies  reported  being  affected  by  labour 
shortages  in  Q4  2024  compared  to  39%  in 
2023 (273). At the same time, the job vacancy rate 
still remains relatively high (3.2% in Q4-2024) and 
above  the  EU  average  (2.3%),  although  it  has 
In 
declined  to  below  its  pre-pandemic 
particular,  shortages  are  reported  in  construction, 
information  and  communication  activities  and 
professional,  scientific  and  technical  activities. 
the 
data, 
According 
the  country 
occupations  most 
ICT 
(January 
professionals, 
and 
researchers and engineers. Moreover, the share of 
employers expecting labour shortages to limit their 
production was at or above the EU average across 
sectors in the Q4-2024. Specifically, it was above 
the  EU  average  in  industry  (19.9%)  and  the 
services sector (38.2%). 

CEDEFOP-EURES 
in 
requested 

to  September  2024)  were 

professionals, 

office 

level. 

to 

to 

tackle 

Population  ageing  will  further  reduce  labour 
supply  and  points  to  the  need  for  further 
measures 
labour  shortages, 
including  through  attracting  skilled  third-
country  nationals.  According  to  the  Ageing 
Report  2024  (274),  the  age  group  20-64  years  is 
projected  to  shrink  by  approximately  2.3  million 
between  2024  and  2030  (approximately  5.7 
million until 2070). The low number of children per 
parents, which has remained stable since the mid-
1970s, and the rapid ageing of society have been 

(273) KfW, 2024, KfW-ifo Skilled Labour Barometer, 

www.kfw.dewww.kfw.de. 

(274) European Commission, Ageing Report 2024. 

80 

747576777879808101234567891020142015201620172018201920202021202220232024%%DEActivity rate 15-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-29 (lhs) 
 
 
   
 
 
 
somewhat counterbalanced by immigration so far. 
The Skilled Immigration Act, from 2023, intends to 
attract  more  skilled  workers  from  third  countries. 
From  the  third-country  nationals  who  entered 
Germany 
in  2023,  72 400  persons  received 
residence  titles  for  employment  purposes  (a 
decrease  of  0.9%  over  a  year),  of  which  56.3% 
were 
skilled  professionals  with 
recognised  qualifications.  58 775  third-country 
nationals received a visa on educational grounds (-
2.7% compared to 2022) (275). 

considered 

jobs may even strengthen the part-time work trap 
for  second  earners (277).  A  reform  of  tax-classes 
which could possibly improve work incentives, was 
put  forward  by  the  governmental  coalition  in  the 
2024 Growth Initiative. 

Graph A10.2: Part-time employment by sex (ages 
20-64, 2023) 

In  light  of  persistent  shortages,  creating 
stronger  incentives  to  increase  the  number 
of  hours  worked, 
including  for  second 
earners,  remains  crucial.  Germany  has  one  of 
the  highest  female  employment  rates  in  the  EU 
(77.6%  in  2024  vs  70.8%).  However,  due  to  a 
large  share  of  women  working  part-time,  it  has 
one  of  the  highest  gender  gaps  in  part-time 
employment  (37.6 pps  in  2024  vs  EU  20.2 pps).  
The  gender  working  time  gap  is  about  7.5  hours, 
having  declined  from  10  hours  in  2010.  The 
interplay  between  the  tax  and  benefits  system 
creates  disincentives  for  second  and  low-wage 
earners  –  a  considerable  number  of  whom  are 
women  -  to  work  more  hours.  Although  the  tax 
wedge  (the  taxation  of  earnings  from  labour)  on 
labour for low-income workers in Germany is now 
1.4 pps  below  its  2018  level,  it  increased  from 
43.5%  in 2023 to 43.9% in 2024, and it remains 
for  OECD 
considerably  above 
countries (31.0%). For second earners, the benefits 
of lower taxes through joint taxation at the cost of 
increased  second  earners’  marginal  tax  rates  is  a 
strong disincentive for second earners to increase 
the hours worked (see also Annex 13 on taxation). 
To tap  into the labour market  potential of second 
earners,  the  government  introduced  the  ‘midi-
jobs’ (276),with  progressivity  in  increasing  social 
incomes.  However,  this 
contributions  for 
reform  did  not  create  substantial 
incentives 
among  this  group  to  work  more  hours.  Research 
showed that the redistribution effects of the midi-

the  average 

low 

Source: Eurostat, LFS [lfsa_eppga] 

Better provision of quality childcare and all-
day  schools  could  also  strengthen  the 
incentives  for  women  to  work  more  hours. 
The share of women working part-time due to care 
responsibilities  was  among  the  highest  in  the  EU 
at  24.6%  (vs  EU:  21.2%).  This  is  at  least  partly 
driven  by  insufficient  childcare  provision,  with  the 
share  of  under  3-year-olds  in  formal  childcare 
remaining  relatively  stable  for  years,  at  around 
30%  with  substantial  regional  differences  and 
below  the  Barcelona  targets (278).  In  2023,  95.3% 
of children between 3 and compulsory school age 
attended  early  childhood  education  and  care 
(ECEC), close to the EU average (94.6%) but below 
the  EU-level  target  of  96%.  Despite  further 
expanding ECEC, Germany faces significant unmet 
demand for childcare, which negatively affects the 
possibilities for women with caring responsibilities 
to increase their labour market outcomes. 

(275) Federal Ministry of Interior and Federal Office for Migration 
and Refugees, 2023, Migration Report of the Federal 
Government, bamf.de. 

(276) The transitional area, known as midi-job, begins with a 

regular monthly salary above the marginal income threshold 
and ends at EUR 2 000 per month. Over the course of the 
adjustment of the minimum wage and thus the marginal 
income threshold, a midi-job was starting at EUR 538.01 
from 1 January 2024 and at EUR 556.01 from 
1 January 2025. 

Germany  has  a  substantial  untapped  labour 
market  potential  including  people  with  a 
lower-level 
migrant 
qualifications.  Despite  the  low  unemployment 
rate, there is still a substantial number of unused 
labour.  In  2024,  an  average  of  around  4  million 

background 

and 

(277) DIW, Wochenbericht 2023, Midijob-Reform, www.diw.de. 

(278) Education and Training Monitor 2024. 

81 

17.17.727.928.511.14801020304050TotalMalesFemales%DEEUDE 
 
   
 
 
citizens, 

third-country 

employable  and  around  1.5  million  non-
employable people in Germany received the social 
assistance 'citizen’s income’ (Bürgergeld), rising for 
the second year in a row and reaching the highest 
level  since  2018 (279).  A  substantial  part  of  this 
including 
group  are 
Ukrainian  citizens,  with  lower  skill  levels  including 
German  language  being  an  obstacle  to  their 
integration  into  the  labour  market.  The  share  of 
employed  Ukrainian  citizens  was  around  32%  in 
February  2025  (280).  In  general,  people  born 
outside  of  the  EU  had  a  low  employment  rate, 
especially women (68.3% and 58.4%, respectively, 
in  2024).  Adults  with  lower-level  qualifications 
also  have  a  much  lower  employment  rate  than 
those with mid- or high-level qualifications (66.5% 
vs  82.1%  and  87.9%,  respectively,  in  2024). 
Women  with  lower-level  qualifications  have  a 
particularly low employment rate (58.6% vs 73.9% 
for men, in 2024). For people born outside the EU 
and with lower-level qualifications, the situation is 
much  more  difficult  for  women,  who  had  a  very 
low  employment  rate  of  47.5%,  than  for  men 
(72.8%) in 2024. However, this was also the case 
for  non-EU  born  women  with  high-level 
qualifications (63.4% vs 80.8% for men in 2024). 
To increase incentives to take up a job, the federal 
government was planning a reform of the citizens 
benefits  system  by  introducing  stricter  sanctions. 
An action plan for the labour market integration of 
refugees  ("Job-Turbo")  was  launched in  fall  2023, 
focusing  on  transitions  to  jobs.  Although  the 
disability  employment  gap  has  decreased  from 
24 pps in 2022 to 22.6 pps in 2023, it still stands 
around the EU average of 21.5 pps.  

in 

automotive 

impacted several important economic sectors such 
energy-intensive 
industries, 
as 
chemical  productions,  construction,  and  retail, 
resulting in job losses (including of well-paid jobs) 
and reduced levels of hiring (282). In 2024 the use 
of  cyclical  short-time  work  continued  to  increase 
sector (283). 
mainly 
the  manufacturing 
Meanwhile,  labour  shortages  were  still  affecting 
sectors  key  for  the  green  transition,  such  as 
construction,  water  supply,  sewerage,  waste 
management  and  energy,  showing  shifting  needs 
and  the  potential  for  the  green  sector  (see  graph 
A8.3).  The  ongoing  structural  changes  in  the 
economy  call  for  a  forward-looking  policy  to 
upskill  and  reskill  workers  facing  job  transitions. 
Reallocation  of  employees 
from  emission-
intensive to green-driven jobs requires significantly 
more  investment  in  retraining  programmes  for 
people  with  lower  levels  of  skills  than  for  high-
skilled  people,  underlining  the 
importance  of 
keeping upskilling and reskilling opportunities well-
targeted,  especially  in  the  rapidly  transforming 
sectors (284).  Germany  addresses 
the  green 
transition  through  many  measures.  The  social 
assistance  citizen’s  benefit  (Bürgergeld)  provides, 
for  example,  an  additional  continuing  education 
and 
to 
training  benefitand  other  benefits 
incentivise  upskilling.  Transfer  companies  offer 
assistance  with  job  searches  and  skill  training 
during  mass  layoffs  while  compensating  workers 
for 
losses  through  public  funds  and 
employer contributions. 

income 

restructuring,  declining 
Labour  market 
economic activity in some sectors as well as 
the  green  transition  requires  the  rapid 
reactivation  of  the  work  force  in  case  of 
layoffs.  According  to  the  OECD  (281),  around 
21.1%  of  the  labour  force  in  Germany  works  in 
green-driven jobs. However, of the existing green-
driven jobs, only 14% are genuinely ‘green new or 
emerging occupations’, while 4.7% of employment 
is  still  found  in  energy-intensive  industries  in 
2023.  Structural  transformations  have  negatively 

(279) Grundsicherung - Statistik der Bundesagentur für Arbeit 

(282) IW Köln, 2024, Handwerk: Jede zweite Stelle bleibt 

(280) Arbeitsmarkt kompakt - Auswirkungen der Fluchtmigration 

aus der Ukraine auf den Arbeitsmarkt und die Grundsicherung 
für Arbeitsuchende 

unbesetzt, www.iwkoeln.de. 

(283) IAB, 2024, IAB-Forschungsbericht, No. 5/2024, 

www.iwkoeln.de. 

(281) OECD, 2024, Employment outlook 2024 - Country Notes: 

(284) OECD, 2024, Employment outlook 2024 - Country Notes: 

Germany, oecd.org. 

Germany, oecd.org. 

82 

 
 
 
Real  wages  have 
just  returned  to  the  pre-
pandemic  level,  while  the  minimum  wage  has 
shown  sizeable  increases.  After  having  lagged 
inflation  as  the  energy  price  shock  hit,  real  wage 
growth  returned  from  2023,  and  real  wages 
reached  their  pre-pandemic  level  by  end  2024.   
The  statutory  minimum  wage  increased  by  just 
over  30%  between  January  2022  and  January 
2025,  corresponding  to  an  increase  of  more  than 
12% in real terms. This, along with the widespread 
including  the  the 
use  of  one-off  payments, 
government’s 
scheme 
bonus 
(Inflationsausgleichsprämie) which had a ceiling of 
EUR  3 000  per  employee,  contributed  to  above-
average increases of lower wages, and a reduction 
of the share of low-wage earners.  

inflation 

an 

platform 

retraining  and  further 

Germany’s recovery and resilience plan (RRP) 
and  the  European  Social  Fund  Plus  (ESF+) 
provide  comprehensive  support  to  increase 
employability.  The  German  RRP  addresses, 
among  other  things,  the  digital  transformation, 
especially  that  of  education,  and  digital  skills  by 
establishing 
and 
education 
educational  centres  of  excellence  focusing  on 
creating  the  necessary  infrastructure  for  digital 
content  and 
training. 
Investment in digital infrastructure supports digital 
transformation, higher growth and better jobs. The 
ESF+  measures  complement  the  German  RRP  in 
these  areas.  The  German  ESF+  programmes 
resilient 
to  a  green,  digital  and 
contribute 
transformation of the economy while: i) supporting 
sustainable  and  quality  employment  (EUR 1.9 
billion); 
ii) increasing  competences  and  skills 
(EUR 2.2 billion); and iii) promoting social inclusion 
(EUR 2.2 billion) in line with the European Pillar of 
Social  Rights  and  its  action  plan.  Active  labour 
market  and 
inclusion  measures  are  strongly 
focused on disadvantaged groups. 

Graph A10.3: Labour shortages in key sectors for 
the green transition in Germany and the EU (Q4-
2024) 

Source: Eurostat, LFS [jvs_q_nace2] 

The  shortage  of  skilled  labour  especially  in 
the  highly  innovative  and  competitive  ICT 
and AI sectors needs to be addressed to help 
in  the  digital  transition.  Businesses  in  the 
digital  sector  experience  difficulties  in  finding 
workers with the right skillset. Compared to its aim 
of  reaching  80%  of  adults  (16-74  years  old) 
possessing at least basic digital skills, the country 
only  improved  marginally  between  2021  and 
2023, from 48.9% to 52.2% and is still below the 
EU  average  of  55.6%.  In  particular,  young  people 
and people born outside the EU have relatively low 
levels  of  basic digital  skills.  A  very  large  share  of 
companies, one of the highest in the EU, also had 
issues  finding  ICT  workers  in  2024  (72.4%  vs  EU 
57.5% (285)).  Meanwhile, there is also a low share 
of students enrolled in ICT studies (see Annex 10). 
improving 
Any 
productivity  could  therefore  be  limited  by  the 
underused  potential  of  the  digital  transition  to 
transform  work. 
reducing 
bureaucratic  burdens  for  skilled  third-country 
citizens enabling their employment in the IT sector, 
to  step-up 
took  measures 
the  government 
investment 
in 
education, 
in 
mathematics,  informatics,  natural  sciences  and 
technology  subjects, 
increasing  adult-learning 
support and improving work condition incentives in 
the IT sector. 

further  progress  made 

Together  with 

especially 

in 

(285) Eurostat, DESI [isoc_ske_itrcrs] share of companies of more 
than 10 workers looking to recruit ICT workers experiencing 
difficulties in filling those positions. 

