The OECD sees a need for reform in Germany

The OECD recommends that the German government improve the framework conditions for businesses in order to revive the economy. The skilled trades sector is calling for "comprehensive structural reforms" to strengthen competitiveness.

The OECD (Organisation for Economic Co-operation and Development) regularly publishes analyses and forecasts on the most important short-term global economic trends. In its outlook for Germany, it recommends various reforms to the German government to improve the framework conditions for growth, investment, and employment. 

"The economy is projected to grow by 0,7 percent in 2026 and by 1,1 percent in 2027. Private consumption will be supported by rising wages – albeit at a slower pace, as higher energy prices and inflation are reducing real income growth. Public investment will increase significantly as a result of greater flexibility in fiscal rules and high investment needs," the analysis states. This will also lead to higher private investment.

Use additional money efficiently

To promote public and private investment, it is essential to continue reducing bureaucratic burdens, digitizing public administration, and improving infrastructure implementation capacities – particularly at the municipal level – according to the OECD Council. This would simultaneously help accelerate the green transition and reduce dependence on fossil fuel imports.

To use the additional funds for infrastructure and defense efficiently, it is important to further simplify public procurement and approval procedures and to improve the capacities of public administration, particularly at the local level. "To avoid rising inflationary pressures, fiscal rule reform should go hand in hand with structural reforms."

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Promoting vocational training

Particularly in the construction and service sectors, reducing excessive administrative burdens and regulatory barriers to market entry and growth is needed to strengthen competition. The OECD also recommends lowering professional licensing requirements and business start-up criteria. "Shifting the tax burden from labor to capital income and wealth, for example through higher revenues from current property taxes and reducing inheritance tax exemptions for business assets, would improve incentives for the labor supply." 

Reducing financial incentives for early retirement would improve work incentives for older workers and help stabilize pension expenditures in the face of increasing budgetary pressures due to demographic change. To address the skills shortage, it is crucial to expand further training opportunities for employed and unemployed individuals, including increased support for obtaining formal vocational qualifications.

Mandate for the Federal Government

"The analyses and findings of the OECD Economic Outlook also present a clear mandate for action by the German Federal Government," commented Jörg Dittrich, President of the German Confederation of Skilled Crafts. "To noticeably improve the framework conditions for growth, investment, and employment, Germany needs comprehensive structural reforms. The OECD report confirms what many craft businesses have been experiencing for a long time: external crises, high energy prices, and trade conflicts are compounded by structural disadvantages for Germany as a business location."

Germany has lost ground in key competitive issues. "Anyone who wants to catch up again must remove the obstacles at their own location. The OECD therefore considers reforms urgent that simplify administrative procedures, use public funds more effectively, facilitate investment, and relieve the burden on businesses, companies, and employees." The report also points to the very high non-wage labor costs, which make labor in Germany more expensive compared to other countries.

No further reform delays

Dittrich: "This finding aligns with the results of the latest spring report by the German Council of Economic Experts. Both the OECD and the Council of Economic Experts demonstrate that Germany cannot afford further delays in reform. Global crises are unavoidable, but a country's resilience is not built on world markets, but rather on its own doorstep. The greatest potential for increased growth, investment, and competitiveness lies in decisively addressing Germany's structural weaknesses through comprehensive reforms. The German government must finally take this to heart."

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