When Christian and Social Democrats formed a new government, the prospects seemed bleak. The same coalition governed Germany for 16 years from 2005 to 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 US, while relying on exports to a seemingly unlimited Chinese market.
Yet the new coalition is surpassing expectations. Chancellor Friedrich Merz has pulled off a 180-degree reversal on Germany’s rigid debt brake, striking a deal with Social Democrats and Greens to finance an ambitious 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 control the four ministries, giving Chancellor Merz enhanced leverage to drive policy.
A single, strong decision-maker is 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 strong position.
Another important change is moving away from Germany’s car obsession. Under the previous government, automative was designed 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-19 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 Bio Bank” will be launched to promote preventive, precision, and personalized medicine.
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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 no longer is seen as a dirty word. The government 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, and 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 a “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, last serving as CEO for electronics retailer Ceconomy. He aims to enable citizens to access public services through a digital DeutschlandID, attempting to make the public sector an anchor customer for 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 aims to reduce dependence on foreign 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. As much as Chancellor Merz promises to reverse course, the Koalitionsvertrag still vows to exclude untrustworthy providers “in a legally secure way.” How? “In the future” is a long period of time.
Another unanswered question is how to deal with US tech in the era of Donald Trump: Should it be excluded from sensitive contracts? Or does it mean working with US tech to build up digital capabilities?
The new German tech policy is ambitious. Like every strategy, it is only relevant if turned into concrete change. 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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