83 

1.7%1.7%1.5%2.9%2.2%2.0%3.0%2.2%4.3%3.5%0.0%1.0%2.0%3.0%4.0%5.0%ManufacturingElectricity, gas, steam and airconditioning supplyWater supply, sewerage, wastemanagement and remediation…ConstructionTransportation and storageDEEU 
   
 
ANNEX 11: SOCIAL POLICIES 

Germany  has  a  strong  social  protection 
system  but  faces  considerable  challenges 
related  to  poverty,  wealth  inequality  and 
housing  that  have  been  worsening  over  the 
past  five  years.  The  country  is  facing  risks  of 
poverty  or  social  exclusion,  a  challenging  housing 
market as well as high levels of wealth inequality. 
Among  the  contributing  factors  are  the  gradual 
recovery  in  real  wages,  the  high  tax  burden  on 
labour  especially  compared  to  other  tax  sources, 
the rising cost of living especially for housing and 
energy,  and  migration-related  challenges.  There 
have  been  noteworthy  reforms  to  improve  social 
conditions.  Other  reforms,  for  example  the  law 
that  establishes  the  compliance  with  collective 
agreements  in  federal  public  procurement  are 
planned  or  are  still  in  the  early  planning  stages. 
Furthermore,  Germany 
the 
European  Child  Guarantee  through  its  National 
Action  Plan  “New  Opportunities  for  Children  in 
Germany” (NAP). 

implementing 

is 

Graph A11.1: At-risk-of poverty or social exclusion 
rate for Germany and its components 

Source: Eurostat, EU-SILC [ilc_peps01n, ilc_li02, ilc_mdsd11, 
ilc_lvhl11n], break in series for 2020 

Despite the positive impact of social benefits 
on  poverty 
reduction,  persistent  social 
exclusion risks point to significant challenges 
for  the  German  social  protection  system.  In 
2024,  the  share  of  people  at  risk  of  poverty  or 
social  exclusion  (AROPE)  was  at  21.1%,  down 
slightly  from  21.3%  in  2023,  close  to  the  EU 

the  at-risk-of-poverty 

average  (21%).  The  share  of  people  with  an 
income  under 
(AROP) 
threshold  decreased  in  2023,  notably  coinciding 
with  the  introduction  of  the  'citizens’  benefit 
(Bürgergeld),  before  rising  to  15.5%  in  2024.  The 
Bürgergeld  reform  aimed  at  simplifying  and 
streamlining the welfare system, providing a more 
comprehensive  and  inclusive  support  network  for 
those  in  need.  The  share  of  people  who  are 
severely materially or socially deprived (i.e. without 
access  to  the  minimum  necessary  or  desirable 
items  to  lead  an  adequate  life)  was  at  6.2%  in 
2024, down from 6.9% in 2023. The indicator shot 
up  from  4.4%  in  2020  to  above  6%  in  2022, 
driven  by  the  soaring  cost  of  living,  especially 
energy  and  transport,  which  are  linked  to  the 
economic  and  inflationary  effects  of  the  Russian 
war  of  aggression  against  Ukraine.  The  rapidly 
increasing  housing  overburden  costs  since  2020 
also created considerable material poverty risks.  

The number of people living in (quasi-)jobless 
households  is  particularly  high,  partly  linked 
to  the  decreasing  average  number  of  hours 
worked.  While  Germany  set  a  2030  poverty 
reduction target of reducing the number of people 
under  65  living  in  (quasi-)jobless  households  by 
1.2  million  compared  to  its  2020  level,  their 
numbers  actually  grew  by  1.158  million  in  2024, 
to a total of 6.161 million (286). In relative terms, in 
2024,  9.8%  of  the  population  under  65  was 
therefore living in a household with very low work 
intensity.  This  figure  is  significantly  above  the  EU 
average  (7.9%)  and  has  been  on  the  rise  since 
2020 when it was 8.3%. The percentage of women 
working part-time due to care responsibilities was 
at  29.9%  in  2024,  higher  than  the  EU  average 
(26.4%), compared with 8.5% for men (EU: 6.4%). 
Germany  also  has  one  of  the  highest  shares  of 
non-EU-born  adults 
low  work 
living 
intensity households (19.5% vs 13.6% for the EU). 
Countering  the  rise  in  very  low  work  intensity 
households 
employment-
oriented measures but also decreasing the existing 
fiscal disincentives for low-earners and secondary 
wage earners to work more hours (see Annex 13). 

boosting 

in  very 

requires 

(286) Although not set in the AROPE indicator used for the EU 

2030 target, Germany’s target in terms of decreasing very 
low work intensity households is expected to have an 
equivalent impact on the AROPE rate. 

84 

051015202520202021202220232024% of populationAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material and social deprivationPeople living in low work intensity households 
 
   
 
 
 
The risk of poverty among children decreased 
slightly.  After  peaking  at  24.4%  in  2022,  the 
AROPE rate for children fell back to 23.9% in 2023 
(EU  average:  24.8%)  and  22.9%  in  2024  (EU: 
24.2%),  slightly  below  its level  in  2020.  However, 
the number of children at risk of poverty or social 
exclusion  grew  by  78 000  since  2020,  to  3.222 
million  in  2024.  This  is  also  the  case  for  the 
number of children living in very low work intensity 
households, which grew by 152 000 since 2020 to 
1.475  million  in  2024.  In  order  to  mitigate  the 
impact  of  poverty  on  children,  Germany 
is 
implementing the European Child Guarantee (ECG) 
as part of its 2023 action plan. Measures taken in 
line  with  the  ECG  could,  among  other  things, 
counteract  Germany's  severe  lack  of  childcare 
availability  (306 000  to  430 000  places  missing 
for  under  3-year-olds)  (287)  and  improve  the 
inclusivity  of  the  education  system,  as  the 
educational outcomes of pupils are strongly linked 
to  the  income  level  of  their  parents  (see  Annex 
10).  The  German  recovery  and  resilience  plan  is 
dedicating  EUR 500  million  to  creating  additional 
childcare places by building new childcare facilities 
and refurbishing old ones. 

Graph A11.2: Risk of poverty or social exclusion in 
different age groups 

Source: Eurostat, EU-SILC [ilc_peps01n], break in series for 
2020 

Poverty  risks  are  mitigated  by  social 
benefits,  but  many  workers  are  not 
sufficiently  protected  despite  the  recent 

(287)IW (2024), 306.000 Betreuungsplätze für unter Dreijährige 
fehlen. IW Report 40/2024. Bertelsmann, 2023, Mehr Plätze und 
bessere Qualität in Kitas bis 2030, bertelsmann.de 

85 

increase  in  the  minimum  wage.  The  impact  of 
social  benefits  (excluding  pensions)  on  reducing 
poverty is  above average in the EU  (35.7% vs EU 
34.4%) but decreased sharply from 2023 when it 
was  41.7%.  The  considerable  increases  in  the 
minimum  wage  since  2022  do  not  fully  shield  all 
workers  from  poverty,  as  6.5%  of  them  were  at 
risk of poverty in 2024 (EU: 8.2%), rising to 14.2% 
for  workers  with  a  low  level  of  education  (EU: 
17.4%)  and  14.8%  for  single  parents  with 
dependent 
(EU:  18.9%).  Collective 
bargaining  coverage  stands  at  49%,  overall 
continuing a decline by 25 percentage points (pps) 
since 1998. 

children 

Some  specific  groups,  migrants  especially, 
but  also  persons  with  disabilities  and  the 
elderly,  face  greater  social  challenges.  In 
2024, people over 18 years old born outside of the 
EU  had  an  AROPE  rate  of  39.6%  (EU:  38.2%), 
compared  to  17%  for  people  born  in  Germany, 
producing  a  gap  above  the  EU  average  (22.6  pps 
vs  20.2 pps  for  the  EU).  In  that  same  year,  there 
were  around  10.5  million  non-EU-born  people 
residing  in  Germany.  A  considerable  proportion  of 
those  are  fleeing  wars  and  hardship  and  follow  a 
difficult path to integration, including an estimated 
one  million  Ukrainians  fleeing  the  Russian  war  of 
aggression  since  2022,  and  around  800 000 
Syrians  who  have  been  granted  refugee  status 
since  2015.  Other  specific  populations  at  risk 
include individuals above the age of 65, for whom 
the  risk  of  poverty  or  social  exclusion  was  21.2% 
in  2024,  and  higher  among  women  (23.1%  vs 
18.7%  for  men).  Nearly  700 000  pensioners  are 
dependent on social assistance due to low pension 
(288).  39.5%  of  persons  with  severe 
rights 
disabilities  were  at  risk  of  poverty  or  social 
exclusion  in  2023,  higher  than  the  EU  average 
(35.6%) and on the rise since 2021 (31%). This is 
a  gap  of  18.3 pps  compared  to  persons  without 
disabilities.  

is 

impacted  by  wealth 
Social  fairness 
inequality, where there is potential for fiscal 
revenues.  Income  inequality  as measured by the 
S80/S20 ratio (289) was 4.49,  slightly below the EU 
average  (4.66).  In  terms  of  wealth  inequality, 
Germany  had  one  of  the  highest  Gini  coefficients 

(288) Destatis, April 2024. 

(289) The ratio of total equivalised disposable income received by 
the 20% of the country’s population with the highest income 
to that received by the 20% with the lowest income. 

18192021222324252620202021202220232024% of populationChildren (<18y)Working age (18-64)Elderly (65+)Total 
   
 
 
benefits rather than being tailored to energy-poor 
households. 

their 

total 

Even 

(EU:  8.9%)  and  33.3% 

Housing  costs  overburden  has 
increased 
significantly  over  time.  In  2024,  12%  of  the 
population  was  living  in  households  with  housing 
costs  above  40%  of 
income, 
significantly above the EU average of 8.2%. Some 
groups,  such  as  older  people  and  the  lowest 
income  quintile,  were  particularly  affected  at 
15.3% 
(EU:  27.8%) 
respectively. 
among  medium-income 
individuals the percentage was significantly higher 
than  the  EU  average  (7.2%  vs  3.3%).  Housing-
induced  poverty  was  a  major  poverty  and  social 
exclusion  risk  in  Germany  in  2024,  as  37.5%  of 
people  who  were  at  risk  of  poverty  were  also 
experiencing housing cost overburden (EU: 31.1%). 
Additionally,  5.0%  of  individuals  faced  arrears  on 
utility  bills,  a  1.3  pp.  increase  compared  to  2021, 
although  still  below  the  EU  average  of  6.9%.  The 
Housing Benefit Plus Act, which entered into force 
in  2023,  increased  the  number  of  households 
receiving  housing  benefits  by  80%  from  the 
previous  year,  to  around  1.2  million  people,  while 
also  increasing  the  benefits  available,  from  an 
average  of  EUR 191  per  household  in  2022  to 
EUR 297 in 2023.  

Graph A11.3: Housing cost overburden in different 
population groups (2023) 

Source: Eurostat, LFS [ilc_lvho07a, ilc_lvho07b] 

The limited supply of affordable housing and 
the decline in social housing stock are major 
challenges  for  poverty  and  social  risks.  By 
early  2023,  the  estimated  housing  shortage  had 

in  the  euro  area  at  0.77  in  Q2-2024  (euro  area: 
0.68),  although  due  in  a  large  part  to  a  lower-
than-average  level  of  home  ownership.  52.4%  of 
Germans rent rather than own their homes, one of 
the highest levels in the EU (where the average is 
31%).  When  homes  are  passed  down  as 
inheritance,  this  can  deepen  the  wealth  gap 
between  renters  and  the  inheritance  owners  as 
generations  go  by.  At  the  same  time,  the 
wealthiest  top  10%  accounted  for  60.9%  of  the 
country’s  net  wealth,  and  the  top  5%  for  47.9%, 
some of the highest – albeit stabilising – levels in 
the  euro  area  (290).  The  high  level  of  wealth 
concentration  is  also  linked  to  a  higher  overall 
saving  rate,  and  thus  to  the  savings  overhang, 
reflected  in  the  current  account  surplus  (291). 
Germany  is  one  of  the  Member  States  that  relies 
the most on labour taxation in its tax mix while the 
revenue share from property taxation is below the 
EU  average.  The  tax  mix  could  be  improved  by 
alleviating  pressure  on  labour  and  increasing 
taxation  on  wealth  (see  Annex  13),  which  would 
contribute to a better targeting and more growth-
friendly sourcing of efforts to fight poverty risks. 

The fight against the rising energy poverty is 
not  targeted  enough  towards  those  most  in 
need. The share of the population unable to keep 
their  homes  adequately  warm  in  2023  stood  at 
8.2%,  lower  than  the  EU  average  of  10.6%,  but 
reflecting  a  significant 
increase  from  2021 
(+4.9 pps).  Structural  issues  such  as  leaks,  damp 
or  rot  affected  16%  of  the  population,  above  the 
EU  average  of  15.5%  and  a  4 pps  increase  since 
2020.  Energy  poverty  policies  include  benefits 
under the minimum social security  schemes, such 
as  support  for  energy  costs  and  a  housing  cost 
subsidy  for  low-income  individuals.  The  country 
has implemented energy price brakes for gas and 
electricity, capping prices in 2023 for a substantial 
portion  of  household  consumption.  However, 
despite  these  interventions,  structural  measures 
vulnerable  households 
specifically 
issues  are 
remain 
addressed 
in  Germany’s  national  energy  and 
climate  plan  through  various  energy  efficiency, 
renewable energy and social welfare programmes. 
Yet  there  is  a  lack  of  measures  explicitly  focused 
on  reducing  energy  poverty,  with  policies  often 
targeting  broader  social  security  and  housing 

limited.  Energy  poverty 

targeting 

(290) ECB Distributional Wealth Accounts and HFCS survey. 

(291) European Commission (2024),  In-Depth Review for 

Germany, 2024. 

