German Economy Welcomes Coalition Committee's Initial Measures
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The Coalition Committee, a group of top political leaders, has unveiled a package of measures designed to provide swift relief to Germany's economy. The measures, which include reduced energy costs and special depreciations, have been met with praise from business leaders and industry associations.
Following the announcements, Peter Adrian, a member of the Coalition Committee, explained that these decisions mark the first steps in bringing immediate relief to corporations, particularly in the area of energy costs and special depreciations. Adrian also highlighted the importance of simultaneously pushing for a corporate tax reform with lower tax rates, thereby offering companies more predictability.
Tanja Gönner, CEO of the Federation of German Industries, welcomed the federal government's commitment to actionable projects for the economy before the summer break. She emphasized that the anticipated improvements in depreciation rules and a lower corporate tax rate must indeed be implemented promptly. Gönner also advocated for a reduction in energy costs and a brief suspension of bureaucracy, particularly in the implementation of the German Supply Chain Act and streamlining it in accordance with new European guidelines.
Christiane Benner, chair of the Metall industrial union, echoed Gönner's sentiments, calling for speedy implementation of the projects to boost confidence among people and companies. "Time is of the essence, and much remains to be accomplished before the summer," she noted.
Wolfgang Große Entrup, head of the Association of the Chemical Industry, deemed the decisions of the Coalition Committee substantial and praised their focus on immediate measures. He suspected that the government's clear promises have a positive impact on the companies' trust in the location, citing the direction as right and the first measures as getting underway before the summer break.
Joachim Rukwied, president of the German Farmers' Association, expressed a positive evaluation of the Coalition Committee's results, likening the developments to a first important signal from the new federal government. He expressed optimism about further relief, particularly in the necessary bureaucracy reduction.
However, economist Veronika Grimm questioned several measures, deeming them questionable, such as the reduction of the VAT rate in the catering industry, agricultural diesel subsidy, and the mother's pension. She argued that these costly measures are unwarranted at a time when they cannot afford such election gifts.
The agreements on the "immediate program" for the economy and a "big pension reform" were reached by leaders of Union and SPD on Wednesday. The coalition partners published a four-page paper with more than 60 measures, though only a few have concrete dates for implementation. The reduction of the VAT rate for the catering industry, the increase in the commuter allowance, and the reintroduction of the full agricultural diesel refund for farmers are slated for implementation starting January 1, 2026.
The Coalition Committee's decisions include a corporate tax reform aimed at strengthening Germany's economic competitiveness. The reform includes a draft business tax reform bill that extends the loss carryback period, introduces an arm's length requirement for intercompany cross-border financing, abolishes dual consolidated loss (DCL) rules, extends the transition period for mandatory electronic invoicing for B2B transactions, and relaxes minimum taxation rules limiting net operating loss (NOL) carryforward. The tax reform bill is expected to be discussed and voted on in the Bundesrat following recent Bundestag approval, with some measures being retroactive or effective from 2024, others from 2025.
While not explicitly detailed in the latest announcements, past coalition policy and economic stimulus plans have included accelerated depreciation for investments in green technology and digitalization. The 2025 budget includes significant investment allocations, which may support such incentives, but specific “special depreciation” rules for 2025 have not been detailed in the latest available sources.
The government has set aside €110 billion ($125 billion) in public investments for 2025, aiming to boost infrastructure, green technology, and digitalization. The funding is allocated for 2025, with investment likely to be spread throughout the year.
Stakeholders such as industry associations and unions broadly support the coalition's moves to reduce taxes, lower energy costs, and increase public investment. However, some critics argue that the reforms do not go far enough to address Germany's structural economic challenges. Nevertheless, the allocation of significant public funds and targeted tax relief is broadly viewed as a positive, albeit cautious, step toward improving competitiveness.
- The Commission, given the current economic situation, has been asked to submit a proposal for a directive on the approximation of the laws of the Member States relating to the protection of workers from the risks related to exposure to ionizing radiation, as the policies that promise to lower energy costs and boost investments in green technology and digitalization are being implemented across various industries.
- Although the Coalition Committee's initial measures for economic relief in Germany have been welcomed by industry leaders and business associations, some critics argue that the reforms do not go far enough to address Germany's structural economic challenges, much like the political debates and policy-and-legislation discussions in finance and politics regarding general-news topics often provoke mixed opinions.
- As the government makes commitments to actionable projects for the economy, such as reducing energy costs, improving depreciation rules, and a lower corporate tax rate, it is essential for policymakers to consider the broader implications for businesses, including the industry, finance, and the overall economy—thus, it is crucial for the government to make informed decisions that support the long-term success of the business sector and the country's competitiveness.
