Ip229 en

ISSN 2443-8014 (online)
2023
Country
Report
Germany
INSTITUTIONAL PAPER 229 | JUNE 2023
EUROPEAN ECONOMY
Economic and
Financial Affairs
Secretariat-General
Recovery and
Resilience Task Force
European Economy Institutional Papers are important reports analysing the economic situation and
economic developments prepared by the European Commission's Directorate-General for Economic and
Financial Affairs, which serve to underpin economic policy-making by the European Commission, the Council
of the European Union and the European Parliament.
This paper has also been published as Staff Working Document SWD(2023) 605.
This specific report was prepared in cooperation with the Secretariat-General Recovery and Resilience Task
Force, with valuable contributions from Eurostat, Directorate-General for Employment, Social Affairs and
Inclusion, Directorate-General for Climate Action, Directorate-General for Environment, Directorate-General for
Regional and Urban Policy, Directorate-General for Structural Reform Support, Joint Research Centre,
Directorate-General for Energy, Directorate-General for Mobility and Transport, Directorate-General for
Internal Market, Industry, Entrepreneurship and SMEs, Directorate-General for Communications Networks,
Content and Technology, Directorate-General for Research and Innovation, Directorate-General for Education,
Youth, Sport and Culture, Directorate-General for Migration and Home Affairs, Directorate-General for Health
and Food Safety, Directorate-General for Financial Stability, Financial Services and Capital Markets Union,
Directorate-General for Taxation and Customs Union, Directorate-General for Justice and Consumers, and
Directorate-General for Translation.
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for the use that might be made of the information contained in this publication.
This paper can be downloaded from https://economy-finance.ec.europa.eu/ecfin-publications_en.
Luxembourg: Publications Office of the European Union, 2023
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CREDIT
Cover photography: © iStock.com/Teka77
European Commission
Directorate-General for Economic and Financial Affairs
Secretariat-General
Recovery and Resilience Task Force
2023 Country Report

Germany
EUROPEAN ECONOMY Institutional Paper 229

EUROPEAN
COMMISSION
Brussels, 24.5.2023
SWD(2023) 605 final
COMMISSION STAFF WORKING DOCUMENT
2023 Country Report - Germany
Accompanying the document
Recommendation for a COUNCIL RECOMMENDATION
on the 2023 National Reform Programme of Germany and delivering a Council opinion
on the 2023 Stability Programme of Germany
{COM(2023) 605 final}
EN EN
ECONOMIC AND EMPLOYMENT SNAPSHOT
Graph 1.1: Components of GDP growth
Germany's economy is adjusting to 4
a new and shifting environment 3
GDP has now recovered beyond pre- 0
pandemic levels, but the economy is still -1
feeling the impact of Russia's war of -2
aggression against Ukraine. As services -3
reopened and households started using the -4
savings built up during the pandemic, -5

2017 2018 2019 2020 2021 2022 2023 2024
consumer spending rebounded strongly in
2022. However, Russia’s war of aggression Consumer spending Public spending
against Ukraine caused significant disruptions Fixed capital formation Inventories
to energy deliveries and to supply chains. This Net exports GDP
had an impact on the economy and fuelled (1) Contribution to GDP growth in percentage points
inflation, reining in the recovery both in terms Source: Eurostat, European Commission
of consumer spending and investment.
The labour market is tight, with firms
High inflation is eroding purchasing experiencing major labour shortages. At
power and putting pressure on firms. around 80%, the employment rate for 2022
Consumer price inflation peaked at 11.6% in remained robust and one of the highest in the
October 2022 – a rate unseen since the oil EU. The unemployment rate has been at
crisis in the 1970s. Since then it has gradually historically low levels at around 3%,
fallen to 7.6% in April 2023. The rise in significantly below the EU average of 6%.
inflation was mainly driven by energy prices, However, there are significant regional
which drove up the cost of products and disparities, with some regions having an
services. unemployment rate close to the EU average
(see Annex 17).
Services are likely to keep inflation high over
the coming years. The rise in consumer prices Job growth has remained strong, especially in
has dented purchasing power, particularly for services, leading to a vacancy rate that is
less affluent households. The high energy higher than the unemployment rate. Reported
prices also had a significant effect on labour shortages have been more acute in
Germany’s large manufacturing base, services (the IT sector, engineering, logistics,
increasing the cost of production and posing a the care sector) and in manufacturing, and
particular challenge for small and medium they remain significant in construction. Due to
enterprises and firms in energy-intensive ageing and the decline in the working age
sectors. The government adopted temporary population by 3.7 million in the 2020s, (1) a
support measures to provide financial relief to net migration balance at around 400 000
households and businesses (see Box 1a). people a year would be needed to offset a
(1) The 2021 Ageing Report: Economic and Budgetary

Projections for the EU Member States (2019-2070).
2
decreasing level of potential labour force (2). depth Review for Germany (3). The current
Meanwhile, the number of hours worked per account balance fell from 7.7% in 2021 to
employed person have continued to fall 4.2% of GDP in 2022. Though the key factor
relative to pre-pandemic years. This reflects was a surge in energy prices, the decrease was
untapped potential, particularly of part-time also the result of a stronger rise in imports of
workers. The share of part-time workers is non-energy goods and services. At the same
particularly high among women and Germany time, the investment ratio increased while
is among the Member States with the highest savings came down towards their pre-
share of women in part-time work. pandemic level. The current account surplus is
expected to increase towards 6% yet
Graph 1.2: Unemployment, wages and prices remaining below pre-pandemic levels for the
next few years and stay below the MIP
12
threshold. While in the past decade house
10 prices have become increasingly overvalued,
8 since the second half of 2022 house price
6 increases receded, reflecting increasing
interest rates and the reduced purchasing
4
power of buyers. At the same time, housing
2
supply remains constrained and house
0 completions have been declining further below
-2 government targets.
-4
I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV Productivity has stalled for the last five
2015 2016 2017 2018 2019 2020 2021 2022 years. Aggregate labour productivity has
wage growth unemployment rate largely recovered to its pre-pandemic level, but
HICP inflation productivity is set to remain sluggish. The
(1) Unemployment in % German economy has structural weaknesses
(2) Wage growth and inflation in % year-on-year such as low investments in intangible assets
Source: Eurostat (including research and innovation), shortages
of skilled labour and a decline in business
Overall business profitability has dynamism. Regulatory restrictions in the
remained robust as firms passed on the access to and exercise of certain business
higher costs to prices. Nominal wages services are higher than in the EU on average,
increased markedly in 2022 (4.7%), though resulting in less competition, higher average
the increase is still below inflation (Graph 1.2). costs and lower competitiveness. Dismissals
High inflation is set to continue to be a drag are avoided as businesses anticipate a
on consumer spending in 2023 until real recovery and attempt to mitigate the shortage
wages grow again. So far, companies have of skilled labour.
been able to pass on the increases in labour
and input costs to customers, helping them Some sectoral trends can partly explain the
maintain profitability. sluggish productivity growth. Manufacturing
activity remains below its peak in 2018, as the
The country's macroeconomic transition to decarbonisation and adjustments
vulnerabilities relating to the persistent to supply chains to mitigate the impact of high
energy costs and other disruptions still
current account surplus have been
constrain the level of output. The growth in
gradually reduced, as assessed in the In-
construction has been hindered by shortages
of material and labour, rising costs of material
and administrative restrictions. Job growth in
(2) Research Institute of the Federal Employment Agency
(IAB) (2021), Projektion des Erwerbspersonenpotenzials (3) European Commission (2023), In-Depth Review for
bis 2060 - Demografische Entwicklung lässt das Germany, Commission staff working document,
Arbeitskräfteangebot stark schrumpfen. (COM(2023) 629 final).
3
labour-intensive public-sector employment Germany performs relatively well on
such as healthcare, social services, education implementing the European Pillar of
and public administration has also slowed Social Rights, but challenges remain
productivity growth. Regional differences in related to inequalities in education and
labour productivity have decreased as training, employment and housing (Annex
Germany has seen its less developed regions 14). In stark contrast to the EU-wide trend, the
gradually catch up. However, significant early school leaving rate from education and
disparities still remain (see Annex 17). training deteriorated significantly in Germany
over the past decade (12.2% against the EU
average of 9.6% in 2022). For non-EU born
The energy crisis highlights the people, the rate is 28.8%, also reflecting the
challenge of integrating large inflows of
urgency of the green and digital newcomers in recent years. The impact of a
transitions for sustainable growth person's socio-economic background on their
educational outcome has increased, and about
one-fifth of 10-year-olds do not meet basic
Germany’s energy mix made it highly standards in German and mathematics, which
exposed to the ongoing energy crisis, risks aggravating skills shortages (Annex 15).
leading to dramatic adjustments. Before
Russia's war of aggression against Ukraine, Access to early childhood education and care
Germany had a very high level of exposure to for children below the age of 3 remains low
Russian gas and oil, at 65% and 34% (31.4% against the EU average of 36.2%). At
respectively in 2021 (4). Over the past years, it 49% in 2021, Germany is below the EU
has reduced this reliance significantly, to zero average of 54% of individuals aged 16-74
for gas and to below 25% for oil (5). However, with at least basic digital skills, hampering the
more action is warranted on electricity and digital transition. A large gap remains between
digital networks, digital public services, the employment rate of people with and
permitting, green and digital skills, energy without disabilities (30.5pps in 2021).
efficiency, natural carbon sinks and the Reflecting the challenge of affordable housing,
circular economy. the share of people living in households with
housing costs above 40% of their total income
Decarbonisation, energy security, (11% in 2021) is above the EU average (8.3%)
digitalisation and skills are key to and rising (up from 9% in 2020).
competitiveness, raising productivity, and
to achieving a fair transition. Germany
could use the green and digital transitions as
an opportunity to boost productivity,
competitiveness and job creation in the
medium-to-long term. The green transition
offers unique opportunities to help shape the
economy for competitive sustainability. To this
end, Germany has carried out a series of
energy-related investments and reforms. This
includes new legislation to accelerate the
rollout of renewable energy, wind energy in
particular, and to accelerate work on
expanding the grid. Germany has also
achieved a high level of gas supply security.
(4) Eurostat (2021)

