ELECTIONS IN GERMANY

Economic aspects for companies

Germany has voted – in all likelihood, a grand coalition will now be formed again in the largest economy in the European Union. In their party programs, CDU/CSU and SPD have set different priorities with regard to the economy and investments. Over the next weeks, the negotiations will show what exactly will be included in the coalition agreement. At the same time, it is already becoming apparent that infrastructure and defence in particular will play an important role in the coming years. This results in possible business potential for companies from Germany and abroad.

According to the provisional results (February 24th, 2025), the 2025 Bundestag election was as follows:

CDU/CSU (Chancellor candidate Friedrich Merz): 28.52%
AfD (Chancellor candidate Alice Weidel): 20.80%
SPD (Chancellor Olaf Scholz):16.41%
The Greens (Chancellor candidate and former Vice-Chancellor Robert Habeck): 11.61%
Die Linke (top candidates Heidi Reichinnek and Jan van Aken): 8.77%

Below the 5 percent threshold and hence not represented in the Bundestag are the following parties:

BSW (top candidate Sahra Wagenknecht): 4.97%
FDP (top candidate and former Vice-Chancellor Christian Lindner): 4.33%

Since CDU/CSU has already ruled out a coalition with the AfD, which is partly right-wing extremist, a grand coalition of CDU/CSU and SPD is the most likely scenario. This would lead to a follow-up of the government between 2005 and 2009 and between 2013 and 2021 – but this time under completely different conditions. Because the AfD has now also achieved a significance at the federal level that, if this new grand coalition fails, would presumably increase the AfD’s chances of winning the next federal election. That is why there is great pressure to make measurable progress, especially in terms of illegal migration and strengthening the economy. The government is to be formed by Easter 2025. Before that, there will be intensive negotiations between the CDU/CSU and SPD on the coalition agreement. With regard to economic matters, the election programs of both parties have some differences:

Economic aspects of the CDU/CSU party program

On the one hand, CDU/CSU plans to reduce corporate taxes so that the tax rate for companies is a maximum of 25 percent. On the other hand, bureaucracy is to be reduced by adjusting statistical obligations, data collection and reports through a right of referral for companies. The CDU/CSU also wants to abolish the German Supply Chain Act. In terms of environmental protection and climate change, the CDU/CSU wants to achieve climate neutrality by 2045 without jeopardizing the competitiveness of the economy. To this end, the focus is on technology-open innovations such as hydrogen and nuclear power. In addition, emission trading is to be expanded. In general, the CDU/CSU wants to invest in digitization and technologies. In order to counteract inflation, among other things, an adjustment of income tax rates shall be made in order to prevent cold progression. In the area of education, school and training, the CDU/CSU wants to expand digital learning opportunities. With regard to internal security, the more surveillance technologies shall be used. In the fields of defence, investments are to be made in an adequate infrastructure with modern barracks and training areas, airfields, naval bases, depot structures and administrative units. For the Bundeswehr, a “full equipment” and “broad reserves” are planned “of everything that the Bundeswehr uses for defense.” In this respect, the country’s own cyber capabilities, a drone army including the necessary production capacities are to be built up and investments are to be made in drone research and the establishment of a drone defense system. In addition, the CDU/CSU plans to expand homeland security. DETAILS (in German only)

Economic aspects of the SPD party program

A likely coalition partner of the CDU/CSU and part of the future government, the SPD wants to increase the growth of the German economy by reducing electricity prices. To this end, the costs for the expansion of the electricity grids (grid fees) are to be capped at three cents per kilowatt hour. In addition, companies that invest in new equipment or technologies are to be reimbursed ten percent of the purchase amount directly through a tax refund instead of a general tax reduction. In addition, the SPD wants to introduce a “Germany Fund”, which shall initially be equipped with 100 billion euros. Public and private capital are to be used to promote investments in future, including electricity and heating networks, e-charging stations and housing construction. In addition to investments, domestic demand is to be increased by relieving the burden on the population in various areas. At the same time, the minimum wage is to rise, which leads to higher wage and salary costs for companies. In this regard, European rules shall play a role in terms of the amount. In addition, a pay equity law is to be introduced to curb differences in pay between men and women. In the defense sector, the SPD wants to spend at least two percent of gross domestic product on the modernization of the Bundeswehr. DETAILS (in German only)

Opportunities for companies

Even though the programs of both parties show significant differences and opposing concepts in economic terms (CDU/CSU: tax cuts, reduction of bureaucracy / SPD: subsidies, state-controlled investments), both parties envisage extensive subsidies or investments that can offer interesting business potential for German and international companies. In particular, infrastructure projects (public buildings, roads, rail network), armaments and defence infrastructure or digitalisation in a wide range of areas (e.g. education) will lead to considerable government investment. The coalition’s future priorities in the economy will also depend on non-economic aspects in the negotiations. However, it is already becoming apparent that infrastructure and defence in particular will play an important role in the next four years. Further information and opportunities to participate in public tenders can be explored via regional chambers of industry and commerce, local economic development agencies or organisations at the federal level such as Germany Trade & Invest.

Board Journal – February 24th, 2025