86 

8.89.829.933.51316.636.643.2051015202530354045OverallpopulationOver 65 yearsLowestincomequintileAt risk ofpoverty% EU27DE 
 
   
increased  to  800 000  units (292).  The  government 
target (as set out in 2021) of 400 000 newly built 
houses  per  year  has  been  getting  further  out  of 
reach every year. 294 400 new units were built in 
2023, of which only 23 000 were publicly  funded 
(against  a  target  of  100 000  to  be  publicly 
funded).  The  pressure  on  affordable  housing  was 
also increased by the steadily decreasing stock of 
subsidised  social  housing  over  the  last  twenty 
years,  from  approximately  2.5  million  units  in 
2000  to  around  1.1  million  in  2023.  The  federal 
government  increased  support  for  building  social 
housing from EUR 1 billion in 2020 to over EUR 3 
billion  in  2024.  However,  further  measures  could 
be  useful.  A  strategic  increase  in  the  publicly 
funded  housing  stock  could  put  downwards 
pressure  on  rents  in  the  private  housing  sector. 
The  government  also  announced 
its  aim  to 
eliminate  homelessness  entirely  by  2030,  while  it 
is  estimated  at  the  beginning  of  2024  that  there 
were  around  31 700  people  sleeping  rough, 
439 500 people housed in the emergency housing 
assistance  system,  and  60 400  people  staying 
involuntarily 
or 
acquaintances  due  to  the  lack  of  their  own 
home (293).  The  national  action  plan  against 
homelessness, 
for  a  home,’  was 
approved in April 2024 (294). 

‘Together 

relatives, 

friends 

with 

House  prices  have  increased  over  the  last 
decade  despite  a  recent  correction  in  the 
context  of  high  interest  rates.  Since  2015, 
house  prices  have  increased  by  around  50%  in 
nominal  terms.  After  several  years  of  house price 
growth, prices decreased by 8.5% in 2023 and by 
a further 1.6% in 2024 . As a result, the estimated 
overvaluation  gap,  which  stood  at  20%  in  2022, 
has  decreased  to  around  7%  in  2023  and  is 
expected  to  have  closed  in  2024.  While  the 
number  of  housing  completions  has  been 
relatively  stable,  the  number  of  building  permits 
decreased  by  more  than  31%  in  2023  and  by 
16.8%  in  2024,  implying  a  lower  supply  of  new 
housing  looking  ahead,  which  could  put  upward 
pressure  on  house  prices.  In  terms  of  financial 
stability, in February 2024 the European Systemic 
Risk  Board  (ESRB)  concluded  that  the  residential 
property market was subject to medium risks and 

(292) Eduard Pestel Institut, 2024, Bauen und Wohnen 2024 in 

Deutschland, www.mieterbund.de. 

(293) BMWSB, Wohnungslosenbericht 2024. 

(294) BMWSB, Nationaler Aktionplan gegen Wohnungslosigkeit 

2024.   

the  macroprudential  policy  mix  was  only  partially 
appropriate and partially sufficient to mitigate the 
situation (295). 

to 

housing 

in  2022 

affordability 

Overall, 
has 
deteriorated  over  the  last  decade  despite  a 
recent improvement. From 2012 to 2022, house 
prices had increased by 80%, outpacing household 
income by 32%.  The standardised house price-to-
income  ratio  (296)  increased  steadily  until  2021 
before  easing  in  the  context  of  the  house  price 
correction.  Housing  supply  was  slow  to  respond, 
with  German  dwelling  completions  per  capita 
remaining  along  the  lowest  in  the  EU  during  the 
2010s.  While  the  aggregate  number  of  dwellings 
had increased roughly with population since 2012, 
this  masks  large  regional  discrepancies,  with 
supply bottlenecks affecting large urban centres in 
particular.  As  a  consequence, 
the 
government 
increase  new  home 
tried 
completions  annually  from  less  than  300  000  to 
its  target  of  400  000.  During  2022-2023  house 
prices  indeed  declined  strongly  amid  pressures 
from  increased  interest  rates  and  falling  real 
wages,  leading  to  a  significant  improvement  in 
price-to-income  and  rent-to-income  ratios.  Price 
pressures  in  large  urban  centres  remains  strong 
nonetheless.  The  housing  market  downturn 
significantly weighed on construction and building 
permits. New dwelling completions are forecast to 
decline  to  less  then  200  000  during  2024-2026, 
which  is  likely  to  exacerbate  the  strong  housing 
affordability  bottlenecks  in  the  seven  large  cities. 
Taking into account the cost of mortgage funding, 
the  borrowing  capacity  of  households  worsened 
over the last ten years as well, since the average 
household now needs a higher share of its annual 
income  for  mortgage  payments.  Having  a  rather 
large  rental  market,  the  ratio  of  new  rents  to 
incomes  (297)  increased  over  the  last  decade, 
especially in the city centres. 

(295) ESRB (2024), Follow-up Report on Vulnerabilities in the 
Residential Real Estate Sectors of the EEA Countries. 

(296) The price-to-income ratio compares changes in the house 
price index to that of households' gross disposable income 
per capita. A persistent rise of this ratio can result in houses 
becoming increasingly unaffordable, creating a mismatch 
between the supply of housing and the demand for it. 

(297) The rent-to-income ratio ratio compares changes in the 
house rent index to that of households' gross disposable 
income per capita. 

87 

 
 
 
ANNEX 12: EDUCATION AND SKILLS 

and 

competitiveness. 

Germany  has  made  progress 
in  adult 
education,  however  shortages  of  skilled 
labour,  weaknesses  in  education  and  low 
education  outcomes  are  major  threats  to 
The 
productivity 
education and training systems are under pressure 
from factors such as the ageing population, which 
has  severely  reduced  the supply  of  skilled  labour, 
and the new skills needed for the digital and green 
transitions.  The  performance  of  the  education 
is  declining,  putting  human  capital 
system 
formation  at 
innovative  and 
risk.  Highly 
competitive  ICT  and  AI  sectors  are  particularly 
affected  by  shortages  of  skilled  labour,  while  the 
digital skills of the population are low, particularly 
among  young  people.  Upskilling  and  reskilling 
efforts,  notably  for  people  with  low  levels  of 
education  and  for  the  unemployed,  are  still 
needed.  

increases 

inequalities.  For 

in  ECEC  was  95.3% 

Limited  participation  of  disadvantaged 
children  in  early  childhood  education  and 
care  (ECEC)  impacts  foundational  learning 
children 
and 
between  three  and  the  mandatory  school  age, 
participation 
in  2023, 
0.5 percentage  point  (p.p.)  below  the  participation 
rate  in  2015.  For  children  under  three,  the 
participation  in  formal  childcare  fell  since  2021 
6.3  pps  to  25.1%  in  2024 (298).  Participation  in 
quality ECEC should allow children to make up for 
early disadvantage due to family  background and 
language deficiencies (299). However, children from 
richer households participated more than twice as 
often  than  their  poorer  peers  (13.8%  AROPE 
compared to  32.4%  non-AROPE) (300).  The  right  to 
a  place  in  ECEC  from  the  age  of  one  was  set  in 
2013  and  the  number  of  places  has  been 
substantially  expanded,  but  significant  unmet 
demand persists. For under-3-year-olds, there is a 
severe  lack  of  childcare  availability  (306 000  to 
430 000  places  missing)  (301).  In  addition  to 
initiatives  in  the  Länder,  the  Federal  Government 

(298)ILC_CAINDFORMAL; EU SILC are survey-based data and can 
show a stronger year-to-year variation compared to register-
based data. The monitoring report cites 35.5% for 2022 based 
on registry data that are persistently higher compared to survey 
data. 
(299)Autor:innengruppe Bildungsberichterstattung (ABBE), Bildung 
in Deutschland 2024. 
(300)AROPE: At risk of poverty or social exclusion. 
(301)IW, 2024, 306.000 Betreuungsplätze für unter Dreijährige 
fehlen. IW Report 40/2024. Bertelsmann, 2023, Mehr Plätze und 
bessere Qualität in Kitas bis 2030, bertelsmann.de. 

supports  the  improvement  of  quality  in  ECEC (302) 
as well as language development for children (303).  

Lack  of  staff  in  ECEC  continues  to  limit 
quality  improvements.  ECEC  staff  shortages 
continue  to  impede  both  the  expansion  of  places 
and  the  improvement  of  quality.  The  National 
Report  on  Education  2024  estimates 
that 
additional  51  000  to  88  500  ECEC  staff  are 
needed,  while  other  estimates  identify  potentially 
larger  gaps (304).    To  address  the  shortage  of 
skilled  workers  in  childcare  and  all-day  care  in 
elementary  schools,  the  Federal  ministry  for 
family  affairs  has  developed  jointly  with  the 
Laender, municipalities, social partners and experts 
a  strategy  to  secure  skilled  labour  in  educational 
professions.  The federally funded quality initiative 
included  improved  initial  and  continued  training 
and better working conditions. 

Graph A12.1: Underachievement rates by field, 
PISA 2012, 2018 and 2022 (%) 

Source: OECD (2023). 

in 

The  performance  of  the  education  system  is 
declining. In the 2022  OECD  PISA test,  29.5% of 
in  mathematics, 
15-year-olds  underperformed 
25.5% 
in  sciences. 
reading  and  22.9% 
Underachievement has significantly increased over 
the  last  decade  (+11.8,  11.0  and  10.7 pps  in 
maths, 
respectively), 
particularly  among  students  from  disadvantaged 
and  migrant  backgrounds,  widening  the  socio-
economic gap.  

reading  and 

sciences, 

Schools face a serious shortage of teachers, 
like 
STEM 
especially 
mathematics.  There  will  be  an  annual  shortage 

disciplines 

in 

(302)KiTa-Qualitätsgesetz and KiTa-Qualitäts- und -
Teilhabeverbesserungsgesetz (KiQuTG). 
(303)‚Sprach-Kitas: Weil Sprache der Schlüssel zur Welt ist‘. 
(304)Bertelsmann Stiftung, 2023, Fachkräfte-Radar für KiTa und 
Grundschule 2023, bertelsmann.de. 

88 

05101520253035DEEUDEEUDEEUMathematicsReadingScience%2012201820222030 EU target 
 
 
   
 
 
 
estimated about 23 500 to 40 000 teachers in the 
coming years (305). There is a fall in the number of 
teacher-training  graduates,  indicating  a  lack  of 
appeal  for  the  profession,  despite  relatively  high 
wages.  The  share  of  lateral  entrants  among 
teachers  more  than  doubled  between  2015  and 
2022, from 4% to 10%. To fill existing gaps,  it is 
important  to  attract  more  teacher  candidates, 
including  through  lateral  entry.  Continued  training 
becomes  more  important  to  update  teachers' 
skills.  The  most  experienced  teachers  are  not 
always 
complex 
environments,  potentially  aggravating  differences 
in education outcomes between schools. 

the  most 

employed 

in 

of 

students 

compared 

in  2012), 

Young  people  with  disadvantaged  and 
migrant  backgrounds  are  disproportionately 
affected  by 
low  education  outcomes. 
Underachievement among disadvantaged students 
saw  a  9.9 pps  rise  between  2018  and  2022.  In 
2022,  about  half  (46.6%)  of  students  from 
disadvantaged  backgrounds  did  not  reach  a 
minimum  proficiency  level  in  mathematics  (vs 
32.6% 
to  8.4%  of 
non-
underperformance 
disadvantaged backgrounds (306). Worryingly, about 
two  thirds  (64.0%)  of  students  born  abroad 
underachieve in mathematics, compared to 21.9% 
of non-immigrant students. Rates improve for the 
second  generation  at  34.5%  (307).  This  is  even 
more  important  as  in  2022,  25.8%  of  students 
had a migrant background. Early school leaving in 
Germany  remains  since  2021  around  12.5%  with 
a  small  drop  to  12.4%  in  2024.  This  is  3.1 pps 
above the EU average and still far from the 2030 
9% European level target. It is considerably higher 
among  young  men  and  those  with  migrant 
backgrounds. 

from 

for 

is  particularly  difficult 

socio-economic 
Compensating 
disadvantages 
in 
countries  with  early  tracking,  such  as 
Germany.  Helping  all  pupils  achieve  their  full 
potential  would  also  require  more  resources, 
including  the  availability  of  teaching  and  support 
staff.  To  promote  a  more  balanced  resource 
allocation,  the  new  ‘Startchancen’  programme, 
with  EUR 20 billion  allocated  for  the  next  ten 

years, encourages better matching of financing of 
individual schools with their actual challenges. It is 
co-financed at federal and regional level. 

the  declining 

The  share  of  top-performers  in  basic  skills 
trend 
remains  high  but 
threatens  a  strong  position  in  STEM  and 
research.  8.6%  of  German  students  reach  the 
highest PISA levels in mathematics and 8.2% and 
9.7%  in  reading  and  science,  above  the  EU 
average  in  all  three  fields.  However,  their  share 
has  halved  in  mathematics  since  2012  (-8.9 pps) 
and  contracted  by  a  fifth  (-2.5 pps)  in  science. 
Combined  with  the  increase  of  low  performers, 
this will pose a challenge to the historically strong 
German  position  in  STEM  fields  and  research,  the 
foundation of the German industrial mix. 

jobs 

require 

Tertiary educational attainment continues to 
increase. In Germany, 30% of jobs require tertiary 
education,  48%  of  jobs  require  upper  secondary 
education  and  21%  of 
lower 
secondary education or lower. The share of young 
tertiary  graduates  aged  25-34 
increased  by 
12.1 pps  between  2014  to  2024.  At  40.5%, 
Germany  is  nevertheless  still  3.7 pps  behind  the 
EU  average  (44.2%)  and  significantly  below  the 
45%  EU  level  target  for  2030.  At  the  same  time, 
the 
according 
Development  of  Vocational  Training  (CEDEFOP), 
28%  of  people  in  Germany  had  a  higher  level  of 
qualification than required for their job.  

the  European  Centre  for 

to 

STEM  skills  remain  strong  despite  signs  of 
weakening.  35.8%  of  all  students  (International 
Standard  Classification  of  Education  (ISCED)  level 
5-8)  are  enrolled  in  STEM  subjects,  the  highest 
share in the EU. However, one in two students did 
not finish their STEM studies in 2022, compared to 
one  in  six  in  2012 (308).  An  increasing  share  of 
foreign  students  keeps  student  numbers  in  STEM 
high.  STEM  graduates  as  share  of  the  population 
have  increased,  and  in  2022  the  country  had  by 
far  the  highest  share  of  STEM  graduates  of  all 
graduates in the EU (35.9% (309) vs EU average of 
26.6%).  Despite  overall  high  participation  rates, 
the gender gap in STEM studies remains an issue. 
Only  27.8%  of  STEM  graduates  are  women, 
5.6 pps below the EU average. 

(305)ABBE, 2022. And Prognose und Maßnahmen - Lehrermangel 
verschärft sich weiter (deutsches-schulportal.de). See also: 
Anders, 2022. 
(306)PISA 2022, Table I.B1.5.25. 
(307)PISA 2022, Table I.B1.7.37. 

(308)DESTATIS, Eurostat. 
(309)Eurostat [educ_uoe_grad02] customised data. 