(5) BMWK
4
Box 1a: Energy policy response in Germany – Part 1
Germany adopted several support measures to cushion the impact of energy price
inflation on households and businesses. The Commission's 2023 spring forecast
projects the gross budgetary costs of these measures to amount to 2.0% of GDP in
2023. (6) Most measures maintain the price incentive to consume less energy, although
they are insufficiently targeted to the most vulnerable. In 2022, the government
adopted a bundle of one-off measures, but from 2023 onwards, the main energy
measures are energy price brakes set to last until April 2024. Depending on price
developments, this can be funded by a dedicated fund of up to EUR 200 billion (worth
4.9% of GDP).
Notable measures in 2022 included one-off lump-sum payments of EUR 300 to

employed persons and pensioners and EUR 200 to other groups, such as people
receiving social assistance. The government paid heating allowances and covered the
December 2022 bill for natural gas and heat consumers. For three months, taxes on
petrol and diesel were reduced. A EUR 9 monthly ticket was offered for local public
transport. In 2023, the main energy measures are a natural gas and heat price brake
and an electricity price brake that cap energy prices for households, small and medium-
sized enterprises and for industrial companies.
The price brakes are based on consumption levels over the previous year, and cover
80% of past consumption by households and small and medium enterprises and 70%
for industrial companies. For these quantities, energy retail prices are capped for
households at 12 cents/kWh for gas, at 9.5 cents/kWh for district heating and at 40
cents/kWh for electricity. Industrial companies qualify for a price cap on the wholesale
energy price without network and distributions costs of 7 cents/kWh for gas, 7.5
cents/kWh for district heating and 13 cents/kWh for electricity.
The government also reduced VAT on gas and district heating from the normal rate of
19% to 7% for the period October 2022 to March 2024.
(6) For 2022, gross budgetary costs of measures amounted

to 1.2% of GDP.
5
Box 1b: Energy policy response in Germany – Part 2
An analysis of the consequences of high inflation on income distributions shows that
the expenditure burden rose particularly sharply for people on the lowest income decile,
by around 14% of household disposable income, compared to only 5% at the top decile.
Government measures such as the electricity and gas price breaks are of greater
benefit to lower-income households by stabilising their relative disposable income and
reducing the expenditure burden by up to 2 pps in the bottom decile. But they are not
enough to compensate for the negative consequences of high inflation. Overall,
Germany's price brake measures have not been very targeted to support vulnerable
households, are insufficient to tackle inequality and add to fiscal cost. (Source:
European Commission's Joint Research Centre, calculations based on the EUROMOD
model, version I5.0+ and its Indirect Tax Tool extension (ITTv4).)
Germany applies the EU solidarity contribution under Council Regulation (EU)

2022/1854 for the fiscal years 2022 and 2023, with a defined rate of 33%. (7)
Germany took several measures to improve the security of its energy supply. This
included energy savings in buildings and industry, bringing in changes to an existing
scheme for building renovation, and adopting two energy conservation ordinances
mandating measures in public buildings and obliging companies to take energy
efficiency measures. Germany decided to nationalize a former subsidiary of Russia’s
Gazprom and bailed out energy suppliers in financial trouble such as Uniper to secure
Germany’s energy supply. The German government initially planned to phase out
nuclear energy by the end of 2022 but agreed to keep its three active nuclear power
plants in operation until April 2023. It also granted the temporary reactivation of hard
coal and lignite power plans to save gas.
Although overall Germany performs well average on reducing inequalities (SDG 10) and
on the UN’s Sustainable Development on delivering quality education (SDG 4). On
Goals (SDGs), challenges remain related environmental sustainability, Germany
to inequality, quality education and performs well (SDG 2, 9, 11) or is improving on
environmental sustainability (Annex 1). underperforming indicators (SDG 7, 12).
Germany performs above the EU average and However, it is moving away and needs to catch
made further progress on decent work and up with the EU average on climate action (SDG
economic growth (SDG 8), on macroeconomic 13).
stability (SDG 16, 17) and productivity (SDG 9).
It also performs well on many SDG indicators
related to fairness (SDG 1, 3, 8), but it is Although it expects to run a deficit
moving away from SDG 5 (Gender equality).
Further, Germany is moving away from the in the coming years, Germany's
targets and needs to catch up with the EU public finances remain healthy
(7) I.e. applying a mandatory temporary solidarity

