Germany increases business aid amid calls for urgent regulatory reforms

07 Mar, 2025

Germany’s business lobbies have welcomed plans to relax fiscal rules for defense spending and establish a €500 billion ($535 billion) infrastructure fund, but emphasize that regulatory reforms are crucial for economic growth. The agreement, reached by parties aiming to form Germany’s next government, includes a 10-year infrastructure fund and revisions to borrowing rules to strengthen the military and boost Europe’s largest economy.

Business leaders, including BDI head Tanja Goenner, see the initiative as vital to halting declining investment and weak growth. However, challenges such as rising competition, high energy costs, and economic uncertainty remain. The swift negotiations between the conservative CDU/CSU and Social Democrats indicate a promising start for decisive policymaking, improving confidence among businesses and consumers.

Experts believe the fund could counteract uncertainties in U.S. trade policy and help Germany’s industrial sector, which faces soaring energy prices. Claudia Kemfert of DIW urges prioritizing power grid upgrades, renewable energy expansion, and climate-friendly industrial modernization to ensure sustainable growth.

Despite optimism, concerns persist about the fund’s impact. Veronika Grimm, an economic adviser, warns that unclear allocations may not directly drive growth, benefiting large corporations more than small and medium-sized enterprises (SMEs). The DIHK Chamber of Commerce and Industry cautions that without cutting red tape, streamlining approvals, and addressing labor shortages, costs could spiral.

DIHK President Peter Adrian stresses that debt alone won’t resolve economic issues. He calls for a comprehensive reform package with greater regulatory freedom, cost relief for businesses, and a more efficient state. While the infrastructure plan is a step forward, Germany’s economic recovery ultimately depends on structural reforms alongside financial investments.

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