Global insurer Allianz has said that Germany needs a ‘strategic vision’ to restart its growth engine.
The firm said in a new report, Germany – Quo Vadis? – that there are 10 priority areas that the country should tackle in order to strengthen its growth foundation and chart a path to future prosperity.
All this comes against statistics in recent days that indicate the country has seen two years of economic decline — the first time this has happened in half a century.
See also: German economy hit by domestic political crisis
According to Allianz, the 10 priority areas are:
- Liberation from fiscal self-restraint: The company needs to implement a dynamic debt brake alongside a ‘golden rule plus’ based on investments. Raising the structural deficit ceiling to between 0.5% and 1% of GDP, Allianz said, should support critical investments even as structural reforms remain essential.
- A transition to a green energy system: Allianz said that shortsightedness has delayed any transition and led to higher costs, slower decarbonisation, and lagging infrastructure growth.
- Rebuilding public infrastructure: Critical priorities, said Allianz, include infrastructure, education, housing, and green energy while fostering public-private partnerships to enhance financing and job creation.
- Unleashing labour supply to close the demographic gap. Allianz named proactive market policies must increase workforce participation among women, older workers, and immigrants.
- Ensuring fair pensions for a population where the old-age dependency ratio is set to rise from 34% to 51% by 2050.
- Reforming the tax system to boost motivation and incentivise work: The current system, said Allianz, puts a high burden on labour.
- Revitalising innovation: Allianz said German R&D investments of 3.1% of GDP are insufficient to stake leadership claims in future technologies industries such as AI, robotics, quantum, and green technologies. Doubling R&D investment to 6% of GDP through tax breaks and strategic institutional support is critical for innovation and competitiveness
- Reducing regulatory burdens: Bureaucratic costs in Germany amount to €146bn annually, with direct costs estimated at €65bn.
- Strengthening European leadership: “Germany must reinvigorate its role by supporting common debt mechanisms, deepening the Capital Markets Union (CMU), promoting equity market growth, incentivising savings reorientation, and simplifying regulations.”
- Engagement for fair trade relations.
The veracity of Allianz’s recommendations come not only as the German economy continues to crater, but around six weeks before the country goes once again to the polls in a federal election. The incumbent Olaf Scholz is widely expected to be replaced as Chancellor by the more-conservative Friedrich Merz.
In addition, the far-right AfD party, recently endorsed by Elon Musk, is polling in the low 20s.