contribution at a rate of at least 33% to the Public finances provided fiscal space for
extraordinary and unexpected profits of businesses the government to react decisively to the
active in the extraction of crude petroleum, natural gas,
recent crises. In 2023, the pandemic support
coal, and refinery sectors. It is calculated on taxable
profits, as calculated under national tax rules in the measures are expected to be phased out, with
fiscal year starting in 2022 and/or in 2023, which are the cost going down to 0.2% of GDP from
above a 20% increase in the average yearly taxable 3.0% in 2020, 4.9% in 2021 and 1.8% of GDP
profits in 2018-2021.
in 2022. With the increase in energy prices in
6
2022, the government took several support national debt brake (10) already in 2023. As
measures amounting to around 1.2% of GDP. nominal GDP growth is expected to exceed
The size of the energy measures for 2023, yearly deficits, the debt-to-GDP ratio is
notably the gas and electricity price brakes, expected to continue to fall.
will depend on the evolution of energy market
prices (8). The tax mix in Germany is based heavily
on labour taxes, while the share of
Extra-budgetary funds are set to increase environmental taxes is below the EU
government spending and deficits over aggregate and Germany continues to
the coming years. The budgetary surpluses grant environmentally harmful subsidies.
seen between 2014 and 2019, before the Labour taxes in Germany are among the
pandemic, are not expected to return soon for highest in the EU, providing weak incentives in
several reasons. First, rising interest rates will the tax and transfer system for low-wage and
entail higher interest costs in the future. second earners to increase hours worked. The
Second, the extra-budgetary funds (9) adopted low rate of environmental taxation in Germany
in 2021/2022 will increase the deficit over the is driven by energy and transport taxes, both
coming years. These include for the coming below the EU average. (11) Environmentally
years an extra EUR 100 billion (2.4% of GDP) harmful subsidies remain substantial and
for defence and an increase in the Climate and hamper the green transition (Chapter 3).
Transition Fund of EUR 60 billion (1.5% of
GDP). Ageing and early retirement put pressure
on the sustainability of the pension
The government also created a EUR 200 billion system. The working age population is
fund (4.9% of GDP) to help households and expected to fall substantially in the 2020s due
businesses cover the higher energy costs (see to the retirement of the baby-boom
Box 1b). Overall, these extra-budgetary funds generation. This will considerably increase the
allow to increase public investment and financing needs of the first pillar mandatory
spending, but they tend to limit the pay-as-you-go system and require action to
transparency of the budgetary framework and ensure pensions remain adequate, particularly
the associated expenditure will count in the for low-income workers. The statutory
deficit from an EU perspective. retirement age is gradually increasing and due
to reach 67 years in 2031. Although the
Despite recent measures, public finances employment rate of workers aged 55-64 was
remain sustainable in the medium-term. among the highest in the EU (at 73.3% against
The level of government debt increased by the EU average of 62.3%), the increase in the
around 10 percentage points during the effective retirement age has slowed over time,
pandemic and peaked in 2021 at 69.3% of and employment in the age group of over 65
GDP. In 2022, debt started to fall again, aided lags behind EU top performers. The state-
by increasing inflation, which generated extra subsidised private pension schemes (third-
revenue and fuelled nominal GDP growth. pillar personal pension schemes, Riester Rente)
Despite the additional spending items, have so far been underused, proving less
Germany has declared that it will reapply its attractive for low-income earners and people
with unstable employment. Despite efforts to
increase the use of occupational pensions
(8) Falling energy prices in recent months make it likely
that the take-up of this fund will fall; the Commission is
predicting support amounting to 2.0% of GDP in 2023
and 0.3% of GDP in 2024.
(10) The national debt brake limits new net debt to 0.35% of
(9) Extra-budgetary funds (Sondervermögen, GDP at federal government level and prohibits it at
Extrahaushalte) lie outside of the core budget Länder level.
(Kernhaushalt) though they still count towards the
federal government level. Since 2022, they already (11) Germany applies carbon prices in the transport and
count for the national debt brake when funded from the heating sectors through a national emissions trading
core budget and no longer only when actually spent. system.
7
(second pillar), the rate of coverage remains at
about 56%.
8
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY
Germany’s recovery and resilience plan aims no way implies formal Commission approval or
to tackle the key challenges related to the rejection of any payment requests.
green and digital transition, to improving its
education system, healthcare and public Germany is rolling out measures to
administration. It consists of 15 reforms and decarbonise the economy, in particular
25 investments funded by EUR 26.4 billion in industry and transport, with a special
grants, representing 0.8% of GDP (see Annex 3 focus on hydrogen. Together with action to
for more details). increase energy efficiency, the measures
contribute to reaching the green target set
The implementation of Germany's under the plan and to the REPowerEU objective
recovery and resilience plan is underway, of diversifying away from imported fossil
however with significant delays. Limited fuels. On hydrogen, Germany carried out an
resources attached to the plan implementation expression of interest procedure for Important
and insufficient prioritisation have led Projects of Common European Interest. Part of
Germany to fall behind regarding the the projects are currently being assessed by
implementation process. Germany still needs the Commission for state aid considerations.
to sign its operational arrangements and Some projects receive additional grants for
submit its first payment request. This request research and innovation under the National
would cover 36 milestones and targets that Hydrogen Strategy, and its implementing
track progress across all components of the programmes such as the national innovation
recovery and resilience plan, potentially programme hydrogen and fuel cell technology,
leading to a disbursement of up to EUR 4 and will tackle the challenges of producing
billion. water electrolysers, offshore production and
transport technologies.
Germany’s recovery and resilience plan
was already amended once in February Germany is also promoting sustainable
2023, adjusting two investment measures transport and energy efficiency. Recipients
that could not be fully completed due to can receive support to purchase 560 000
objective circumstances (12). The plan is electric vehicles, alongside an extension of tax
expected to be revised again in 2023, to cover exemptions for e-vehicles that also applies to
among others additional reforms and businesses. It plans to improve charging
investments in the REPowerEU chapter, with infrastructure by funding both public and
the overall aim to increase the value of its residential recharging points. Funding is also
plan to over EUR 30.3 billion, making full use planned to accelerate the uptake of buses
of the grants available. However, negotiations fuelled by greener alternatives to diesel.
on the REPowerEU chapter and to Projects in the building sector are underway
accommodate the increase of non-repayable with energy-efficient renovation schemes and
support are still ongoing. the start of 23 network projects on climate-
friendly timber construction.
The following, more detailed review of
measures being implemented under the RRP in Reforms of the public administration
have progressed. A first set of laws to
(12) Council Implementing Decision amending Council accelerate planning and approval procedures
Implementing Decision of 13 July 2021 on the approval in the transport sector have entered into force
of the assessment of the recovery and resilience plan
for Germany, Brussels, 14 February 2023, 5536/23.
and resulted in simpler, more transparent and
digital procedures. Further efforts are
9
underway to shorten administrative planning especially for employees of small and medium
and approval procedures, standardise the enterprises. The recovery and resilience plan
requirements for requesting financing has funded research, development, and
subsidies, accelerate housing construction and innovation led by the Digitalisation and
increase the number of successful transfers of Technology Research Centre of the German
business ownership to the next generation, armed forces (dtec.bw). This has funded
and these efforts require diligent research and innovation in strategic
implementation. The public consulting agency technological areas, strengthening German
PD – Berater der öffentlichen Hand provides and European digital and technological
technical assistance to public authorities to sovereignty.
stimulate investment at municipal level,
including digitalising schools. Germany has also advanced on measures
to improve education, social and health
Progress is being made on numerous outcomes. During the COVID-19 pandemic,
digitalisation projects, including the plan funded grants for at least 70 000
proposals for microelectronics and apprentices, provided learning support for
communication technologies. The aim of pupils and provided teachers with digital
the microelectronics Important Project of devices when an increasing share of
Common European Interest (EUR 1.5 billion) is educational activities had to be organised
to boost the EU’s capabilities in electronics online. The commitment that the total social
design and roll out the next generation of low security contribution rate would stay below
power trusted processors and other electronic 40% in 2021 was a reassurance at a time of
components. A call for expressions of interest high insecurity. Funding for research into
was launched to identify potential participants. COVID-19 vaccines helped BioNTech develop
Several pilot projects contributing to the and produce life-saving vaccines.
digitalisation of the railway under the ‘Digital
Rail Germany’ initiative and the ‘fast track’ Germany is preparing additional social
programme are due to be completed, which measures requiring longer-term planning.
should help develop standardised, These include a pension information portal
interoperable modules for the digitalisation of (Digitale Rentenübersicht) informing citizens
the railway. about their individual pension rights from all
three pension pillars (statutory, company and
Vehicle manufacturers and their suppliers private pensions), the first national education
have received support to manage the platform (Nationale Bildungsplattform)
digital and ecological transition. The providing easy access to multiple education
federal programme ‘Building continuing offers, the digitalisation of public health
education and training networks (CET offices and the modernisation of hospitals,
networks)’ promotes training activities, including action on digitalisation
(Zukunftsprogramm Krankenhäuser).
Box 2: Key deliverables under the recovery and resilience plan in 2023-24
 Funding at least 400 000 recharging points in residential buildings
 Launching the beta version of the national education website (Nationale Bildungsplattform)
 Launching the Digital Pension Overview (Digitale Rentenübersicht), a web portal that informs citizens
about their individual pension rights
 Completing energy-efficient renovations of 10 000 housing units
 Increasing the digitalisation of hospitals and public health offices
 Modernising 60 educational institutions of the armed forces (Bundeswehr)
 Completing pilot registers and a technical architecture ready to be connected with priority registers
10
FURTHER PRIORITIES AHEAD
Graph 3.1: Total installed capacity of the main

renewable energy sources and the national Removing bottlenecks to
expansion goals in Germany investment and boosting the green
400 transition
installed envisioned
350
300
Offshore wind +196% Streamlining and speeding up permitting
Solar photovoltaic procedures would help accelerate the
250
Gigawatts
Onshore wind roll-out of renewable energy sources and

200 additional net-zero technologies.
150 Renewable electricity is vital for the successful
+ 67% roll-out of Germany’s green transition plans
100
(renewable hydrogen production, electric
50 vehicles, heat pumps, etc.) and for achieving
energy security in the medium term due to the
0
high dependence on imported fossil fuels.
2014
2018
2022
2012
2016
2020
2024
2026
2028
2030
Rollout plan Graph 3.1 shows the total (planned) installed