89 

 
 
 
 
The  well-functioning  vocational  education 
and training (VET) system continues to adapt 
to  the  green  transition  but  faces  rising 
concerns over underachievement and limited 
apprenticeship  opportunities.  In  2023,  57.7% 
of  students  in  medium-level  of  education  were 
enrolled  in  a  VET  programme,  slightly  above  the 
EU  average  (54.2%),  and  participation  in  work-
based  learning  was  significantly  higher  than  the 
EU  average  (94.5%  vs  65.3%  in  2024).  However, 
concerns  are  growing  over  the  basic  skills  of 
apprentices, 
in 
educational  performance,  while  many  young 
people  still  lack  apprenticeship  opportunities.  To 
address  these  issues,  the  Federal  Government 
introduced  an  apprenticeship  guarantee  in  2024, 
particularly targeting people with a disadvantaged 
background.  In  addition,  the  Federal  Employment 
Agency  launched  a  national  online  portal  for 
continuous  VET,  serving  as  a  one-stop  shop  for 
people  seeking  vocational  training.  In  response  to 
the  green  transition,  Germany  has  modernised  its 
VET system by integrating new cross-occupational 
training standards. Climate neutrality continues to 
drive VET reforms in a comprehensive approach. 

reflecting  a  broader  decline 

Persistent  skills  and  labour  shortages  are 
hindering  competitiveness  and  the  green 
transition.  In  the  third  quarter  of  2024,  labour 
shortages  remained  widespread  (3.0%  vs  EU 
2.3%),  reflecting  strong  skills  shortages  given  the 
low  level  of  skills  mismatches  (310)  (11.4%  vs  EU 
19.2% in 2024). Although the economic slowdown 
has  led to  a  slight  easing,  32%  of  SMEs  continue 
to report that skills shortfalls are hampering their 
operations,  with  particularly  high  levels  in  the 
services  sector  (39.1%) (311).  They  are,  however, 
relatively  limited  in  the  manufacturing  sector 
(9.7%),  which  is  more  affected  by  economic 
headwinds.  Labour  shortages  are  also  hindering 
the  green  transition.  In  2023  they  exceeded  EU 
averages  in  many  sectors  key  to  the  green 
transition,  including  construction  (4.6%  vs  EU 
(3.1%  vs  2.2%),  water 
3.1%),  transportation 
supply,  sewerage  and  waste  management  (2.3% 
vs  1.6%),  energy  supply  (2.5%  vs  1.7%)  and 

(310)The macroeconomic skills mismatch indicator measures the 
dispersion of employment rates across skill groups (proxied by 
qualification levels, with ISCED 0-2 low; 3-4 medium and 5-7 
high). 
(311)KfW-ifo Skilled Labour Barometer, December 2024. More 
than 70% in law firms, tax accounting and auditing; more than 
50% in road and rail transport services; and 50% in architecture 
and engineering firms. 

manufacturing  (2%  vs  1.8%).  Meanwhile,  the 
share  of  employees  working  in  environmental 
goods  and  services  sectors  remains  among  the 
lowest  in  the  EU  (2%  vs  EU  average  of  3.3%  in 
2022),  while  the  share  of  employees  in  energy-
intensive industries is one of the highest (4.7% in 
2023).  This  highlights  both  the  strong  growth 
potential  of  Germany’s  green  sector  and  the 
pressing  need  to  develop  a  workforce  with  the 
appropriate skillset (see also Annex 8). 

Graph A12.2: Population with at least basic digital 
skills, by age, country of birth and educational 
attainment 

Source: Eurostat, LFS [isoc_sk_dskl_i21] 

The  overall  digital  skills 
level  of  the 
population  is  low  and  not  enough  students 
are enrolled in ICT to reply to the needs. The 
share of adults (16-74) with at least basic digital 
skills  increased  from  48.9%  in  2021  to  52.2%  in 
2023.  However,  this  is  still  below  the  EU  average 
of  55.6%.  In  the  context  of  the  Digital  Decade, 
Germany  aims  to  reach  80%  by  2030,  implying 
that significant further efforts are needed. This is 
particularly important among the youth (aged 16-
24),  who  experienced  a  decrease  from  57.7%  in 
2021  to  55.7%  in  2023  and  continue  to  be  well 
below the EU average of 70%, and among non-EU 
born  (37.5%  vs  EU  average  of  50%).  This  lack  of 
basic  digital 
skills  among  adults  hinders 
competitiveness  while  many  companies  have 
difficulties  recruiting  ICT  specialists  (72.4%  vs  EU 
average of 57.5%). On the other hand, only 7% of 
German  students  are  enrolled  in  ICT,  3 pps  below 

90 

303540455055606570Age 16-74Age 16-24Age 16-24with low levelof educationNon-EU bornEUDE 
 
   
employment  service  -  PES)  provides  support 
measures to unemployed people pursuing VET and 
training,  including  accommodation,  travelling  and 
childcare  expenses.  These  measures  have  been 
recently  expanded  by  the  Skills  Development 
Opportunities  Act  (Qualifizierungschancen-gesetz) 
and  the  Work  of  Tomorrow  Act  (Arbeit-von-
morgen-Gesetz). 
allowance 
(Bürgergeld) continues to be paid through the PES 
and  persons  entitled  to  unemployed  benefits 
receive  a  top-up  (Bürgergeldbonus)  during  VET 
periods. 
labour  market 
participation and  access to training of  carers, and 
especially  women,  it  is  also  crucial  to  continue 
expanding childcare availability. 

increase 

citizen’s 

The 

the 

To 

Germany  is  exploring  introducing  individual 
learning accounts to further develop its adult 
education  system.  As  part  of  a  pilot  project, 
which  incorporates  some  key  policy  elements  of 
individual learning accounts (ILAs) and involves the 
social  partners,  Germany  is  considering  providing 
personal  entitlements to people with low incomes 
who need upskilling and reskilling. The framework 
would  ensure  that  these  entitlements  are  (i) 
transferable  across  professional  status, 
(ii) 
employer-independent,  and  (iii)  accumulable  over 
a three-year period. Developing ILAs would require 
learning  entitlements  to 
expanding  the  adult 
continuous  VET  provided  by  the  PES  to  a  broader 
group of persons. At the moment, these are limited 
to early  school  leavers seeking to obtain a school 
diploma.  In  addition,  further  enhancing  the  digital 
infrastructure through a single national registry for 
upskilling  and  reskilling  courses  could  improve 
quality assurance and facilitate access for users to 
their individual accounts. (On skills related support 
of the ESF+ and the RRF, see: Annex 8). 

the  EU  average (312).  The  share  of  women  among 
enrolled ICT students (21.7%) is just above the EU 
average (20.2%), but overall low. The slow pace of 
digital transformation in Germany further hampers 
the  competitiveness  of  the  economy.  Progress  on 
digital infrastructure, digital skills and digital public 
administration  is  an  important  prerequisite  to 
reducing  the  administrative  burden  on  firms  and 
boosting  the  use  of  digital  technologies  to 
stimulate productivity growth. 

The  adult  learning  system  is  generally  well-
to  address  upskilling  and 
positioned 
reskilling  needs,  although  challenges  remain 
for  disadvantaged  groups.  Adult 
learning 
participation 
the  highest 
registered  one  of 
increases  between  2016  and  2022  (excluding 
guided  on-the-job  training:  +7.3 pps,  vs  +2.1 pps 
at  EU  level),  reaching  53.7%,  well  above  the  EU 
average of 39.5%. The country is on track to reach 
its national target of 65%. Access, information and 
guidance  for  disadvantaged  groups  continue 
nevertheless  to  pose  challenges (313).  People  with 
low  levels  of  education  participate  significantly 
less  in  training  (30%)  than  their  peers  with 
medium  or  high  levels  of  education  (49.9%  and 
71.5%, respectively), while participation among the 
unemployed (31.7%) remains markedly lower than 
among the employed (58.4%). The German Länder 
have  a  well-established  framework  for  adult 
learning,  with  14  out  of  16  offering  paid 
educational  leave  and  eight  providing  training 
vouchers,  partly  funded  by  the  European  Social 
Fund  Plus  (ESF+).  At  federal  level,  the  Upgrading 
Training  Assistance  Act  (AFBG)  provides  support 
for  people  preparing  for  advanced  vocational 
qualifications.  The  National  Skills  Strategy 
strengthens  continuous  education  and  training, 
while  the  National  Decade  for  Literacy  and  Basic 
Education  (2016-2026)  was  designed  to  raise 
reading  and  writing  skills  as  well  as  the  level  of 
basic  education  of  adults  in  Germany.  The  Act  to 
Strengthen  the  Promotion  of  Vocational  Training 
and  Skills  (Skills  Act)  adopted  in  2023  improves 
the  promotion  of  continuing  vocational  education 
and training of employed workers and introduces a 
Federal 
skills 
public 
Employment 

The 
(Germany's 

development 

benefit. 

Agency 

(312)EE and FI 10.7%, HU 8.3%, LU 9.8%. 
(313)Bilger, F. & Koubek, E. (2024). Continuing education 
behaviour in Germany in 2022: Results of the Adult Education 
Survey - AES Trend Report (Weiterbildungsverhalten in 
Deutschland 2022. Ergebnisse des Adult Education Survey – 
AES-Trendbericht). 

91 

 
 
ANNEX 13: SOCIAL SCOREBOARD 

Table A13.1:Social Scoreboard for Germany 

(1) Update of 5 May 2025. Members States are categorised based on the Social Scoreboard according to a methodology agreed 
with the EMCO and SPC Committees. Please consult the Annex of the Joint Employment Report 2025 for details on the 
methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0). 
Source: Eurostat 

92 

53,712,452,28,57,34,4981,33,40,9112,921,122,935,722,012,025,10,8Critical situationTo watchWeak but improvingGood but to monitorOn averageSocial Scoreboard for GermanyEqual opportunities and access to the labour marketAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Early leavers from education and training(% of  the population aged 18-24, 2024)Share of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Young people not in employment, education or training(% of the population aged 15-29, 2024)Gender employment gap(percentage points, population aged 20-64, 2024)Income quintile ratio (S80/S20, 2024)Dynamic labour markets and fair working conditionsEmployment rate(% of the population aged 20-64, 2024)Unemployment rate(% of the active population aged 15-74, 2024)Long term unemployment(% of the active population aged 15-74, 2024)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2023)Social protection and inclusionAt risk of poverty or social exclusion (AROPE) rate (% of the total population, 2024)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2024)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2024)Disability employment gap (percentage points, population aged 20-64, 2024)Housing cost overburden (% of the total population, 2024)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2024)Self-reported unmet need for medical care (% of the population aged 16+, 2024)Better than averageBest performers 
 
 
 
  
 
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

Germany's  health  system  faces  challenges 
that  must  be  addressed  to  improve  public 
health,  social  equity,  and  to  boost  economic 
competitiveness.  Germany's  health  system 
remains  primarily  hospital-centred,  with  an 
increasing  emphasis  on  prevention.  With  a  high 
level  of  health  spending  compared  to  the  EU 
average,  the  country  is  planning  a  major  hospital 
reform  to:  (i)  reduce  inpatient  cases;  (ii)  enhance 
coordination  and  integration  across  care  settings; 
and (iii) ensure cost effectiveness and quality. This 
reform  also  aims  to  tackle  challenges  related  to 
the  sustainability  of  the  health  workforce  arising 
from demographic changes.  

Life  expectancy  at  birth  in  Germany  has 
nearly  returned  to  pre-COVID-19  levels  and 
remains  just  below  the  EU  average.  This 
contrasts with the pre-pandemic period,  when life 
expectancy in Germany was above the EU average. 
Germany  performs  relatively  well  in  preventing 
deaths  from  treatable  conditions,  indicating  an 
effective  healthcare  system.  Diseases  of  the 
circulatory  system  (cardiovascular  diseases)  are 
the  leading  cause  of  death  -  with  rates  slightly 
above  the  EU  average,  followed  by  cancer,  with 
large  disparities  between  regions.  Germany  has 
launched  the  National  Action  Plan  “IN  FORM”,  an 
initiative  to  promote  healthy  diets  and  physical 
activity.  Germany  participates  in  several  joint 
actions funded by EU4Health, aimed at preventing 
cancer  and  other  non-communicable  diseases, 
while  also  developing  networks  for  better  care, 
including  European  Reference  Network  for  rare 
diseases.  

Graph A14.1: Life expectancy at birth, years 

Graph A14.2: Treatable mortality 

Age-standardised death rate (mortality that could be 
avoided through optimal quality healthcare) 
Source: Eurostat (hlth_cd_apr) 

is 

system 

Germany’s  health 
strongly 
hospital-centred.  In  2022,  health  spending  per 
person was the highest in the EU, with the majority 
covered  by  public  funds.  Out-of-pocket  payments 
stood at 10.7% of total health expenditures, below 
the EU average of 14.3%. Germany’s high number 
of hospital beds (635 per 100,000 people in 2022, 
well  above  the  EU  average)  reflects  its  hospital-
focused  care  model.  To  lower  inpatient  cases, 
promote  outpatient  care,  and  ensure  cost-
effectiveness  and  quality,  a  new  law  has  been 
passed  to  restructure  the  hospital  sector.  As  part 
of  the  reform,  a  new  hospital  reimbursement 
system aims to remove incentives for unnecessary 
medical  procedures  by  partially  replacing  the 
current  payment  model  with  flat  fees  and  newly 
defined  service  groups.  A  transformation  fund  of 
up to EUR 50 billion is planned to support hospital 
restructuring  from  2026  to  2035.  The  goal  is  to 
centralize  complex  procedures  in  well-equipped 
hospitals  and  better  integrate  inpatient  care  with 
outpatient  and  community  nursing  services, 
expanding outpatient options for patients. 

Source: Eurostat (demo_mlexpec) 

Germany  prioritises  disease  prevention.  In 
2022,  Germany  allocated  7.9%  of  its  healthcare 
budget  to  prevention  in  2022,  surpassing  the  EU 
this,  preventable 
average  of  5.5%.  Despite 
mortality  increased  by  3%  between  2012  and 
2022,  but  remaining  below  the  EU  average. 
Germans  consume  fewer  fruits  and  vegetables 
than  the  EU  average.  However,  vaping  is  more 
prevalent,  particularly  among  young  adults,  with 
4.8%  using  e-products,  exceeding  the  EU  average 
of 2.7% (314). 

(314) OECD/European Commission (2024), Health at a Glance: 

Europe 2024 - State of Health in the EU Cycle, Chapter 4. 

