Too much bureaucracy and regulation, too little digitalization: Economists only rate Germany as a location in an international comparison with a school grade of 3.4. But they also see strengths of the economic area.
Economists have given Germany very mixed grades as a location. On average, they give it a school grade of 3.4, according to a survey published today by the Munich Ifo Institute among 180 professors of economics at German universities.
This is “worryingly bad for the industrial nation of Germany,” said Ifo expert Niklas Potrafke today. The economic experts particularly complained about bureaucracy and regulations.
Call for reform
“For Germany to do better as a business location, reforms are needed,” said Potrafke. “This includes reducing bureaucracy and more public investment in infrastructure and digitalization.” The retirement age must also be adjusted to life expectancy.
Similar recommendations come from the Organization for Economic Cooperation and Development (OECD). The Iodustrieländer organization recommends the abolition of environmentally harmful and other distorting tax benefits – such as company car privileges, diesel subsidies and exceptions to inheritance tax. This could increase the federal government’s financial leeway. “This should be combined with a reform of the debt brake, which increases the scope for net investments,” said OECD Germany expert Robert Grundke this week.
Wage level not in focus
In nine of the 13 categories surveyed in the ifo survey, the experts more often saw a weakness than a strength for Germany in an international comparison. Bureaucracy and regulation were particularly frequently cited as weaknesses – followed by problems with energy, raw materials and digitalization.
The location also received negative reviews in terms of non-wage labor costs, taxes and infrastructure. The wage level in Germany, however, did not play a particular role in the survey. Around three quarters of economists rated it as neutral.
Stable institutions as a strength
Despite the points of criticism, the experts surveyed also see strengths in the German business location. At 67 percent, the political institutions in Germany were most often rated positively.
“Our still functioning democracy, combined with features such as the rule of law, economic freedom, protection of property and low corruption – is a clear location advantage for Germany – especially compared to dictatorships or autocracies,” said Potrafke.
The experts surveyed also tended to see education and “human capital”, the categories of security and geopolitical risks as well as access to financing, as Germany’s strengths.
A total of 180 professors of economics took part in the ifo and “Frankfurter Allgemeine Zeitung” economist panel from April 16th to April 23rd.