Source: Bundesnetzagentur (2023), Council of Economic
capacity of the main renewable energy
Experts (2022), EEG 2023, Flächenentwicklungsplan sources. A three-fold acceleration is needed to
2023 meet the national targets (from a +67%
expansion over the past 8 years to a +196%
Germany faces challenges additional to over the coming 8 years). While 41% of
those tackled in the recovery and electricity is currently generated by renewable
resilience plan. The government has recently energy, further progress is achievable. This is
put in place important reforms (see Annex 2 particularly important since otherwise fossil
on progress on country-specific fuels will continue to be used to offset the
recommendations). Further action will be phase-out of nuclear, especially coal and
required to make progress on numerous lignite-fired power plants.
priority challenges. They include accelerating
the green and digital transitions by swiftly and In addition to the energy-related investments
smoothly implementing permitting procedures, and reforms made by Germany (see Economic
rolling out fibre optic networks, promoting the Snapshot), further improvements could be
skills needed for the green and digital made to digitalise the related administrative
transitions, boosting productivity and processes, develop related skills, speed up
competitiveness, improving the tax mix, consultations and procedures in administrative
improving education and training, and readying courts, provide incentives to roll out hydrogen
the pension system for population ageing. infrastructure, and provide support to
understaffed authorities (13).
Tackling these additional challenges will also
help Germany make further progress in Cross-border collaboration, such as the
achieving the UN Sustainable Development initiatives to accelerate the roll-out of offshore
Goals (SDGs), where Germany currently has
room for further improvement, namely on (13) In particular, local municipalities and administrative
climate action (SDG 13), quality education districts depend on adequate support from the Länder.
(SDG 4) and reduced inequalities (SDG 10).
11
wind energy, including cross-border Greening the heating network and accelerating
infrastructure, in the North and Baltic Seas the roll-out of heat pumps in an affordable
helps address implementation challenges way would help reduce Germany’s reliance on
(Annexes 7 and 12). fossil fuels. Municipal heat planning would
help facilitate the progressive decarbonisation
Expanding and upgrading the electricity of Germany's heating system.
networks would help meet the needs for
the green transition. Germany has taken New gas terminals can improve the EU’s
steps to stimulate flexible solutions for the security of supply, if installed without
electricity system and to expand the power delay. Germany has planned and started
grid. However, more effort seems warranted to implementing natural gas infrastructure (14)
remove the remaining bottlenecks to grid that would replace Russian gas imports
flexibility, including storage, and to accelerate completely in the medium term. Germany
the expansion of high voltage transmission fulfilled its gas storage obligations last winter,
grids. This could include realising projects of reaching 90.1% by 31 December 2022.
common interest and streamlining the related
court and consultation procedures. Due to interconnected gas markets, liquified
natural gas imported to Germany can also be
In addition, Germany's distribution grids would transmitted to other European countries and
benefit from being digitalised and upgraded help boost Europe’s security of supply.
further to accommodate new producers and Notably, the floating storage regasification
consumers of electric vehicles, solar units in Lubmin could contribute to secure gas
photovoltaic systems and heat pumps. supply for other Member States. It is essential
Electricity storage is likely to become to continue the energy diversification efforts
increasingly important to smoothen out and stick to the envisaged timeline in order to
fluctuations and peak demand, help integrate improve the security of supply within and
renewable energy, reduce congestion and grid beyond national borders. However, new gas-
investment costs, and increase the resilience related infrastructure should not create lock-
and reliability of the energy system. ins; instead, it should pave the way for the
green transition. Land-based liquified natural
Accelerating action on energy efficiency, gas terminals should be compatible with
including in transport, domestic heating hydrogen or ammonia in the medium term.
and industry can help maintain
Germany’s competitiveness while Reaching Germany’s climate and energy
continuing the transition to a green targets requires further action to
economy. Despite several relief and decarbonise the transport and building
protection measures, including voluntary sectors and protect carbon sinks. The
energy demand reduction measures, transport climate policy measures set out in the
and industry need to structurally reduce their recovery and resilience plan and other
energy intensity to manage the persistently government measures to date, such as
high energy costs. While energy prices have introducing a national carbon price to bring
decreased, they remain historically high and down emissions in the transport and building
uncertainty remains regarding next winter, sectors, were not sufficient to enable Germany
which requires continued efforts to structurally to reach its sectoral national emission targets
reduce gas demand. Targeted energy in 2022 (15): While progress was made on
efficiency measures, including the energy and industry-related emissions, the
electrification of transport and industry, are an
opportunity for Germany to boost
competitiveness and job creation, including in (14) Six floating storage regasification units, one floating
regasification unit and two stationary liquefied natural
the clean tech sector. The current recovery and gas terminals.
resilience plan includes investments in
(15) Federal Environmental Agency (2023) press release No
decarbonising industry, carbon contract-type 11/2023 from 15.03.2023.
schemes, and energy renovation in buildings.
12
transport and building sectors have failed
again to meet national sector-specific Tackling labour shortages and
emission targets for 2022. boosting productivity by
strengthening skills, digitalisation,
More progress is needed in the transport
sector in particular to help Germany meet its research and innovation
2030 target under the Effort Sharing
Regulation. Action is also needed to achieve
net carbon removal targets in land use, land Structural reforms and further
use change and forestry (LULUCF). The trend investments are needed to boost
seen since 2017 of falling net carbon productivity and business dynamism, with
removals needs to be reversed (16). There is a particular focus on skills, digitalisation
significant potential to boost the capacity of and innovation. Sluggish productivity growth
the LULUCF sector to act as a carbon sink by in Germany reflects an investment gap in
rewetting peatlands. intangible assets, such as research and
development, software and databases,
Environmental protection, climate digitalisation, digital skills, fibre coverage and
adaptation and the circular economy can skilled labour, which are all barriers to
boost Germany's resilience. Adapting investment. The risk is that these barriers have
forests to climate change and improving the a lasting negative effect on Germany’s long-
LULUCF sector would yield added co-benefits term competitiveness, in particular for regions
for biodiversity (17). This would also be in which productivity is already below the EU
beneficial in view of unprecedented levels of average.
water scarcity, which affects water quality,
energy management and agriculture (18). Germany is one of the EU's Eco-Innovation
Urgent action is needed to minimise the Leaders (20), performing strongly both in
growing risks of extreme heat, drought and absolute numbers and in the share of green
flooding events and their impacts on human patents, thereby supporting the Green Deal
health, biodiversity, agriculture, forestry, Industrial Plan (21). However, the share of
transport and infrastructure (19). business R&D expenditure by small and
medium enterprises has stalled at below the
Lastly, as Germany strengthens its strategic EU average (Annex 11). Firms’ access to
supply chains for the green transition, shifting growth and later-stage capital remains a
to circular economy business models and major challenge. The lack of skilled workers is
increasing the circularity of critical a considerable barrier to investment,
components and materials will help boost the undermining the innovation performance of
resilience of supply chains, while reducing small and medium-sized enterprises in
emission-intensive production procedures. particular. The slow take-up rate of technology
and weaknesses in eGovernment affect the
business environment, leading to an overall
(16) This value is indicative and does not prejudge the drop in business dynamism (22).
legally binding 2030 national target on LULUCF that
will be set in 2025, according to revised Regulation (EU) Reducing restrictive regulation in
2018/841
business services could boost competition
(17) 92% of Germany’s peat soils are currently drained, and productivity. Business services are
releasing greenhouse gases of around 53 Mt CO2eq,
about 7.5% of Germany’s total emissions in 2020. See essential to manufacturing and other service
also Umweltbundesamt (ed.) Emissionen der
Landnutzung, -änderung und Forstwirtschaft.
(20) Eco-innovation index, Eco-Innovation (europa.eu).
(18) Federal Environmental Agency (2019), Monitoringbericht
2019 zur Deutschen Anpassungsstrategie an den (21) Overall Strategic Analysis of Clean Energy Technology in
Klimawandel. the European Union, JRC (2022).
(19) Umweltbundesamt (Eds.). Klimawirkungs- und (22) OECD, OECD Economic Surveys: Germany 2020, OECD
Risikoanalyse 2021 für Deutschland. Publishing, Paris (2020).
13
sectors. However, barriers to competition in compensation schemes. To significantly reduce
several important regulated professions the burden on users – businesses and citizens
remain high in Germany, in comparison to the – and on the public authorities, digital, user-
EU average, including for tax advisers, lawyers friendly services could be set up, at least to
and architects (Annex 12). For example, the extent originally planned under German
exclusive rights to exercise tax advice and legislation.
legal advisory services stifle competition.
These restrictions contribute to an overall The Online Access Act mandates digitalising
decline in business dynamism and competition, user-facing services beyond requirements of
as indicated by below average business churn the related measure in Germany's recovery
rates and shares of high growth enterprises as and resilience plan to full geographical and
well as above average markups in certain comprehensive thematical coverage. Germany
business services. could make significant progress at all stages
of this process by swiftly modernising the
Despite significant improvements in the registers, as envisioned in the recovery and
coverage of very-high-capacity networks, resilience plan, and taking significant
fibre coverage remains low. Germany is at additional steps to digitalise and inter-
risk of missing the target of connecting 50% operationalise service handling within and
of households and businesses to the network between public authorities (24). This would free
via fibre optics by 2025 and of achieving up resources and increase agility, raising the
nationwide uninterrupted mobile (voice and efficiency and efficacy of public service
data) communication by 2026 (and 100% by delivery. To reach these goals, it is essential to
2030). Despite significant improvements in the secure commitment and coordination between
overall coverage of very-high-capacity all levels of the public administration.
networks, rural areas still lag behind. Only Increasing transparency on service design and
19.3% of households have access to a fibre delivery may also enhance user buy-in (25).
connection, making Germany one of the
Member States with the lowest fibre coverage Germany's working age population is
(second lowest in the EU; the top five having a shrinking. The working age population is
fibre coverage of at least 85%). (23) expected to fall by 3.7 million in the 2020s,
and the lack of qualified workers is a
Improving framework conditions is crucial significant factor hampering economic growth.
to accelerate fibre coverage. It is Demographic ageing and the need for skills
particularly important to increase capacity in linked to the digital and green transitions are
local administrations for permit-granting and expected to exacerbate labour shortages. The
the number of qualified experts employed. Research Institute of the Federal Employment
Meeting the network targets will also require Agency estimates that a net migration balance
improvements to the administrative at around 400 000 people a year would be
procedures for permit application and granting needed to offset a decreasing level of
and the standardisation of alternative, less potential labour force. The lack of skilled
time-consuming installation techniques. workers is a considerable barrier to
investment, especially for small and medium-
Digitalising public services and sized enterprises (26).
administrative procedures can improve
business dynamism and productivity. The
(24) The eGovernment Benchmark (2022) suggests Germany
COVID-19 pandemic and the energy crisis is one of nine Member States with non-consolidated
have shown that a strong digital base is eGovernments that need to digitalise both front and
important for effective crisis response back offices of public-service providers.
measures, including digitally-run (25) Germany underperforms on transparency in the
eGovernment Benchmark (2022).
(23) Key Indicators — Digital Scoreboard - Data & Indicators (26) In 2021, over 350 000 people worked in Germany in
(digital-agenda-data.eu) renewable energy jobs, but around 40% of businesses
in clean-energy-relevant manufacturing experience
14
To alleviate these labour shortages, more Graph 3.2: Employment rate of people aged
could be done to tap the potential of 20-64 by country of birth
women as well as of low-qualified people,
people with disabilities and migrants. Total Males Females
Germany has one of the highest employment 100