93 

81.381.180.880.781.181.380.480.180.681.420192020202120222023GermanyEU85.481.880.881.383.491.389.291.793.389.720182019202020212022per 100 000 populationGermanyEU 
 
          
 
        
 
 
 
Table A14.1:Key health indicators 

*The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple 
average is used based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data refer to practising 
doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data 
refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and 
Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric care. ***The EU median is used for patents. 
Source:  Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023. 

Germany's  healthcare  workforce  is  aging, 
with  a  growing  reliance  on  migrant  workers 
to  fill  labor  gaps.  Germany  has  a  high  number 
of doctors and nurses, but its medical workforce is 
aging rapidly, with 36% of doctors between 55-64 
years old (highest in the EU) and fewer than 20% 
under 35. Germany has a relatively low number of 
new medical graduates, with only 12 per 100,000 
population,  and  has  seen  a  modest  increase  in 
medical and nursing student admissions compared 
to other countries.  

Germany's healthcare workforce is becoming 
increasingly  reliant  on  foreign  doctors,  with 
40%  of  all  foreign  doctors  coming  from  EU 
countries  and  60%  from  non-EU  countries. 
The country is also experiencing a growing outflow 
of doctors, primarily to Switzerland. Despite having 
a  high  number  of  nurses  per  capita,  Germany 
faces  shortages in  certain  areas,  such  as  hospital 
and long-term care facilities. Temporary staff has 
become costly, with expenses reaching nearly EUR 
2.9  bn  in  2022,  double  than  in  2015.  Increasing 
number  of  hospital  staff  (around  33,000,  almost 
double  than 
in  2010)  work  without  formal 
employment  contracts,  primarily  among  non-
doctors. 

Germany's  health  system  has  significant 
potential  to  drive  innovation  and  growth  in 
the EU's medical sector. Germany is one of the 
EU  largest  investors  in  health  R&D,  with  high 
levels of public spending in this area. The country 
leads  the  EU  in  medical  innovation,  with  the 
highest  number  of  European  patents  (1,210) 

devices 

granted  in  2023  in  the  areas  of  pharmaceuticals, 
(315). 
biotechnology, 
and  medical 
Germany's pharmaceutical sector is robust, with a 
record  EUR  14.4  bn  invested  in  R&D,  driven  by 
large  multinational  companies  headquartered  in 
the 
country.  The  European  Federation  of 
Pharmaceutical  Industries  and  Associations  ranks 
Germany  as  the  first  for  R&D  investment  in  the 
pharmaceutical  sector  based  on  the  country  of 
activity,  with  a  budget  of  EUR  9.4  bn  (316).  R&D 
activities  are  also  funded  through  the  German 
recovery  and  resilience  plan.  This  includes  a 
special  programme  to  accelerate  research  and 
development on vaccines against SARS-CoV-2. 

Despite recent relevant progress, Germany is 
lagging  behind  in  the  digitalisation  of  its 
health  system.  Germany  has  seen  a  slight 
increase  in  online  healthcare  usage,  with  5.3%  of 
people  accessing  their  health  records  online  and 
11%  using  online  health  services,  but  these 
numbers remain below the EU average (see Annex 
6).  Germany  still  lags  behind  in  digital  health 
adoption.  Sizeable investments planned  under the 
recovery  and  resilience  plan  focus  on  IT-related 
investment in hospitals and public health services. 
Complementary  investments  are  also  planned 
under  the  cohesion  policy  aiming  to  support  e-
health  services  and  applications  and  to  boost  the 
digital  transformation  of  the  healthcare  sector. 
landmark  Digital  Acts  were 
Additionally,  two 
passed  in  2024,  aiming  to  enhance  healthcare 
through  electronic  patient records,  e-prescriptions, 

(315) European Patent Office, Data to download | epo.org. 
(316) See EFPIA. 

94 

20192020202120222023EU average* (latest year) Cancer mortality per 100 000 population243.8240.3235.7237.3n.a.234.7 (2022)Mortality due to circulatory diseases per 100 000 population 349.9 348.3 345.1 361.5n.a.336.4 (2022)Current expenditure on health, purchasing power standards, per capita4 5504 8115 1455 317n.a.3 684.6 (2022)Public share of health expenditure, % of current health expenditure 84.0 85.3 85.5 86.7 85.981.3 (2022)Spending on prevention, % of current health expenditure 3.53.56.67.9n.a.5.5 (2022)Available hospital beds per 100 000 population** 661 652 645 635n.a.444 (2022)Doctors per 1 000 population*4.44.54.54.5n.a.4.2 (2022)*Nurses per 1 000 population* 11.8 12.0 12.0 12.0n.a.7.6 (2022)*Mortality at working age (20-64 years), % of total mortality14.013.513.713.013.014.3 (2023)Number of patents (pharma / biotech / medical technology)178915741286899121029 (2023)***Total consumption of antibacterials for systemic use,                    daily defined dose per 1 000 inhabitants****::::13.320.0 (2023) 
 
 
        
 
 
and  improved  health  data  analysis  for  research 
and development. (see Annex 3). 

95 

 
HORIZONTAL 
ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS 

social 

fairness 

This  Annex  assesses  Germany’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  dimensions  of  competitiveness, 
and 
sustainability, 
macroeconomic stability. 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 
inequalities  and  tackle  climate 
poverty,  fight 
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 
the EU. 

is  further 
Germany  performs  well  and 
improving  on  SDGs  on  competitiveness 
(SDGs 8  and  9)  but  needs  to  catch  up  with 
the EU average on quality education (SDG 4). 
Germany  performs  above  the  EU  average  on 

Graph A15.1: Progress towards the SDGs in Germany 

SDG 8 (Decent work and economic growth) and on 
SDG 9  (Industry,  innovation  and  infrastructure). 
With  3.11%  of  GDP  allocated  to  R&D  in  2023, 
Germany  has  some  of  the  highest  R&D  spending 
in the EU. The share of R&D personnel in the active 
population  rose  from  1.71%  in  2018  to  1.91%  in 
2023  (EU:  1.56%  in  2023).  However,  Germany  is 
performing  below  the  EU  average  on  SDG 4 
(Quality  education),  which  is  hampering  growth 
and  competitiveness.  The  share  of  low-achieving 
15-year-olds  in  mathematics  increased  strongly 
from  21.1%  in  2018  to  29.5%  in  2022.  A  rising 
number  of  young  people  leave  education  early 
(10.3% in 2019, vs 12.4% in 2024), well above the 
EU  average  (9.3%  in  2024).  Adult  participation  in 
learning  in  the  past  four  weeks  is  below  the  EU 
average (DE: 9.6%; EU: 13.3% in 2024). The need 
for  improving  skills  is  also  reflected  in  the  low 
share  of  adults  with  at  least  basic  digital  skills 
(52.2% vs 55.6% in the EU in 2023). The German 
recovery  and 
targets 
resilience  plan 
bottlenecks for the digitalisation of administration 
and  the  economy,  for  instance  by  supporting  the 

(RRP) 

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). 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 
five 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 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

96 

 
 
 
 
 
 
 
digitalisation of vehicle supplier companies. It also 
helps address challenges related to digital skills. 

responsible 

consumption 

While  Germany  performs  well  on  several 
SDGs related to sustainability (SDGs 6, 9, 11, 
14,  15),  though  improving,  it  still  needs  to 
catch up with the EU average on zero hunger 
(SDG2), 
and 
production (SDG 12) as well as on affordable 
and clean energy (SDG 7) and climate action 
(SDG 13).  Germany  has  made  some  progress  on 
energy consumption indicators, including the share 
in  gross  final  energy 
of  renewable  energy 
consumption  (SDG 7;  from  16.7%  in  2018  to 
21.6%  in  2023).  Nevertheless,  it  remains  below 
the  EU  average  (24.6%).  Regarding  affordable 
energy,  the  share  of  people  unable  to  keep  their 
home adequately warm has increased significantly 
from  2.7%  in  2018  to  8.2%  in  2023.  On  SDG 13 
(Climate  action),  net  greenhouse  gas  emissions 
decreased from 11.3 tonnes per capita in 2018 to 
8.9  tonnes  per  capita  in  2023,  although  they  still 
remain  above  the  EU  average  (6.8  tonnes  per 
capita  in  2023).  Average  CO2  emissions  per  km 
from  new  passenger  cars  fell  considerably 
between 2018 and 2023 (SDG 12; 157 g in 2018 
vs  113 g  in  2023)  but  are  above  the  EU  average 
(107.6 g  in  2023).  Germany  performs  well  on 
sustainable  agricultural  production  and  has 
reduced  agriculture’s  environmental  impact. 
It 
reduced  nitrate  in  groundwater  and  the  use  and 
risk of chemical pesticides (SDG 2), although both 
remain  above  the  EU  average,  and  achieved 
reductions 
in  premature  deaths  due  to  fine 
particulate  matter  (SDG 11).  Various  measures  in 
Germany’s 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 
indicators related to  social fairness (SDGs 1, 
3,  8).  However,  though  improving,  it  still 
needs  to  catch  up  with  the  EU  average  on 
quality  education  (SDG 4),  gender  equality 
(SDG 5), affordable and clean energy (SDG 7) 
and  reducing  inequalities  (SDG 10).  Germany 
generally  performs  better  than  the  EU  average  in 
areas  linked  to  poverty,  health  and  decent  jobs 
and growth. On health (SDG 3), road traffic deaths 
and fatal accidents at work have declined and are 
proportionally  below  their  level  in  the  rest  of  the 
EU. At the same time, 19% of the adult population 
was  obese  in  2019,  up  from  16.9%  in  2014  and 

97 

above  the  EU  average  of  14.8%  (in  2022)  and 
healthy  life  years  declined  from  66,4  years  in 
2016 to 65.6 years in 2021 (though remain above 
the EU average of 63.6 years in 2021. On gender 
equality (SDG 5), the unadjusted gender pay gap is 
particularly  high  in  Germany  (17.6%,  vs  12%  in 
the  EU  in  2023)  and  the  impact  of  caring 
responsibilities  on  women’s  employment  is  higher 
than  the  EU  average.  While  the  overall  share  of 
people  at  risk  of  poverty  or  social  exclusion 
(SDG 1) is aligned with the EU average, it is rising 
(21.3% in 2023 vs 18.5% in 2018), and there is a 
significant urban-rural gap (SDG 10). Housing cost 
overburden is worse than the EU average in 2023 
(13%;  EU:  8.8%).  There  is  room  for  improvement 
on  integrating  non-EU  citizens  into  education  and 
training and the labour market (SDG 10). Germany 
performs  worse  than  the  EU  average  on  EU/non-
EU  citizenship  gaps  for  early  school  leaving 
(17.6 percentage points (pps) vs 15.4 pps in the EU 
in 2024), as well as for the share of young people 
not in education, employment or training (13.7 pps 
vs  9.9 pps  in  the  EU  in  2024)  and  for  the 
employment rate (21.5 pps, vs 12.5 pps in the EU 
in 2024). Tertiary educational attainment (SDG 4), 
although 
improving,  remained  below  the  EU 
average in 2024 (40.5%; EU: 44.2%). The German 
RRP  promotes  apprenticeships  and  helps  improve 
educational outcomes for students with a learning 
backlog, often from disadvantaged backgrounds.  

Germany 
is  performing  well  on  SDG 
indicators related to macroeconomic stability 
(SDGs 8, 16, 17) and has further improved its 
performance. Germany performs well on SDG 16 
(Peace,  justice  and  strong  institutions),  showing  a 
stable  and  secure  environment  for  pursuing 
economic  activities,  and  on  SDG 8  (Decent  work 
and economic growth). Germany further increased 
its  employment  rate  from  79.6%  in  2019  to 
81.3% in 2024 (vs EU 75.8% in 2024). The share 
of  young  people  not  in  education,  employment  or 
training  reached  8.5%  in  2024,  below  the  EU 
average  (11%),  and  long-term  unemployment  is 
low  (0.9%  vs  EU  1.9%  in  2024).  In  contrast,  at 
20.9%  of  GDP  in  2024,  Germany’s  investment 
share,  remained  below  the  EU  average  of  21.7% 
of  GDP.  The  German  RRP  includes  reforms  to 
speed up public investment and tackle investment 
bottlenecks  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. 

 
ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION 

projects  until  2023  and  has  had  significant 
benefits  for  the  economy  and  German  society. 
Project  selection  under  the  2021-2027  cohesion 
policy programmes has accelerated.  

The  German  RRP  contains  28  investments 
and  17  reforms  to  stimulate  sustainable 
growth  and  allow  for  decarbonising  and 
digitalising  all  aspects  of  German  society.  A 
year  before  the  end  of  the  RRF  timespan, 
implementation is well on its way with 65 % of the 
funds  disbursed  (321).  At  present,  Germany  has 
fulfilled  54%  of  the  milestones  and  targets  in  its 
RRP.  Nevertheless,  efforts  are  needed  to  ensure 
completion  of  all  RRP  measures  by  31 August 
2026. 

Germany  also  receives  funding  from  several 
other  EU  instruments,  including  those  listed 
in  table  A16.1.  Most  notably,  the  common 
agricultural policy (CAP) provides Germany with an 
EU  contribution  of  EUR 30.7  billion  under  the CAP 
strategic plan for 2023-2027 (322). A further EUR 2 
billion  are  available  under  the  Asylum,  Migration 
and  Integration  Fund  (AMIF),  together  with  the 
border  management  and  visa  instrument  (BMVI) 
and 
Furthermore, 
operations amounting to EUR 2.2 billion (323) have 
been signed under the InvestEU instrument backed 
by 
to 
financing for riskier operations in Germany. 

the  EU  guarantee, 

improving  access 

security 

internal 

funds. 

Germany  faces  structural  challenges  in  a 
wide  range  of  policy  areas,  as  identified  in 
the country-specific recommendations (CSRs) 
addressed  to  the  country  as  part  of  the 
European  Semester.  They  refer,  among  other 
things,  to  the  budgetary  framework  and  fiscal 
governance,  taxation  policy,  pension  systems  and 
active  ageing,  digital  connectivity,  infrastructure 
and market functioning, digitalisation of the public 
administration  and  public  services,  business 
environment, skills, vocational education and adult 
learning. 

