When Christian and Social Democrats formed a new German government in May this year, the framework conditions were bleak. Both parties had gotten weak results, one netting the second lowest percentage since 1949, the other the lowest since 1887. The same coalition had governed Germany for 12 years between 2005 and 2021, allowing strategic weaknesses to develop and fester. Under Chancellor Angela Merkel, Germany underestimated and neglected disruptive digitization. It became dependent on cheap Russian gas. It outsourced German security to the United States, while relying on exports to a seemingly unlimited Chinese market.
Yet the new coalition is showing strong ambition. Chancellor Friedrich Merz has pulled off a 180-degree-reversal on his party’s perennial insistence on the infamous debt brake policy, striking a deal with Social Democrats and Greens to finance a sweeping program of investment and innovation.
Tech is key. In the coalition agreement, the so-called Koalitionsvertrag, the government pledges twice in the first 100 lines of the text to turn Germany into an “AI nation.” Economic topics cover 80 of the agreement’s 146 pages. Four ministries are tasked with achieving the innovation goals: the Ministry for Economy and Energy, the Ministry for Transport, the new Ministry for Digitization and State Modernization, and the Ministry for Research, Technology, and Space. Interestingly, Christian Democrats and their Bavarian allies control all four ministries, giving Chancellor Merz enhanced leverage to drive policy.
Well-coordinated decision-making would be welcome. Under the previous coalition, ministries dealing with tech were divided among different parties, which often resulted in deadlock. As Brussels moved forward with a series of tech regulations, Germany often abstained from taking a position at all.
Another important change is moving beyond Germany’s car obsession. Under the previous government, automative companies were designated as the only key industry. The new Koalitionsvertrag adds biotech and space to the ”key“ level. Credit the Christian Democrats for the change; their electoral platform promoted these industries, while the Social Democrats ignored them.
Biotech builds on a German strength in chemicals and pharmaceuticals. A German startup developed the Covid vaccine. Although details remain unclear, the government wants to build on this success by boosting venture capital and improving regulations for developing and producing medicines. A taboo on genome editing is being discarded. A “National BioBank“ will be launched to promote preventive, precision, and personalized medicine.
Space represents the third “key“ industry. The coalition promises to build a resilient satellite infrastructure for crisis communication and internet connectivity and to create “sovereign capacities“ to shoot satellites into orbit. It will move to boost European space activities.
Digital has been a much-used word in German politics for long. The new government now promises to turn words into deeds. It has set a goal to spend more than 3.5% of GDP each year until 2030 supporting an IT surge into key technologies such as AI, Quantum, robotics, ICT, photonics, micro, and nanoelectronics. Germany plans to host at least one of the European AI gigafactories. Regulation should be simplified: the coalition wants the EU’s AI Act to be implemented in an “innovation friendly” and “bureaucracy light” fashion.
The public sector needs digital modernization and the coalition has appointed Germany’s first dedicated Ministry for Digitization and State Modernization. Its new minister Karsten Wildberger comes from the private sector. He aims to enable citizens to access public services through a digital DeutschlandID, attempting to make the public sector an anchor customer for the digital industry with an emphasis on open standards and open source.
Are these ambitions realistic? Germany continues to struggle to build a nationwide modern data grid infrastructure. A new law aims to boost mobile and fiber optic-based connectivity by limiting time-consuming litigation. The country aims to pursue “digital sovereignty,” without answering how much it dares to reduce dependence on US and Chinese tech.
The history of China’s Huawei’s involvement in the country’s mobile phone network offers a dispiriting example. Previous governments pledged to exclude “untrustworthy companies” from partaking in critical infrastructure, but backed down after Deutsche Telekom objected. Chancellor Merz’s Koalitionsvertrag remains unclear about what exactly the new government will do after watering down an originally strongly worded pledge in the last minute. Course correction may be in the offing “in the future”. But the future is a long period of time.
Another unanswered question is how much to promote European digital sovereignty. Excluding US tech is not to be expected from Germany. But how much will the country trust US tech to build up digital capabilities?
The new German tech policy is certainly ambitious. However, the beauty of any strategy depends on mobilizing good troops and winning decisive engagements. It will be a tall order to turn Germany into a digital native country. But any German patriot, right, left, or center, in government or serving as opposition, must hope that at this the government will be successful.
Reinhard Bütikofer is a Senior Fellow with the Tech Policy Program at the Center for European Policy Analysis, Bütikofer previously served as a Member of the European Parliament (2009-2024) and was a prominent leader of the European Green Party.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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