87
rates for women in the EU (76.8% in 2022) 90 83
86
81 82
and a relatively small gender employment gap. 80 76 78
Nevertheless, the high share of women 70

67
working part-time and the low number of 60 57

hours paid contributes to a substantial 50
unadjusted gender pay gap (17.6% in 2021)
40
and to the pension gap (31.6% in 2021).
30
There is potential to increase the employment 20
of low-qualified people, which was 15.4 10
percentage points (pps) lower than overall 0

employment in 2022 (for the age group 20- DE EU except DE Non-EU
64). In addition, considerable employment

gaps remain for people born outside the EU, Source: Eurostat
and the employment gender gap is especially
wide for non-EU-born women (see Graph 3.2). Skills policies are key for the green and
digital transition and can also alleviate
Although skilled immigration can alleviate labour shortages. Adult learning is essential
shortages of skilled labour, measures for to tackle persistent skills shortages, but over
labour market and social integration with the last 10 years, the participation rate of
implications for schools and social services are adults in learning over the past four weeks
a precondition to better tap this potential. was roughly stable and below the EU average
Targeted labour market inclusion measures for (8.1% in 2022; EU average 11.9%) and only
people with disabilities and improving basic 4.0% for low-qualified workers. Improving
skills of disadvantaged groups could also digital, entrepreneurial and STEM (27) skills can
contribute to tackling labour shortages and to contribute to automation, to modernising the
raising the employment rate to Germany's economy and to tackling labour shortages
national target of 83% by 2030. across the economy. However, only 49% of the
population in Germany aged 16-74 had at
least basic digital skills, below the EU average
of 54%.
It is crucial to develop skills for the green

transition (to install heat pumps and solar
panels, and make energy efficiency upgrades,
for example) to achieve Germany's energy and
climate goals (28). Promoting participation in
initial and continuous vocational education and
learning programmes to support the green
transition would be in line with Germany’s
target of having 65% of adults in learning
(27) Science, technology, engineering and mathematics.

(28) In 2022, labour shortages were reported in Germany for
20 occupations that required specific skills or
knowledge for the green transition, including incinerator
labour shortages that have limited their production and civil engineering technicians, civil engineers, and
between Q4 2021 and Q1 2023. plumbers and pipe fitters.
15
every year by 2030. Despite the shortages on labour supply for the green and
the labour market, the share of students
following a STEM course in their first semester
digital transitions
fell from 40.5% in 2015 to 37.7% in 2021.
The tax mix in Germany is skewed to
The educational outcomes of young
taxing labour, hampering labour supply.
people are strongly influenced by their
Labour taxes in Germany are among the
migrant and socio-economic status.
highest in the EU and the interplay of the tax
Inequalities in education outcomes have and transfer system result in weak incentives
worsened during the pandemic. Children of for low-wage and second earners to increase
parents with a higher secondary education are their working hours. Women are particularly
more likely to succeed in school. The share of affected by the high tax wedge for low-wage
early leavers from education and training and second earners (see Annexes 18 and 12).
increased slightly in 2022 to 12.2%, above the
EU average of 9.6% and well above the EU The measures taken, such as adjusting the tax
target of 9% by 2030. The rate was more than schedule and tax-free allowances to account
double (28.8%) for non-EU born (Annexes 1 for inflation (kalte Progression – bracket creep)
and 14). benefit low-income earners more than others,
but this group is also the hardest hit by
Further assistance to young people from
inflation (30). Increasing the earning thresholds
disadvantaged backgrounds, especially those
for mini-jobs and midi-jobs (31) above which
with a migrant background, and an increase in
full employee social contributions gradually
qualified teachers may improve education
apply is only a partial remedy to this long-
outcomes and help tackle staff shortages in
standing challenge. It increases the take-home
schools. Improving teachers’ digital and
pay for low-income earners but does not
pedagogical skills also remains a priority.
significantly raise the incentives to increase
hours worked beyond the thresholds,
Improving early childhood education and
compounding the part-time work trap.
care and all-day schooling could enhance
both educational outcomes and the share The government does not plan to carry out a
of parents working full-time. Around 30% major reform of the joint income taxation and
of children under 3 are enrolled in early the current option to allocate the tax benefit
childhood education and care, below the new more equally (Faktorverfahren) has been used
Barcelona target of 40.4% by 2030. This low by less than 1% of married couples, due to a
participation rate is key to explaining why the complex application process. At the same time,
employment rate of women aged 25-49 with tax bases that are less harmful to inclusive
children younger than 6 is much lower and sustainable growth remain underused.
(18.6pps) than for women of the same age
without children. Since 2013, all children under Germany’s share of environmental taxes
the age of 3 have the legal right to a place in is below the EU aggregate. This applies to
early childhood education and care, but in both the share of GDP and the share of total
2021, the places available were still 12.4 pps
behind the needs identified in some regions (30) An analysis of the consequences of high inflation for
and issues with service quality remain (29). the income distribution carried out by DG JRC based on
EUROMOD shows that low-income earners face a
particularly pronounced increase in spending.
Government measures such as price caps on electricity
and gas benefit lower-income households more by
A tax mix for inclusive and stabilising their relative disposable income but they are
sustainable growth, incentivising not enough to compensate for the negative
consequences of high inflation.
(31) These are labour contracts where employee social
(29) BMFSFJ, Kindertagesbetreuung Kompakt Ausbaustand security contributions are lower than for regular
und Bedarf 2021 (2021). contracts.
16
tax revenues. The low rate of environmental financing needs of the first pillar mandatory
taxation in Germany relative to the EU pay-as-you-go system.
aggregate is the result of low scores on all
types of environmental taxes: both energy and In recent years, an increasing share of
transport taxation are below the EU average. financing needed to come from the federal
Unlike many other Member States, Germany budget, in 2022 amounting to EUR 101 billion
does not levy resource or pollution taxes. (2.6% of GDP). (35) This share has increased
Vehicle taxation does not promote more over time and is a drag on public finances. By
environmentally friendly transport. European standards, Germany faces a
sustainability risk for the pension system. The
Environmentally harmful subsidies are move to reactivate the catch-up factor
hampering the green transition. Germany (Nachholfaktor) from 2022 that prevents
continues to grant substantial environmentally pensions from outpacing wage developments
harmful subsidies (Annex 6) such as fossil fuel improves pension system sustainability, but
subsidies (32) (33). Implementing the coalition the challenges are broader. The government’s
government’s commitment to reduce these plan for a long-term commitment that
subsidies would generate revenue to invest in pensions do not fall below 48% of previous
the green transition and help achieve emission income is expected to have a positive impact
targets under the German climate law, on the adequacy of pensions. However, it is
especially in the transport sector. expected to result in further fiscal transfers,
unless accompanied by a major shift in how
the statutory pension system is financed.
Safeguarding the pension system Early retirement puts pressure on the