The Commission has assessed the 2019-2024 
CSRs  considering  the  policy  action  taken  by 
Germany to date and the commitments in its 
recovery  and  resilience  plan  (RRP).  At  this 
stage, Germany has made at least ‘some progress’ 
on 61% of the CSRs (317), and ‘limited progress’ on 
38% (Table A16.2). 

competitiveness, 

EU funding instruments provide considerable 
resources 
supporting 
to  Germany  by 
investments  and  structural  reforms  to 
increase 
environmental 
sustainability  and  social  fairness,  while 
helping  to  address  challenges  identified  in 
the  CSRs.  In  addition  to  the  EUR 30.3  billion 
funding  from  the  Recovery  and  Resilience  Facility 
(RRF) in 2021-2026, EU cohesion policy funds (318) 
are  providing  EUR 19.8  billion 
to  Germany 
(amounting  to  EUR 38.8  billion  with  national  co-
financing)  for  2021-2027  (319)  to  boost  regional 
competitiveness  and  growth.  Support  from  these 
instruments  combined  represents  around  1,2%  of 
these 
2024  GDP 
instruments  to  different  policy  objectives 
is 
outlined 
in  Graphs  A16.1  and  A16.2.  This 
substantial  support  comes  on  top  of  financing 
provided  to  Germany  under  the  2014-2020 
multiannual  financial  framework,  which  financed 

(320).  The  contribution  of 

(317) 5% of the 2019-2024 CSRs have been fully implemented, 
10% substantially implemented, and some progress has 
been made on 46%. 

(318) In 2021-2027, cohesion policy funds include the European 
Regional Development Fund, the European Social Fund Plus 
and the Just Transition Fund. The information on cohesion 
policy included in this annex is based on adopted 
programmes with the cut-off date of 5 May 2025. 

(319) European territorial cooperation (ETC) programmes are 

excluded from the figure. 

(320) RRF funding includes both grants and loans, where 

(321) As of mid-May 2025, Germany has submitted 2 payment 

requests. 

(322) An overview of Germany’s formally approved strategy to 
implement the EU’s common agricultural policy nationally 
can be found at: Germany - CAP Strategic Plan.  

applicable. GDP figures are based on Eurostat data for 2024. 

(323) Data reflect the situation on 31.12.2024. 

98 

 
 
 
 
 
 
Graph A16.1: Distribution of RRF funding in 
Germany by policy field 

(1) Each RRP measure helps achieve the aims of two of the 
six policy pillars of the RRF. The primary contribution is shown 
in the outer circle, while the secondary contribution is shown 
in the inner circle. Each circle represents 100% of the RRF 
funds. Therefore, the total contribution to all pillars displayed 
on this chart amounts to 200% of the RRF funds allocated. 
Source: European Commission. 

Graph A16.2: Distribution of cohesion policy 
funding across policy objectives in Germany 

Source: European Commission 

Cohesion  policy  funds  aim  to  increase  the 
productivity  and  competitiveness  of  German 
firms and improve the business environment. 
The  European  Regional  Development  Fund  (ERDF) 
strengthens  research  and  innovation  capacities 
and supports the uptake of advanced technologies, 
mainly  in  small  and  medium-sized  enterprises 
(SMEs). 43 500 businesses are expected to receive 
support  in  2021-2027.  Germany  has  so  far 
reprogrammed  EUR  891  million  of  EU  funding 
from the ERDF, the Just Transition Fund (JTF) and 
the  European  Social  Fund  +  (ESF+)  to  support 
critical technologies across the sectors covered by 
the  Strategic  Technologies  for  Europe  Platform 
(STEP)  in  five  regions.  This  funding  will  support 
SMEs,  large  companies  (in  the  Just  Transition 
regions),  as  well  as  vocational  training  and 

99 

research  institutions  –  for  instance,  laboratory 
infrastructure  -  in  the  fields  of  critical  digital 
technologies,  biotechnology  and 
the  circular 
economy.  In  addition,  other  programmes  support 
deep-tech innovation, green and resource-efficient 
technologies  and  technology  transfer  activities 
between  universities,  research  organisations  and 
SMEs.  the  European  Social  Fund  Plus  (ESF+)  is 
providing  EUR 2.13  billion  for  education  and 
training measures. EUR 1.13 billion is allocated to 
improving  equal  access  to  education  and  training 
as well as improving the quality, inclusiveness and 
labour market relevance of education and training. 
EUR 809  million  is  allocated  to  life-long  learning, 
in  particular  flexible  upskilling  and  reskilling 
opportunities  for  all  and  new  skills  requirements 
based on labour market needs. 

are 

funds 

contributing 

Other 
to 
competitiveness  in  Germany,  for  instance 
through  open  calls.  Germany  is  one  of  the 
Member  State  benefiting  most  of  the  Connecting 
Europe  Facility  (CEF)  for  Transport  and  Energy 
funding  key  infrastructure  projects  that  enhance 
connectivity,  sustainability,  and  efficiency  along 
the  Trans-European  Transport  Network.  A  key 
project  is  the  Fehmarnbelt  Tunnel,  connecting 
Denmark  and  Germany.  CEF  Digital  has  also 
in  smart 
the  deployment  of  5G 
advanced 
communities.  Horizon  Europe  has  supported 
research 
scientific 
innovation, 
breakthroughs  to  scaling  up  innovations,  with  the 
European  Research  Council,  Climate,  Energy  and 
Mobility  and  Digital,  Industry  and  Space  as  top 
priorities 
in  Germany.  The  Technical  Support 
Instrument  has  supported  Germany  for  the  green 
and  digital  transition,  including  the  adoption  of 
innovative  technologies  (such  as  AI),  developing 
Green  Budgeting  practices  at  the  regional  level 
and  helping  with  reform projects  in  the  education 
sector.   

from 

and 

to 

the 

Germany’s  RRP  also  contains  ambitious 
business 
improve 
measures 
environment  and  competitiveness.  Among  the 
measures covered by the second payment request 
submitted  over  the  past  year,  Germany  has 
implemented  some  measures  relating  to  the 
reduction  of  barriers  to  investment.  Examples 
include  the  expansion  of  consulting  services  for 
the  public  sector  and  the  joint  Federal-Land 
programme  for  an  efficient  administration  that 
benefits citizens and businesses. 

Green transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilienceNext generationSmarter EuropeGreener EuropeConnected EuropeSocial EuropeEurope closer to citizensJTF specific objective 
     
 
 
   
EU  funds  are  playing  a  significant  role  in 
promoting  environmental  sustainability  and 
green  transition 
in  Germany  during  the 
current  seven-year  EU  budget  (multiannual 
framework).  EUR 6.3  billion  of 
financial 
cohesion  policy  funding  is  used  to  support  the 
green  transition.  This  contributes,  for  instance,  to 
the growth in waste-recycling capacity by 285 000 
tonnes/year  and  it  provides  EUR 36.5  million  in 
support  for  investment  against  natural  risks.  The 
ERDF  supports  improvements  in  energy  efficiency 
and  the  use  of  renewable  energy.  Germany’s  CAP 
strategic  plan  allocates  approximately  EUR 8.9 
billion  of  EU  funds  to  environmental  and  climate-
related  objectives.  This  supports  farmers 
in 
applying  more  sustainable  practices,  such  as 
reduced  use  of  fertilisers  and  pesticides,  organic 
farming and non-productive areas for biodiversity. 
Additionally,  approximately  EUR 624 million  of  EU 
funding is allocated to investment, for example in 
sustainable  water  resources  management,  flood 
and coastal protection and restoration of habitats. 

Germany’s  RRP,  including  the  REPowerEU 
chapter, has a comprehensive set of reforms 
and investments for the green transition. The 
measures covered by the second payment request 
submitted over the past year include: (i) reforms in 
climate  and  energy  policy,  such  as  advancing 
Germany’s  national  hydrogen  strategy,  enhancing 
on-and offshore wind energy and promoting clean 
mobility; and (ii) investment in sustainability, such 
as electric vehicles and use of renewable energies 
for business and household sectors as well as the 
energy efficiency of buildings.  

funding 

businesses. It is expected that over 27 000 people 
will benefit from improved education facilities and 
nearly  7 400  will  be  able  to  participate 
in 
professional  training.  In  addition  to  the  education 
and training measures (EUR 2.13 billion) the ESF+ 
also  supports  labour  market  measures  (EUR 1.8 
billion),  social  inclusion  (EUR 2.14  billion)  and 
social innovation (EUR 0.24 billion). Almost 13% of 
the  ESF+ 
to  youth 
employment  measures  and  more  than  5.5%  to 
combating  child  poverty.  In  addition,  the  AMIF 
programme  promotes,  among  others, 
legal 
migration  pathways,  family  reunification,  and 
structured  migration  operations,  with  a  focus  on 
pre-departure  measures  to  equip  migrants  with 
basic  knowledge  of  the  German  language  and 
society  before  arrival.  It  also  plays  a  key  role  in 
enhancing reception conditions and addressing the 
needs of vulnerable individuals. 

is  allocated 

Germany’s RRP contains several reforms and 
investments  related  to  fairness  and  social 
policies. As part of the measures covered by the 
second  payment  request  submitted  over  the  past 
year,  Germany  included  several  measures  among 
others focusing on modernising hospitals and local 
health  administrations  to  improve  their  digital 
capacities  and 
the  availability  of 
childcare places as well as supporting apprentices. 

increasing 

in 
is  helping  Germany 
Germany’s  RRP 
enhancing 
the  digitalisation  of  public 
services  for  citizens  and  businesses.  The 
measures covered by the second payment request 
submitted  over  the  past  year  covered  reforms 
related 
public 
administration.  

digitalisation 

the 

of 

to 

Promoting  fairness,  social  cohesion  and   
improving  access  to  education  and  training 
measures and social inclusion are among the 
key priorities of EU funding in Germany. In the 
four  German  regions  where  the  phasing-out  of 
fossil  fuel  extraction  and  related  activities  are 
expected  to  have  the  strongest  socio-economic 
impacts, the JTF is boosting innovation, promoting 
economic 
counteracting 
supporting  around  4 300 
deindustrialisation, 

diversification 

and 

100 

 
Table A16.1:Selected EU funds with adopted allocations - summary data (million EUR) 

(1) The cut-off date for data on disbursements under the RRF is 31 May 2025. 
(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022. 
(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member 
State before 2021.  Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The 
cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025.  The cut-off date for data on disbursements 
under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025. 
(4) AMIF - Asylum, Migration and Integration Fund; BMVI- Border Management and Visa Instrument; ISF - Internal Security Fund. 
(5) Expenditure outside the CAP strategic plan is not included. 
(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the 
Member State declarations until March 2025.  Disbursements for the Direct Payments (EAGF) started in 2024. 
Source: European Commission 

101 

Instrument/policyDisbursed since 2021   (1)             RRF grants (including the RepowerEU allocation)19 760.1RRF loans0 Instrument/policyAllocation 2014-2020 (2)Allocation 2021-2027 Disbursed since 2021 (3)    (covering total payments to the Member State on commitments originating from both 2014-2020 and 2021-2027 programming periods) Cohesion policy (total)20 673.319 860.612 871.5European Regional Development Fund (ERDF)12 288.210 820.47 962.7European Social Fund (ESF, ESF+)8 385.16 562.64 140.8Just Transition Fund (JTF)2 477.7 768.1European Maritime, Fisheries and Aquaculture Fund (EMFAF) and the European Maritime and Fisheries Fund (EMFF) 219.6 211.8138.6Migration, border management and internal security - AMIF, BMVI and ISF (4) 794.92 044.3892.8The common agricultural policy under the CAP strategic plan (5)Disbursements under the CAP Strategic Plan (6)Total under the CAP strategic plan9 822.7European Agricultural Guarantee Fund (EAGF)8 714.0European Fund for Agricultural Development (EAFRD)1 108.7Allocation 2023-202730 727.622 488.48 239.2Allocation 2021-2026 30 324.70FisheriesMigration and home affairs 
 
 
      
 
Table A16.2:Summary table on 2019-2024 CSRs 

(Continued on the next page) 

102 

GermanyAssessment in May 2025*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 progressSDGs 8, 9, 16Focus investment-related economic policy on education;Limited progressSDGs 4, 10, 11research and innovation;Some progressSDGs 9, 10, 11digitalisation and very-high capacity broadband;Some progressSDGs 9, 10, 11sustainable transport Some progressSDGs 10, 11as well as energy networks Some progressSDGs 7, 9, 10, 11, 13and affordable housing, taking into account regional disparities. Limited progressSDGs 1, 2, 8, 10, 11Shifttaxesawayfromlabourtosourceslessdetrimentaltoinclusiveand sustainable growth.Some progressSDGs 8, 10, 12Strengthencompetitioninbusinessservicesandregulatedprofessions.Limited progressSDG 92019 CSR 2Some progressReduce disincentives to work more hours,Some progressSDGs 8, 10, 12including the high tax wedge,  in particular for low-wageSome progressSDGs 8, 10, 12and second earners.Limited progressSDGs 8, 10, 12Take measures to safeguard the long-term sustainability of the pension system, while preserving adequacy.Limited progressSDG 8Strengthen the conditions that support higher wage growth, while respecting the role of the social partners. Substantial progressSDG 8Improve educational outcomes and skills levels of disadvantaged groups.Limited progressSDGs 4, 8, 102020 CSR 1Some progressTakeallnecessarymeasures,inlinewiththegeneralescapeclauseoftheStabilityandGrowthPact,toeffectivelyaddresstheCOVID-19pandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuring debt sustainability, while enhancing investment. Not relevant anymoreSDGs 8, 16Mobiliseadequateresourcesandstrengthentheresilienceofthehealth system, including by deploying e-health services.Some progressSDG 32020 CSR 2Some progressFront-load mature public investment projects Some progressSDGs 8, 16and promote private investment to foster the economic recovery. Some progressSDGs 8, 9Focus investment on the green and digital transition, in particular on sustainable transport, Some progressSDG 11clean, efficient and integrated energy systems, Some progressSDGs 7, 9, 13digital infrastructure and skills, Some progressSDG 4, 9housing, Limited progressSDGs 1, 2, 8, 10education Limited progressSDG 4and research and innovation. Some progressSDG 9Improve digital public services across all levels Limited progressSDGs 9, 16and foster the digitalisation in SMEs. Substantial progressSDGs 8, 9Reduce the regulatory and administrative burden for businesses.Some progressSDGs 8, 92021 CSR 1Not relevant anymoreIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationally financed investment.Not relevant anymoreSDGs 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term. Not relevant anymoreSDGs 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupportingthegreenanddigitaltransition. Not relevant anymoreSDGs 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Not relevant anymoreSDGs 8, 16 
 
 
  
 
Table (continued) 

(Continued on the next page) 

