Statement by EES President Dr Ingo Friedrich, May 26th, 2025
Perspectives and Tasks of the New Federal Government
The new German government under Chancellor Friedrich Merz is facing a completely new global situation. For many years, America was responsible for security, Russia supplied cheap energy, and German products were cheaply copied in China. All three pillars have now collapsed: Today, Germany and Europe are responsible for security themselves. Russia is no longer an energy supplier, and China offers cutting-edge technology with virtually no competition worldwide. This means new challenges, new problems, and immense financial efforts.
On the positive side, European cooperation within the EU can help overcome these challenges:
Including England, there are 530 million Europeans compared to only 160 million Russians, so based on numbers alone, Europe should be able to defend itself even without America. And the large European internal market makes it possible – at least in theory – to keep pace with the world's giants technologically and financially.
At the national level, the new government faces five central strategic problems:
- Social Costs Are Too High
The government's share of spending now exceeds 50% of gross domestic product, which is clearly too high. Pension financing now accounts for the largest share of the national budget, even ahead of defense and debt service. Urgent reforms are needed here, such as raising the retirement age and fundamentally reforming the so-called citizen's income. The idea of a tax-free income of €2,000 for pensioners is a very small first step. More must follow.
- Bureaucratic Costs Are Excessively High
Discontent with the pervasive bureaucracy in almost all areas has now become unmistakable. At the national and European levels, therefore, the course has – thankfully – been fundamentally changed: Easing the burden on the economy, broadly eliminating regulations (the so-called Omnibus Model), and prioritizing competitiveness are now the most important objectives. Easing the burden on housing construction and the establishment of new businesses is essential if the German economy is to regain momentum.
- Reducing Energy Costs
From today's perspective, shutting down nuclear power plants was certainly too early. Other countries are building new nuclear power plants, both in Europe and around the world. Renewable energies may appear more cost-effective at first glance, but their extremely fluctuating availability makes them very expensive in individual cases. When demand is high, the listed electricity price can rise by up to 1000%! And it is expected that demand for electricity will significantly increase even further, due to developments such as artificial intelligence and electric cars. Storage systems that better balance supply and demand are urgently needed.
- The Skilled Labor Shortage
When discussing migration, the focus is usually on reducing it, not on intelligently managing immigration, which would involve recruiting needed skilled workers. Given the declining birth rate, skilled immigration is extremely important for the German economy. Better support for talented young professionals must also be considered. This applies equally to schools, academies, and companies. The media should also report more on success stories, not just disasters.
- New Work Mentality
media talks a lot about life work balance and the four-day work week, but not about the need for peak performance and more work. OECD statistics indicate that working hours in Germany are now the lowest in all of Europe. A broad economic recovery is not achievable with this mentality.
Some concrete measures taken by the new government offer hope:
Germany's position as a center of automotive production is to be significantly strengthened, the expansion of charging stations is to be pushed forward, affordable electric cars are finally to be launched on the market, and the complete ban on combustion engines is to be postponed.
A new high-tech agenda is intended to particularly promote cutting-edge technologies and highly qualified startups. This also includes space travel and artificial intelligence. A positive example from history is that Europe was able to build a successful competitor to the then-giant Boeing with the Airbus. The message is: Germany and Europe can do it if they really want to.
The fundamentally new policy for the Bundeswehr will also have positive effects. Many inventions and technologies had their origins in the military sector, and the economic impact of this spending should not be underestimated.
Unresolved and difficult areas of work will include curbing debt and avoiding higher inflation rates. The reduction of CO2 emissions will also slow down.
Overall, the new government should be given a fair chance, especially since the first steps in foreign policy certainly give cause for optimism.
Dr. Ingo Friedrich