to prepare for population ageing sustainability of the pension system and
and raising the employment rates compounds the labour shortages. The
statutory retirement age is gradually
of older workers increasing to reach 67 years in 2031, while
adjustments after 2031 will need further
responses following increasing life expectancy.
An ageing population puts social security
Although Germany continues to be one of the
systems under financial pressure. The
top performers in the EU in the employment of
working age population is expected to fall older workers, the increase in the effective
substantially over the coming decade due to retirement age has slowed over time, and
the retirement of the baby-boom generation employment in the age group of over 65 lags
and the old-age dependency ratio is expected behind EU top performers. After at least 35
to increase by over 12 pps to 46.4% in years of work, workers can retire early with
2030 (34). This will considerably increase the relatively small reductions in their pension
benefits (36). Since 2014, workers can retire
after at least 45 years of work without a loss
(32) Such as company car tax benefits, the excise tax refund of pension entitlements (Rente mit 63),
for diesel fuel used in agriculture, the lower energy tax
rate for light fuel oil used in mobile machinery, the fuel
tax refund for agriculture, the excise tax exemption and
tax relief for natural gas for industrial consumers or the
reduced carbon tax rate on diesel used in agriculture. (35) Rentenversicherungsbericht (2022).
(33) According to the German Federal Environmental Agency, (36) If retiring before the statutory retirement age, benefits
these subsidies amount to EUR 65 billion. The German in Germany are reduced by 3.6% for each year under
Finance Ministry uses a narrower definition. the statutory retirement age. This is low by international
standards, as the reduction for each early retirement
(34) The 2021 Ageing Report: Economic and Budgetary year is about 5% in France, Finland and Austria, 6% in
Projections for the EU Member States (2019-2070). Greece, 6.5% in Slovakia, and 6% to 8% in Spain
The old-age dependency ratio shows the ratio between depending on contribution years. It is not possible at all
the number of people aged 65 and over and the to retire early under the basic old-age scheme in
number of people aged between 20 and 64. Denmark, Poland and in the Netherlands.
17
accounting now for about one-third of people
retiring, or 260 000 people a year (37).
Second and third-pillar pensions remain

underdeveloped. Germany would need to
scale up plans to strengthen the funded
elements of the pension system to have a
noticeable positive effect both for individuals
and for public finances. The current state-
subsidised private pension schemes (third-
pillar personal pension schemes, Riester Rente)
have been underused, with the coverage rate
stalling at around 34% over the past ten
years. They invest in low-yielding safe debt,
suffer from high commissions, resulting in low
rates of return and limited uptake. As a result,
the system has failed to provide sufficient
incentives for private retirement savings,
especially for low-income earners.
The government plans to bring in a

standardised investment product by the state
for the Riester Rente which could lower costs
and raise returns and the take-up of funded
personal pension schemes. The planned
Aktienrente (a debt-financed fund of EUR 10
billion which will transfer its investment
returns to the public pension system in the
2030s) is limited compared to the annual
contribution made by the federal government
to the pension system. The latter already
exceeds EUR 100 billion (2.6% of GDP) per
year, accounting for one-third of overall
pension expenditure. Despite efforts to
increase the use of second-pillar occupational
pensions (Betriebliche Altersvorsorge),
coverage remains at about 56%. The
increasing share of volatile employment
careers is likely to be a barrier to significantly
scaling up this coverage. Pensions from the
second pillar can be boosted by facilitating
agreements between social partners.
(37) Taking the average pension at EUR 1 500, the

additional pension expenditure is around EUR 4.7 billion
for each year of retirement before the statutory age.
18
KEY FINDINGS
Germany’s recovery and resilience plan capacity of the land use sector for carbon
includes important measures to tackle a removals;
series of its structural challenges:
 boosting productivity and competitiveness
 investments in building renovations, clean by promoting digital skills and digital
mobility, industry decarbonisation and the administration, accelerating the roll-out of
hydrogen value chain; very-high-capacity digital networks,
especially fibre optics, including by
 investments in key advanced technologies improving administrative framework
and in the digital transformation of the conditions, and stimulating investment in
automotive industry, healthcare, education, research and innovation, in particular in
and public administration; and small and medium enterprises;
 action to tackle the learning disparities  tackling inequalities in educational

exacerbated by the COVID-19 pandemic, outcomes, particularly to improve the
and to provide additional childcare places. educational outcomes of disadvantaged
groups;
Germany should significantly accelerate the
implementation of its amended recovery and  improving the tax mix to provide incentives
resilience plan, also by ensuring sufficient to increase hours worked and promote
resources, and swiftly finalise the addendum environmental sustainability; and
and the REPowerEU chapter with a view to
rapidly starting its implementation.  ensuring the pension system is sustainable,
given the ageing population, and raising the
In addition to the reforms and employment rates of older workers by
investments set out in the recovery and reducing the incentives for early retirement.
resilience plan, Germany would benefit
from:
 boosting investment and swiftly

implementing permitting procedures to roll
out renewable energy sources and
electricity networks;
 boosting the labour supply and promoting

the skills needed for the green transition;
 reducing further its reliance on fossil fuels