103 

2022 CSR 1Limited progressIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspendingtothe evolving situation.Not relevant anymoreSDGs 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Not relevant anymoreSDGs 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachieving prudent medium-term fiscal positions.Not relevant anymoreSDGs 8, 16Improvethetaxmixformoreinclusiveandsustainablegrowth,inparticular by improving tax incentives to increase hours worked.Some progressSDGs 8, 10, 12Safeguard the long-term sustainability of the pension system.Limited progressSDG 82022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 13 July 2021.SwiftlyfinalisethenegotiationswiththeCommissiononthe2021–2027cohesionpolicyprogrammingdocumentswithaviewtostarting their implementation.2022 CSR 3Some progressRemove investment obstaclesLimited progressSDGs 8, 9andboostinvestmentinvery-high-capacitydigitalcommunicationnetworks.Some progressSDG 92022 CSR 4Some progressReduce overall reliance on fossil fuels and diversify their importsSome progressSDGs 7, 9, 13by improving energy efficiency, incentivising energy savings,Some progressSDG 7diversifying energy supplies and routes,Substantial progressSDGs 7, 9, 13removinginvestmentbottlenecks,furtherstreamliningpermittingprocedures,boostinginvestmentinandacceleratingthedeploymentof electricity networks and renewable energy,Substantial progressSDGs 7, 8, 9, 13andfurtheradvancingparticipationinenergy-relatedcross-bordercooperation.Limited progressSDGs 7, 9, 132023 CSR 1Some progressWinddowntheemergencyenergysupportmeasuresinforce,usingtherelatedsavingstoreducethegovernmentdeficit,assoonaspossiblein2023and2024.Shouldrenewedenergypriceincreasesnecessitateneworcontinuedsupportmeasures,ensurethatthesearetargetedatprotectingvulnerablehouseholdsandfirms,fiscallyaffordable and preserve incentives for energy savings.Substantial progressSDGs 8, 16Ensureprudentfiscalpolicy,inparticularbylimitingthenominalincreaseinnationally-financednetprimaryexpenditurein2024tonot more than 2.5%.No progressSDGs 8, 16Preservenationally-financedpublicinvestmentandensuretheeffectiveabsorptionofRRFgrantsandotherEUfunds,inparticulartofosterthegreenanddigitaltransitions.Implementpublicinvestment initiatives as planned.Full implementationSDGs 8, 16Fortheperiodbeyond2024,continuetopursueamedium-termfiscalstrategyofgradualandsustainableconsolidation,combinedwithinvestmentsandreformsconducivetohighersustainablegrowth, to achieve a prudent medium-term fiscal position. Full implementationSDGs 8, 16Improvethetaxmixformoreinclusiveandsustainablegrowth,inparticularbyimprovingtaxincentivesinordertoincreasehoursworked. Some progressSDGs 8, 10, 12Safeguard the long-term sustainability of the pension system.Limited progressSDG 82023 CSR 2Significantlyacceleratetheimplementationofitsrevisedrecoveryandresilienceplan,alsobyensuringsufficientresources,andswiftlyfinalisetheaddendumandtheREPowerEUchapterwithaviewtorapidlystartingitsimplementation.Proceedwiththespeedyimplementationofcohesionpolicyprogrammes,inclosecomplementarity and synergy with the recovery and resilience plan.2023 CSR 3Limited progressSpeedupthedigitalisationoftheentireservicechainforpublicservices and Limited progressSDGs 9, 16improve people’s digital skills. Limited progressSDG 4Remove investment obstaclesLimited progressSDGs 8, 9andboostinvestmentinvery-high-capacitydigitalcommunicationnetworks.Some progressSDG 9RRP 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.RRP 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. 
 
 
  
 
Table (continued) 

Source: European Commission. 

104 

2023 CSR 4Some progressIncreaseeffortstofurtherreducetheoverallrelianceonfossilfuelsby Some progressSDGs 7, 9, 13boostinginvestmentinandacceleratingthedeploymentofrenewableenergyandelectricitynetworksthroughimprovedadministrativecapacityandstreamlinedprocesses,includingpermitting procedures. Substantial progressSDGs 7, 8, 9, 13Step up energy efficiency efforts in transport,Limited progressSDGs 7, 9, 11, 13buildingandindustry,includingthroughinvestmentsinheatingsystems and Some progressSDGs 7, 9, 13furtherpolicymeasuresaimedattheprovisionandacquisitionofskills and competences needed for the green transition.Limited progressSDG 42024 CSR 1Some progressSubmit the medium-term fiscal-structural plan in a timely manner.Limited progressSDGs 8, 16InlinewiththerequirementsofthereformedStabilityandGrowthPact,limitthegrowthinnetexpenditurein2025toarateconsistentwith,interalia,puttingthegeneralgovernmentdebtonaplausiblydownwardtrajectoryoverthemediumtermandreducingthegeneralgovernment deficit towards the 3% of GDP Treaty reference value.Full implementationSDGs 8, 16Strenghthen public investmentSome progressSDGs 8, 16andremoveobstaclestoprivateinvestmenttoboostcompetitiveness.Limited progressSDG 3Enhancethefiscalspaceforproductivespendingincludingbyreforming the financing side of the first pillar pension system.Limited progressSDGs 8, 10, 12Improvethetaxmixformoreinclusivegrowthandsustainablecompetitiveness,alsobyreducingdisincentivestoincreasehoursworked, in particular for second earners.Some progressSDGs 8, 10, 122024 CSR 2Significantlyacceleratetheimplementationoftherecoveryandresilienceplan,includingtheREPowerEUchapter,ensuringcompletionofreformsandinvestmentsbyAugust2026,byensuringeffectivegovernance.Acceleratetheimplementationofcohesionpolicyprogrammes.Inthecontextoftheirmid-termreview,continuefocusingontheagreedpriorities,whileconsideringtheopportunitiesprovidedbytheStrategicTechnologiesforEuropePlatforminitiativeto improve competitiveness.2024 CSR 3Limited progressAddresstheshortageofskilledworkers,particularlybystrengthening basic and digital skills,Limited progressSDGs 4, 8, 10andimprovingeducationoutcomes,includingbyenhancingtheprovision of targeted support to disadvantaged groups.Limited progressSDG 4Speedupthedigitalisationofpublicadministrationincludingbyincreasing the geographic coverage of digital public services.Limited progressSDGs 9, 16Furtherboostthedeploymentofveryhigh-capacitydigitalcommunicationnetworks,includingbyfacilitatingthenecessaryimplementationofprivateinvestmentprojectsandmobilisingpublicresources where needed.Limited progressSDG 92024 CSR 4Some progressAcceleratethedecarbonisationofthetransportsector,includingbyupgrading the rail network.Some progressSDGs 8, 9, 11RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets. Progress with the cohesion policy is monitored in the context of the Cohesion Policy of the European Union. 
 
 
 
  
 
ANNEX 17: COMPETITIVE REGIONS 

industrial 

The  German  economy  has  a  solid  and 
undergoing 
base 
diversified 
transformation  towards  the 
low  carbon 
economy  in  the  face  of  global  competition, 
but  persisting  regional  disparities  remain  a 
challenge  especially  in  the  context  of  slow 
growth.  German 
leverage 
regions 
competitive  advantages  in  net-zero  technologies 
(such  as  batteries,  solar,  wind,  and  green 
hydrogen),  invest  in  research  and  innovation, 
businesses,  education  and  training,  and  ensure 
affordable housing. 

could 

Germany’s  economy  grew  slowly  from  2013 
to  2023,  and  its  ranking  within  the  EU-27 
fell.  Real  GDP  per  head  growth  averaged  only 
0.8%  compared  to  the  EU  average  of  1.55%. 
Regional  disparities 
in  Germany  have  been 
decreasing  since  2013  but  remain  substantial.  In 
2023,  Hamburg  led  with  189%  GDP  per  head 
(purchasing  power  standard  (PPS))  of  the  EU 
average, 
(170%), 
followed  by  Oberbayern 
Darmstadt  (146%)  and  Stuttgart  (145%).  Two 
least  developed (324)  eastern  regions  Thüringen 
and  Chemnitz  and  two  western  regions  Trier  and 
Lüneburg scored 83-85%. (Map A17.1). 

than 

(1.0%–1.7%) 

Internal  disparities  narrowed  in  2013-2023 
as  less  developed  eastern  regions  grew 
faster 
the  national 
average,  as  did  several  southern  regions. 
Only  Berlin  (2.2%)  and  Mecklenburg-Vorpommern 
(1.7%)  in  the  east  matched  the  EU  average  of 
1.55%.  Most  western  regions  underperformed, 
with  Saarland  and  Bremen  remaining  static  (Map 
(325) 
A17.2).  The  Federal  Equivalence  Report 
confirms also regional convergence at NUTS3 level 
(for a range of indicators). 

Map A17.1:  GDP per head (in purchasing power 
standard PPS), 2023 

Source: Eurostat 

Map A17.2:  Real GDP per head growth 
(2014-2023) 

(324) In  this  annex,  ‘less/least  developed  regions’  are  defined  as 
having a GDP per capita (PPS) below the EU average (100%) 
in  2022  and  ‘more/most  developed’  126  or  higher.  These 
terms  should  not  be  confused  with  the  classification  for 
eligibility criteria. 

(325) BMWK - Equivalence Report 2024. 

Source: Eurostat 

105 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph A17.1: Labour productivity per hour 

regions, with Oberbayern and Hamburg at the top 
(130)  and  Sachsen-Anhalt  and  Mecklenburg-
Vorpommern  at  the  bottom  (102).  This  is  due  to 
regional  differences 
in  the  pillars  of  higher 
education  and  lifelong  learning,  labour  market 
efficiency and innovation (Map A17.3). 

Map A17.3:  Regional Competitiveness Index 2.0, 
2022 edition 

Unit: Real GDP per hour worked (EUR, 2015 prices) 
Source: ARDECO (JRC) 

Regional  disparities  in  GDP  per  capita  in 
Germany largely reflect differences in labour 
productivity.  In  2022,  productivity,  measured  as 
GDP  per  hour  worked,  averaged  122%  of  the  EU 
level  in  PPS  terms.  A  total  of  11  German  regions 
ranked  among  the  top  30  EU  regions  in  terms  of 
productivity  (all  over  125%),  with  Hamburg  and 
Oberbayern  exceeding  150%.  Only  three  of  the 
less  developed  eastern 
(Thüringen, 
Chemnitz  and  Mecklenburg-Vorpommern)  are 
around 
labour 
the  EU  average.  Disparate 
economic 
productivity 
development (Graph A17.1). 

challenges 

regions 

growth 

The productivity gap has been closing slowly 
but  steadily,  matching  overall  moderate 
economic  growth.  From  2013  to  2022,  annual 
real  hourly  productivity  growth  reached  1.8%  in 
Thüringen  and  1.6%  in  Berlin.  All  other  eastern 
regions  followed  with  growth  rates  of  at  least 
1.2%. Only western Rheinhessen-Pfalz (1.5%)  and 
southern Tübingen, Niederbayern and Oberfranken 
(1.2% and 1.1%, respectively) showed comparable 
rates  to  eastern  regions.  Some  western  regions 
recorded minimal productivity growth, in particular 
Düsseldorf  and  Hannover  (0.3%)  and  the  less 
developed  regions  Münster  and  Saarland  (0.2%). 
Targeted 
investment  would  be  beneficial  to 
regions  struggling  with  low  productivity  and  low 
productivity growth. 

Competitiveness 

In  2022,  all  German  regions  ranked  above 
the EU average in terms of competitiveness. 
However, there are significant differences between 

Source: DG REGIO, JRC based on Eurostat 

Most  competitive  regions,  with  strong  high-
productivity sectors, innovation, R&D activity 
and  human  capital (326)  are  leading  in  terms 
of  economic  performance.  These 
regions 
include  Oberbayern,  Darmstadt,  Berlin,  Stuttgart, 
Tübingen, Karlsruhe, Köln, and Rheinhessen-Pfalz. 

Regional disparities in Germany are driven by 
sector  specialisation  and  human  capital.  In 
2021,  the  most  developed  regions  excelled  in 
high-value  sectors,  such  as:  i) finance,  ii) ICT, 
iii) professional,  scientific  and  technical  activities, 
iv) administrative  and  support  service  activities, 
and v) manufacturing. Less developed regions had 
lower  shares  in  the  areas  of  finance  and  ICT.  In 
addition,  Hamburg,  Köln,  Darmstadt,  Oberbayern 
and  Berlin  have  high  shares  of  employment  in 
knowledge-intensive sectors (over 45%) and high-
technology  sectors  (more  than  7%).  By  contrast, 

(326) Human capital encompasses knowledge, skills and 

competences, highlighting the importance of education, 
training and experience in building a workforce that drives 
economic growth, innovation and productivity. 

106 

303540455055606570201220132014201520162017201820192020202120222015 EUR per hour workedOther NUTS2 regionsCapital regionNational averageEU 27 average 
      
 
 
 
 
Table A17.1:Selected indicators at regional level in Germany 

Source: Eurostat and JRC 

the regions with the lowest shares of employment 
in  high-technology  sectors  were  Trier  in  the  West 
and  Mecklenburg-Vorpommern  and  Sachsen-
Anhalt  in  the  East  (less  than  3%).  This  indicates 
that  high-value  sectors/sectors  with  growth 
potential  could  be  further  strengthened  in  some 
regions. 

Tech  take-up  in  Germany  is  moderate  but 
above  the  EU  average.  47%  of  businesses  buy 
cloud  computing  services  used  over  the  internet, 
32%  conducted  in-house  data  analytics  and  12% 
used at least one AI technology (see Annex 3). The 
ICT  sector  led  in  all  of  these  three  areas  (83%, 
53%  and  33%,  respectively),  followed  by  the 
sectors  of  real  estate  activities  and  professional, 
scientific  and  technical  activities  combined  (64%, 
33% and 24%). Regions with a high concentration 
of  these  sectors  are  benefiting  from  the  use  of 
advanced  technology  and  thereby  boosting  their 
economic performance. 

