On 8 December 2021, Germany introduced its first new Chancellor in 16 years when Olaf Scholz formally took over from Angela Merkel. During her decades-long role as the country’s “eternal Chancellor”, Merkel transformed German politics and its economy.
The new centre-left government, a coalition formed by the Social Democratic Party, the Greens and the market-oriented Free Democrats, was voted in on the promise of a set of progressive policies. These included turning Germany into a tech powerhouse through green tech, and an all-encompassing digitalisation of the economy.
What do Scholz and his government’s plans to modernise the country mean for the tech industry?
What did Merkel do?
Merkel, the former Chancellor, presided over Germany’s economic revival. The country’s economy grew 34 per cent under her leadership, establish itself as Europe’s richest country. But, having been at the forefront of industrial innovation for decades, it found itself lagging behind its European rivals on tech.
Germany ranked 34th out of 38 industrialised economies for fast internet connections. Another survey found that four out of 10 German companies still use fax machines frequently for all communications.
Merkel made fixing Germany’s digital shortcomings a priority for her final term. In 2020, she announced a €130 billion stimulus plan designed to tackle future challenges – €50 billion of which were earmarked for climate change, innovation and digitisation projects.
On Industry Day in June 2021, Merkel said the next German chancellor would have to bring in far-reaching reforms to help Germany pick up the pace of technological progress, do more to digitise the public sector and ensure businesses can access cutting edge technology to remain competitive.
In her speech, Merkel said she supported the state’s investment of “gigantic” sums in the high-tech sector including artificial intelligence, quantum computing, batteries and microchips.
As she prepared for her successor’s takeover, Merkel encouraged firms to invest in tech and IT, whilst highlighting how the bulk of the funding would need to come from government aid to tackle the lack of public and private investment in the sector.
New direction for German tech?
The new Chancellor may be nicknamed the “Scholzomat” because of his dry political style, but the career politician has made no secret of his future-oriented coalition’s ambition to pursue – and enhance – Merkel’s digitalisation of the German economy.
Despite their economic power, Germany’s digital capabilities have long lagged behind that of their closest rivals, and the new Chancellor is setting out to change that. According to Bloomberg, less than one in five (18 per cent) German businesses issue electronic invoices.
Such antiquated practices have led some industry commentators to accuse Germany of being a tech ‘laggard’ – while harsh, there is a semblance of truth. But with new leadership comes new ideas, and in his first major address as Chancellor, Scholz asserted that Germany “can no longer stand still”.
He vowed to launch the biggest transformation of the economy for a hundred years, with a heavy emphasis on what he called a “decade of investment”. He also rolled out plans to double renewable energy production by 2030 and “transform [Germany] into a climate leader”, alongside committing to kick-starting the long-term task of digitalising and modernsing the German economy.
Upon his inauguration, it became immediately apparent as to the scale of Scholz’s ambitious vision. Software Engineers will play a critical role in realising it, but billions of Euros in annual investment are essential to ensure Germany can play catch up in the tech race. We will have to wait and see whether or not his coalition will stump up the funds.
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