and strengthening competitiveness, by
reforming environmentally harmful
subsidies, improving energy efficiency and
incentivising energy savings, accelerating
decarbonisation in industry, transport,
building and heating networks and
strengthening the circular economy and the
19
ANNEXES
LIST OF ANNEXES
Cross-cutting indicators 26
A1. Sustainable Development Goals 26
A2. Progress in the implementation of country-specific recommendations 28
A3. Recovery and resilience plan - overview 31
A4. Other EU instruments for recovery and growth 33
A5. Resilience 36
Environmental sustainability 37
A6. European Green Deal 37
A7. Energy security and affordability 42
A8. Fair transition to climate neutrality 47
Productivity 50
A9. Resource productivity, efficiency and circularity 50
A10. Digital transformation 52
A11. Innovation 55
A12. Industry and single market 57
A13. Public administration 61
Fairness 63
A14. Employment, skills and social policy challenges in light of the European Pillar of Social Rights 63
A15. Education and training 65
A16. Health and health systems 68
A17. Economic and social performance at regional level 70
Macroeconomic stability 73
A18. Key financial sector developments 73
A19. Taxation 75
A20. Table with economic and financial indicators 78
A21. Debt sustainability analysis 79
A22. Macroeconomic imbalance procedure assessment matrix 82
23
LIST OF TABLES
A2.1. Summary table on 2019-2022 CSRs 29
A3.1. Key elements of the German RRP('s) 31
A5.1. Resilience indices aggregating the country situation across RDB dimensions and areas 36
A6.1. Indicators tracking progress on the European Green Deal from a macroeconomic perspective 37
A7.1. Key Energy Indicators 42
A8.1. Key indicators for a fair transition in Germany 47
A9.1. Overall and systemic indicators on circularity 50
A10.1. Key Digital Decade targets monitored by DESI indicators 52
A11.1. Key innovation indicators 55
A12.1. Industry and the Single Market 57
A13.1. Public administration indicators 61
A14.1. Social Scoreboard for Germany 63
A14.2. 2030 National targets for Germany 64
A15.1. EU-level targets and other contextual indicators under the European Education Area strategic framework 65
A16.1. Key health indicators 68
A17.1. Selected indicators at regional level 71
A18.1. Financial Soundness Indicators 73
A19.1. Taxation indicators 75
A20.1. Key economic and financial indicators 78
A21.1. Debt sustainability analysis - Germany 80
A21.2. Heat map of fiscal sustainability risks - Germany 81
A22.1. Assessment of macroeconomic imbalances matrix 82
LIST OF GRAPHS
A1.1. Progress towards the SDGs in Germany in the last 5 years 27
A2.1. Germany’s progress on the 2019-2022 CSRs (2023 European Semester) 28
A3.2. Share of RRF funds contribution to each policy pillar 31
A3.1. Total grants disbursed under the RRF 31
A4.1. Cohesion policy funds 2021-2027 in Germany: budget by fund 33
A4.2. Synergies between Cohesion policy funds and RRF six pillar in Germany 33
A4.3. Cohesion policy funds contribution to the SDGs in 2014-2020 and 2021-2027 in Germany 34
A6.1. Thematic – greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2021 37
A6.2. Energy mix (top) and electricity mix (bottom), 2021 38
A6.3. Thematic- Environmental investment needs and current investment, p.a. 2014-2020 39
A7.1. Underground storage levels in Germany 42
A7.2. Share of gas consumption per sector, 2021 43
A7.3. Gas consumption per industrial sector, 2021 (% of total gas consumption in industry) 43
A7.4. Germany´s retail energy prices for industry (top) and households (bottom) 44
A7.5. Patent families in Energy Union R&I priorities 45
A8.1. Fair transition challenges in Germany 47
A8.2. Distributional impacts of energy prices due to rising energy expenditure (2021-2023) 48
A9.1. Trend in material use 50
A9.2. Treatment of municipal waste 50
A11.1. Venture Capital in Germany (2022) as % of GDP 55
A12.1. Total factor productivity 57
A12.2. Productivity by sector 57
A12.3. Business environment and productivity drivers 59
A13.1. Germany. E-government maturity and e-government users 61
A13.2. Germany. a) Participation rate of 25-64 year olds in adult learning (%) by sector and occupation; b) Share of women and
men in senior positions and c) Accounting maturity by government sector 62
A15.1. Low-achieving 15-year-olds in reading in 2015 and 2018 (PISA) 65
A16.1. Life expectancy at birth, years 68
A16.2. Projected increase in public expenditure on healthcare over 2019-2070 68
A17.1. GDP per capita (2010) and real GDP growth (2011-2020) in Germany 70
A17.2. Evolution of labour productivity in Germany (2000-2020) 70
24
A19.1. Tax revenues from different tax types as % of total taxation 76
A19.2. Tax wedge for single and second earners as % of total labour costs, 2022 76
25
CROSS-CUTTING INDICATORS
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS
This Annex assesses Germany’s progress on average on climate action (SDG 13). The
the Sustainable Development Goals (SDGs) country has made some progress on energy
along the four dimensions of competitive consumption indicators, including the share of
sustainability. The 17 SDGs and their related renewable energy in gross final energy
indicators provide a policy framework under the consumption (SDG 7; from 14.9% in 2016 to
UN’s 2030 Agenda for Sustainable Development. 19.2% in 2021). Nevertheless, it remains below
The aim is to end all forms of poverty, fight the EU average (21.8%). On SDG 13 (Climate
inequalities and tackle climate change and the action), net greenhouse gas emissions decreased
environmental crisis, while ensuring that no one is from 11 tonnes per capita in 2016 to 9.2 tonnes
left behind. The EU and its Member States are per capita in 2021. Similarly, average CO2
committed to this historic global framework emissions per km from new passenger cars have
agreement and to playing an active role in fallen considerably over the last 5 years (126.9 g
maximising progress on the SDGs. The graph in 2016 vs 113.6 g in 2021). However, on both
below is based on the EU SDG indicator set indicators Germany is still performing worse than
developed to monitor progress on the SDGs in an the EU average (7.4 tonnes per capita and 116.3 g
EU context. respectively). Various measures in the recovery
and resilience plan (RRP) that support the use of
While Germany performs well (SDGs 2, 9, 11) renewable hydrogen in industry and the transport
or is improving (SDGs 7, 12) on most of the sector will help reduce greenhouse gas emissions
SDG indicators related to environmental and increase the share of renewable energy.
sustainability, it is moving away from SDG
Germany is performing well on some SDG
14 and needs to catch up with the EU
Graph A1.1: Progress towards the SDGs in Germany in the last 5 years
For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for
details on extensive country-specific data on the short-term progress of Member States: Key findings – Sustainable development
indicators – Eurostat (europa.eu). The status of each SDG in a country is the aggregation of all indicators for the specific goal
compared to the EU average. A high status does not mean that a country is close to reaching a specific SDG, but signals that it is
doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 5
years. The calculation does not take into account any target values as most EU policy targets are only valid for the aggregate EU
level. Depending on data availability for each goal, not all 17 SDGs are shown for each country.
Source: Eurostat, latest update of early April 2023, except for the EU Labour Force Survey (LFS) indicators released on 27 April
2023. Data mainly refer to 2016-2021 or 2017-2022.
26
indicators related to fairness (SDGs 1, 3, 8), skills ((SDG 4); 48.9% vs 53.9% in the EU in 2021).
but it is moving away from SDG 5 (Gender The German RRP targets bottlenecks related to the
equality). Further, it is moving away and digitalisation of administration and the economy,
needs to catch up with the EU average on for instance by interconnecting business registers
reducing inequalities (SDG 10) and delivering to reduce the administrative burden for businesses
quality education (SDG 4). The country and individuals. It further helps address challenges
related to digital education and training.
generally performs better than the EU average in
domains linked to poverty, health and decent jobs
Germany is performing well on SDG
and growth. The unadjusted gender pay gap (SDG
5), however, is particularly high in Germany indicators related to macroeconomic stability
(17.6% vs 12.7% in the EU in 2021). While the (SDGs 8, 16, 17) and has further improved its
overall share of people at risk of poverty or social performance. The country performs well on SDG
exclusion (SDG 1) is slightly below the EU average 16 (Peace, justice and strong institutions), showing
(21% vs 21.7% in the EU in 2021), the urban-rural a stable and secure environment for pursuing
gap for people at risk of poverty or social exclusion economic activities, and on SDG 8 (Decent work
(SDG 10) is more than ten times the EU average and economic growth). Germany further increased
and increasing (7.8 percentage points (pps) in its employment rate from 78.2% in 2017 to
2021 vs 6.5 pps in 2016 and 0.6 pps in the EU in 80.7% in 2022, which is very high compared to the
2021). Furthermore, there is room for EU average (74.6% in 2022). The share of young
improvement in integrating non-EU citizens into people not in education, employment or training
education and training as well as into the labour reached 8.6% in 2022, below the EU average
market (SDG 10). Germany performs worse than (11.7%), and long-term unemployment is low (1%
the EU average on EU/non-EU citizenship gaps for vs EU 2.4% in 2022). On the other hand, though
both young people not in education, employment improving, Germany’s investment share, at 22.6%
or training (14.8 pps vs 11.4 pps in the EU in of GDP, remained below the EU average of 23.2%
2022) and the employment rate (21.9 pps vs 13.5 of GDP in 2022. The RRP includes a package of
pps in the EU in 2022). On quality education, the reforms to speed up public investment and tackle
share of early leavers from education and training investment bottlenecks in order to unlock private
(SDG 4) amounts to 12.2%, higher than the EU investment and reduce the savings-investment
average (9.6% in 2022), and even higher among imbalance.
students with a migrant background (SDG 10).
Tertiary educational attainment (SDG 4), though As the SDGs form an overarching framework, any
improving, remained below the EU average in links to relevant SDGs are either explained or
2022 (37.1% vs EU 42%). The German RRP will depicted with icons in the other Annexes.
help improve educational outcomes for students
with a learning backlog, often from disadvantaged
backgrounds, and promote apprenticeships. This
will help young people enter the labour market.
Germany performs well and is further

improving on SDGs on productivity (SDGs 8
and 9), but is moving away from SDG 4
(quality education). The country performs above
the EU average on SDG 8 (Decent work and
economic growth) and on SDG 9 (Industry,
innovation and infrastructure). With 3.13% of GDP
allocated to R&D in 2021, Germany has some of
the highest R&D spending in the EU. The share of
R&D personnel in the active population rose from
1.59% in 2016 to 1.8% in 2021 (EU: 1.5% in
2021). However, adult participation in learning is
below the EU average (11.9% in 2022) and has
further decreased over the last 5 years (8.4% in
2017 vs 8.1% in 2022). This is also reflected in
the low share of adults with at least basic digital
27
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC
RECOMMENDATIONS
The Commission has assessed the 2019-2022 Graph A2.1: Germany’s progress on the 2019-2022
country-specific recommendations (CSRs) (75) CSRs (2023 European Semester)
addressed to Germany as part of the
European Semester. These recommendations Full implementation
Limited
concern a wide range of policy areas that are Substantial 2%
progress
related to 12 of the 17 Sustainable Development progress 30%
12%
Goals (see Annexes 1 and 3). The assessment
considers the policy action taken by Germany to
date (76) and the commitments in its recovery and
resilience plan (RRP) (77). At this stage of RRP
implementation, 70% of the CSRs focusing on
structural issues from 2019-2022 have recorded
at least ‘some progress’, while 30% recorded
‘limited progress’ (see Graph A2.1). As the RRP is
implemented further, considerable progress in
Some
addressing structural CSRs is expected in the years progress
to come. 56%
Source: European Commission.
(75) 2022 CSRs: EUR-Lex - 32022H0901(05) - EN - EUR-Lex