Germany has a strong industrial base, with a 
high  share  of  Gross  Value  Added  (GVA)  for 
industry 
(24%)  and  for  manufacturing 
(20.3%). There is a competitive advantage in the 
manufacturing  of  net-zero  technologies  (solar, 
wind,  batteries,  green  hydrogen)  (see  Annex  8). 
Many  German 
this  competitive 
regions  use 
advantage  by  investing  in  critical  technologies 
(digital  technologies  and  deep-tech  innovation, 
technologies, 
resource-efficient 
clean 

and 

biotechnologies)  under  the  Strategic  Technologies 
for Europe Platform. 

on 

heavy 

reliance 

The 
automotive 
manufacturing,  the  largest  industry  sector, 
manufacture  of  other  transport  equipment 
as  well  as  heavy  and  chemical  industries 
poses  several  challenges  for  transformation 
in  the  regions  where  these  industries  are 
located.  

in 

In  2023, 

innovation 

in  Germany  shows 
Regional 
innovation 
significant  disparities. 
regions  of 
the  most  developed 
leaders 
Hamburg,  Karlsruhe,  Oberbayern  and  Berlin 
outperformed  the  least  developed  regions  of 
Mecklenburg-Vorpommern,  Sachsen-Anhalt  and 
Trier  by  a  factor  of  1.7.  The  least  developed 
regions  of  Sachsen-Anhalt,  Trier,  Chemnitz, 
Mecklenburg-Vorpommern  and  Lüneburg  are 
moderate innovators. 

R&D  expenditure  and  patent  activity 
is 
heavily  concentrated  in  the  most  developed 
regions  in  the  west  and  south.  In  2021, 
business  enterprise  R&D  (BERD)  expenditure  was 
highest  in  Stuttgart,  Braunschweig,  Tübingen  and 
Karlsruhe  (3.6-6.4%  of  GDP),  driven  by  a  strong 
industrial  sector.  Other  more  developed  regions 
(except  Hamburg  and  Bremen)  and  Rheinhessen-
Pfalz  also  exceeded  2.5%.  By  contrast,  BERD 
investment was below 0.6% in the less developed 
western  region  of  Trier  and  eastern  regions  of 

107 

GDP per head (PPS)Real GDP per head growthProductivity - GDP per person employed (PPS)Real productivity growth (per person employed)Productivity - GDP per hour worked (PPS)Real productivity growth (per hour worked)R&D expenditureRegional Competiti-veness IndexPopulation growthPopulation aged 65+Unemploy-ment rateAt-risk-of-poverty or social exclusionEnergy povertyIndex EU-27 = 100Average annual % changeIndex EU-27 = 100Average annual % changeIndex EU-27 = 100Average annual % change% of GDPIndex EU-27 = 100Average annual change per 1000 residents% of total population% of labour force% of total populationInability to keep home adequately warm % of total population20232014-202320232014-202320222013-2022202120222014-20232024202420242024European Union (27 MS)1001.61000.61000.92.281001.721.65.921.09.2Germany1160.81020.31220.83.181173.322.43.421.16.3Baden-Württemberg1290.61090.41300.85.611215.521.23.018.86.6Bayern1361.01110.41320.93.371184.421.32.615.23.5Berlin1232.21010.81211.63.321226.819.15.521.54.1Brandenburg901.1971.01071.51.711224.226.03.119.37.3Bremen136-0.2101-0.21290.63.161096.720.74.934.912.3Hamburg1890.4128-0.31540.82.141305.918.04.824.54.9Hessen1310.71110.01320.53.061213.621.43.222.56.4Mecklenburg-Vorpommern871.7891.1971.21.76102-1.227.43.922.46.1Niedersachsen1060.8980.21180.62.711082.822.93.123.47.1Nordrhein-Westfalen1100.498-0.11200.42.191232.521.73.724.08.1Rheinland-Pfalz1000.6970.31231.12.771163.222.93.422.08.4Saarland99-0.290-0.11080.21.941082.324.93.321.910.9Sachsen911.2860.8991.53.081110.226.83.719.84.7Sachsen-Anhalt861.0900.71031.41.58102-4.628.04.325.93.8Schleswig-Holstein960.492-0.11110.51.671084.823.73.419.84.2Thüringen851.0851.0961.82.74107-2.227.53.422.28.2 
 
     
 
Brandenburg, Mecklenburg-Vorpommern, Sachsen-
Anhalt and Leipzig. With 285 biotechnology and 25 
ICT  patents  per  million  inhabitants  in  2021, 
Oberbayern is one of the leading regions in the EU. 
Less  developed 
regions  applied  for  1.2-2.3 
biotechnology  patents  and  less  than  0.4  ICT 
patents  per  million  inhabitants (327).  Investment  in 
research  and  innovation  could  be  strengthened  in 
less and least developed regions. 

Regional  disparities  in  human  capital  affect 
innovation  performance.  The  more  highly 
educated  population  tends  to  be  located  in  more 
developed regions. In  2024, in Berlin, Oberbayern, 
Hamburg  and  Tübingen,  at  least  40%  of  people 
aged  25-64  had  a  tertiary  degree,  and  five  more 
In  contrast, 
western 
Sachsen-Anhalt  had  the  lowest  percentage  with 
26.0%. 

reached  37%. 

regions 

in 

high-level 

educational 
Disparities 
attainment  are  even  greater  for  young 
adults.  The  proportion  of  people  with  a  tertiary 
education  among  those  aged  30-34  in  Berlin 
(58.0%),  and  Oberbayern  (55.5%)  as  well  as  in 
Hamburg  (51%)  are  well  above  the  EU  average 
(44.8%).  Chemnitz  and  Sachsen-Anhalt  have 
proportions below 30%. 

Digital  literacy  remains  moderate.  52%  of 
people had at least basic digital skills in 2023 (up 
from  49% in 2021), compared to the EU  average 
(56%).  Urban  areas  performed  better  (57%)  than 
rural  areas  (47%).  So,  there  is  scope  to  improve 
education, including digital literacy. 

and 

Demographic  dynamics  structurally  impact 
development 
Germany’s 
growth 
performance.  The  population  has 
increased, 
mainly  due  to  positive  net  migration.  Nationally, 
the  population  grew by  an  annual  rate  of  3.3  per 
1 000 inhabitants over 2014-2023. Net migration 
growth  was  5.7  per  1 000  inhabitants  per  year, 
offsetting  a  natural  decrease  of  2.4  per  1 000 
inhabitants per year. The increase in net migration 
was  significant  in  most  southern  regions,  but 
particularly strong in Brandenburg and Leipzig (10-
11  per  1 000  per  year).  On  the  other  hand,  some 
less developed eastern regions registered minimal 
net  migration  and  saw  significant  demographic 
declines  (-2.2  to  ‑5.1  per  1 000  per  year).  This 

(327) For more information on Germany’s performance in research 

and innovation see Annex 3. 

reflects  broader  trends  in  rural-urban  migration 
in  growing  urban 
across  Germany,  resulting 
population and expanding metropolises. 

The  decline  in  the  working-age  population 
and  an  ageing  population  poses  challenges 
for all German regions. Germany’s working-age 
population  (20-64  years  old)  increased  at  a 
sluggish average of 0.1% per year between 2014-
2023.  While  the  working  population  increased  or 
remained  stable  in  many  regions,  some  of  the 
eastern regions (Dresden, Thüringen, Mecklenburg-
Vorpommern,  Sachsen-Anhalt  and  Chemnitz) 
recorded declines (-0.9% to -1.7% per year). 

The  share  of  population  aged  65+  increased 
to  22.4%  by  2024  nationally,  slightly  above 
the  EU  average.  The  highest  increases  (around 
2%)  were  recorded  in  southern  Niederbayern  and 
eastern 
and 
Brandenburg.  In  several  eastern  regions,  25-30% 
of the population are aged 65+. 

Mecklenburg-Vorpommern 

Demographic change is likely to put pressure 
on  public  finances,  the  labour  market  and 
strain the provision of services, especially in 
some (less developed) regions  in the East. In 
the  medium  to  long  term,  this  may  significantly 
affect their capacity to grow, or even to cope with 
the inherent challenges of an ageing population. 

Social fairness 

in 

Labour  market  conditions  are  among  the 
strongest 
the  EU,  although  some 
disparities remain. In 2024, 15 regions reached 
or  exceeded  the  national  employment  target  of 
83%  for  people  aged  20  to  64.  In  four  of  these 
regions  workers  who  commute  to  other  regions 
contribute  significantly  to  very  high  employment 
rates  (but  not  to  the  GDP),  namely  Trier  (25% 
working  in  other  regions,  of  which  17%  abroad), 
Tübingen  (15%  work  in  other  regions),  Schwaben 
(15%  work  in  other  regions)  or  Freiburg  (6% 
working  abroad).  Berlin,  Bremen  and  Düsseldorf 
had the lowest employment rates (76-78%). 

Though the national unemployment rate rose 
from  3.1%  to  3.3%  in  2024,  the  rate  was 
lower  than  the  EU  average  (5.9%)  in  all 
German regions. The lowest rates were recorded 
in  Niederbayern,  Kassel,  Schwaben  and  Trier 

108 

 
 
(below  2.5%)  with  the  highest  recorded  in  Berlin 
job 
(5.5%).  Combined  with  Germany’s  high 
vacancy rate of 3.2%, the low unemployment rate 
points to the presence of labour shortages in many 
regions. The job vacancy rate in Germany is one of 
the  highest  in  the  EU  with  92  vacancies  per  100 
unemployed.  Despite 
the 
unemployment rate in the eastern regions over the 
last decade, their rates remain among the highest 
in Germany. All these regions have recovered from 
a temporary spike during the COVID-19 pandemic. 
Labour  shortages  remain  a  key  challenge  in  all 
regions. 

the  decline 

in 

the 

Labour  market  performance  is  also  closely 
linked to disparities in the risk of poverty or 
social  exclusion  (AROPE)  at  the  regional 
level. In Germany, cities (25%) are affected more 
than rural areas (16.9%). The energy poverty rate, 
measured  by 
to  keep  homes 
inability 
adequately warm, is below the EU average (9.2%) 
at  national  level  (see  Annex  11).  It  increased 
across  all  regions  from  2021  to  2022  and/or 
2023. Despite some declines in 2024, it remained 
above  2021  levels  in  most  regions.  Regional 
disparities in household income per capita remain, 
even though all regions are above the EU average. 
The  list  of  top  regions  as  regards  household 
income  (130-155%  of  the  EU  average)  coincides 
with that of GDP. 

Access  to  basic  services  varies  strongly 
between  rural  parts  of  the  different  regions 
and between rural and urban parts. The share 
of  people 
in  rural  areas  whose  access  to 
healthcare  is  within  a  10-minute  drive  is  well 
above the EU average (29%)  in all regions except 
Trier,  Lüneburg,  and  Mecklenburg-Vorpommern. 
However,  the  share  of  children  with  a  primary 
school  within  a  15-minute  walk  is  well  below  the 
EU  average  (31%)  for  all  regions  except  for  five 
(Tübingen, 
Stuttgart, 
Rheinhessen-Pfalz)  (Graph  A17.2).  By  contrast, 
99%  of  the  urban  population  has  close  access  to 
healthcare  and  77%  of  pupils  to  school.  Fairness 
could be increased by addressing the poverty risk, 
especially  in  cities  and  improving  access  to  basic 
services, including education in rural areas. 

Karlsruhe, 

Freiburg, 

Graph A17.2: Access to healthcare and primary 
education in rural areas, 2023 

Units: Percentage of population that can reach nearest 
hospital within 10 minutes by car (EU-27); Percentage of 
children under 15 years old who can reach primary school 
within 15-minute walk (EU-24).  
Source: Eurostat 

Affordable  housing  is  becoming  a  growing 
concern  in  Germany  (see  Annex  11),  with 
noticeable  regional  disparities.  In  2024,  the 
housing  cost  overburden  (328)  was  highest  in 
Oberbayern,  Weser-Ems,  Schleswig-Holstein  and 
Rheinhessen-Pfalz impacted  by  increases  in  2022 
and  2023.  In  contrast,  it  was  below  the  EU 
average (8.2% in 2024) in Chemnitz, Oberfranken 
and Mecklenburg-Vorpommern (Map A17.4). 

(328) The housing cost overburden rate is the percentage of the 

population living in households where the total housing costs 
(‘net’ of housing allowances) represent more than 40% of 
disposable income (‘net’ of housing allowances). 

109 

020406080HamburgBerlinArnsbergKölnBrandenburgBremenSaarlandDresdenMecklenburg-VorpommernOberfrankenDüsseldorfLüneburgDetmoldUnterfrankenChemnitzMittelfrankenLeipzigThüringenNiederbayernSchleswig-HolsteinOberpfalzSchwabenOberbayernKoblenzSachsen-AnhaltWeser-EmsHannoverKasselMünsterTrierGießenBraunschweigDarmstadtRheinhessen-PfalzStuttgartFreiburgKarlsruheTübingenGermanyEuropean UnionAccess to healthcare (% of population)Access to primary school (% of children under 15) 
      
 
Map A17.4:  Housing cost overburden, 2024 

higher  density,  including  Hamburg  (968)  and 
Oberbayern (600). 

Green  employment (330),  with  20%  of  jobs 
classified  as  sustainable  and  competitive,  is 
is 
above  the  EU  average  of  15%. 
concentrated 
in  the  most  developed  regions: 
Hamburg  (38%),  Oberbayern  (40%)  and  Stuttgart 
(42%).  By  contrast,  Chemnitz  and  Mecklenburg-
Vorpommern are below the EU benchmark for less 
developed  regions 
is  scope  for 
increasing green employment in some regions. 

(6%).  There 

It 

Source: Eurostat 

Sustainability 

Environmental  sustainability,  which  depends 
on  the  intensity  and  sectoral  composition  of 
activities and geographical features, is mixed 
In  2023,  average  greenhouse  gas 
overall. 
emissions  per  capita  in  Germany  were  slightly 
higher  than  the  EU  average.  Some  23  regions 
recorded  values  above  the  EU  average,  reaching 
16-18 tCO2eq in Sachsen-Anhalt and Brandenburg. 
In  contrast,  Berlin  and  Hamburg  recorded  only 
3.14-3.45  tCO2eq.  The  share  of  renewables  in 
electricity  production  accounted  for  63.4%  in  Q3-
2024. 

Most regions score below the EU average  as 
regards air  quality  and  the  average  of  more 
developed  EU  regions  in  terms  of  green 
infrastructure  and  employment. 
In  most 
German  regions,  the  infrastructure  for  charging 
electric  vehicles  (329)  is  below  the  EU  average  of 
287 charging points within 10 km, with an average 
of  222  for  Germany.  Only  six  regions  have  a 

(329) Indicators of access to alternative fuel infrastructure are 

based on calculations by DG REGIO and the JRC, using data 
from the European Alternative Fuels Observatory (EAFO), 
Eurostat, TomTom and Eco-Movement. 

(330) Regional Competitive Environmental Sustainability indicator, 
Measuring transition to a competitive and sustainable 
economy. 

110