(europa.eu)
2021 CSRs: EUR-Lex - 32021H0729(05) - EN - EUR-Lex
(europa.eu)
(europa.eu)
(europa.eu)
(76) Including policy action reported in the national reform
programme and in Recovery and Resilience Facility (RRF)
reporting (twice a year reporting on progress in implementing
milestones and targets and resulting from the payment
requests assessment).
(77) Member States were asked to effectively address all or a
significant subset of the relevant country-specific
recommendations issued by the Council in 2019 and 2020 in
their RRPs. The CSR assessment presented here considers the
degree of implementation of the measures included in the
RRP and of those carried out outside of the RRP at the time
of assessment. Measures laid down in the Annex of the
adopted Council Implementing Decision on approving the
assessment of the RRP, which are not yet adopted or
implemented but considered credibly announced, in line with
the CSR assessment methodology, warrant ‘limited progress’.
Once implemented, these measures can lead to
‘some/substantial progress or full implementation’,
depending on their relevance.
28
Table A2.1: Summary table on 2019-2022 CSRs
Germany Assessment in May 2023* RRP coverage of CSRs until 2026** Relevant SDGs
2019 CSR 1 Some Progress
While respecting the medium-term budgetary objective, use fiscal

Relevant RRP measures planned as of 2020,
and structural policies to achieve a sustained upward trend in private Some Progress SDG 8, 9, 16
2021, 2022, 2023.
and public investment, in particular at regional and municipal level.

Focus investment-related economic policy on education; Limited Progress SDG 4, 10, 11
2021 and 2022.
research and innovation; Some Progress SDG 9, 10, 11
2021, 2022 and 2023.
digitalisation and very-high capacity broadband; Some Progress SDG 9, 10, 11
2021 and 2022.
Relevant RRP measures planned as of 2020
sustainable transport Some Progress SDG 10, 11
and 2021.
as well as energy networks Some Progress SDG 7, 9, 10, 11, 13
2021 and 2023.
and affordable housing, taking into account regional disparities. Limited Progress Relevant RRP measures planned as of 2021. SDG 1, 2, 8, 10, 11
Shift taxes away from labour to sources less detrimental to inclusive
Some Progress Relevant RRP measures planned as of 2021. SDG 8, 10, 12
and sustainable growth.
Strengthen competition in business services and regulated
Limited Progress SDG 9
professions.
Reduce disincentives to work more hours, Some Progress Relevant RRP measures planned as of 2021. SDG 8, 10, 12
including the high tax wedge, in particular for low-wage Some Progress SDG 8, 10, 12
2021.
and second earners. Limited Progress SDG 8, 10, 12
2021.
Take measures to safeguard the long-term sustainability of the
Limited Progress Relevant RRP measures planned as of 2021. SDG 8
pension system, while preserving adequacy.
Strengthen the conditions that support higher wage growth, while
Substantial Progress Relevant RRP measures planned as of 2021. SDG 8
respecting the role of the social partners.
Improve educational outcomes and skills levels of disadvantaged Relevant RRP measures planned as of 2020,
Limited Progress SDG 4, 8, 10
groups. 2021, 2022.
Take all necessary measures, in line with the general escape clause
of the Stability and Growth Pact, to effectively address the COVID-
19 pandemic, sustain the economy and support the ensuing
Not relevant anymore Not applicable SDG 8, 16
recovery. When economic conditions allow, pursue fiscal policies
aimed at achieving prudent medium-term fiscal positions and
ensuring debt sustainability, while enhancing investment.
Mobilise adequate resources and strengthen the resilience of the Relevant RRP measures planned as of 2020,
Some Progress SDG 3
health system, including by deploying e-health services. 2021 and 2022.
Front-load mature public investment projects Some Progress SDG 8, 16
2021, 2022.
and promote private investment to foster the economic recovery. Some Progress SDG 8, 9
2021, 2022.
Focus investment on the green and digital transition, in particular on Relevant RRP measures planned as of 2020
Some Progress SDG 11
sustainable transport, and 2021.
clean, efficient and integrated energy systems, Some Progress SDG 7, 9, 13
2021 and 2023.
digital infrastructure and skills, Some Progress SDG 4, 9
2021 and 2022.
housing, Limited Progress Relevant RRP measures planned as of 2021. SDG 1, 2, 8, 10
education Limited Progress SDG 4
2021 and 2022.
and research and innovation. Some Progress SDG 9
2021, 2022 and 2023.
Improve digital public services across all levels Limited Progress SDG 9, 16
and 2022.
and foster the digitalisation in SMEs. Some Progress SDG 8, 9
and 2021.
Reduce the regulatory and administrative burden for businesses. Some Progress SDG 8, 9
2021, 2022.
In 2022, maintain a supportive fiscal stance, including the impulse
provided by the Recovery and Resilience Facility, and preserve Full Implementation Not applicable SDG 8, 16
nationally financed investment.
When economic conditions allow, pursue a fiscal policy aimed at
achieving prudent medium-term fiscal positions and ensuring fiscal Substantial Progress Not applicable SDG 8, 16
sustainability in the medium term.
At the same time, enhance investment to boost growth potential.
Pay particular attention to the composition of public finances, on
both the revenue and expenditure sides of the budget, and to the
quality of budgetary measures in order to ensure a sustainable and Some Progress Not applicable SDG 8, 16
inclusive recovery. Prioritise sustainable and growth-enhancing
investment, in particular investment supporting the green and digital
transition.
(Continued on the next page)
29
Table (continued)
Give priority to fiscal structural reforms that will help provide
financing for public policy priorities and contribute to the long-term
sustainability of public finances, including, where relevant, by Limited Progress Not applicable SDG 8, 16
strengthening the coverage, adequacy and sustainability of health
and social protection systems for all.
In 2023, ensure that the growth of nationally financed primary
current expenditure is in line with an overall neutral policy stance,
taking into account continued temporary and targeted support to
Substantial Progress Not applicable SDG 8, 16
households and firms most vulnerable to energy price hikes and to
people fleeing Ukraine. Stand ready to adjust current spending to
the evolving situation.
Expand public investment for the green and digital transitions, and
for energy security taking into account the REPowerEU initiative,
including by making use of the Recovery and Resilience Facility and
other Union funds.
For the period beyond 2023, pursue a fiscal policy aimed at
achieving prudent medium-term fiscal positions.
Improve the tax mix for more inclusive and sustainable growth, in Relevant RRP measure being planned as of
Some Progress SDG 8, 10, 12
particular by improving tax incentives to increase hours worked. 2021.
Relevant RRP measure being planned as of
Safeguard the long-term sustainability of the pension system. Limited Progress SDG 8
2021.
2022 CSR 2
Proceed with the implementation of its recovery and resilience plan, RRP implementation is monitored by assessing RRP payment requests and analysing reports published
in line with the milestones and targets included in the Council twice a year on the achievement of the milestones and targets. These are to be reflected in the country
Implementing Decision of 13 July 2021. reports.
Swiftly finalise the negotiations with the Commission on the
2021–2027 cohesion policy programming documents with a view to Progress on the cohesion policy programming documents is monitored under the EU cohesion policy.
starting their implementation.
2022 CSR 3 Limited Progress
Relevant RRP measure being planned as of
Remove investment obstacles Limited Progress SDG 8, 9
2021.
and boost investment in very-high-capacity digital communication
Some Progress SDG 9
networks.
Relevant RRP measures being planned as of
Reduce overall reliance on fossil fuels and diversify their imports Some Progress SDG 7, 9, 13
2020, 2021 and 2023.
by improving energy efficiency, incentivising energy savings, Some Progress SDG 7
2021 and 2023.
Rekevant RRP measures being planned as of
diversifying energy supplies and routes, Some Progress SDG 7, 9, 13
2020, 2021 and 2023.
removing investment bottlenecks, further streamlining permitting
procedures, boosting investment in and accelerating the deployment Some Progress SDG 7, 8, 9, 13
2021.
of electricity networks and renewable energy,
and further advancing participation in energy-related cross-border Relevant RRP measures being planned as of
Limited Progress SDG 7, 9, 13
cooperation. 2021.
Note:
* See footnote (77).
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as 'being implemented'
are only those included in the RRF payment requests submitted and positively assessed by the European Commission.
Source: European Commission
30
ANNEX 3: RECOVERY AND RESILIENCE PLAN - OVERVIEW
The Recovery and Resilience Facility (RRF) is related to the digitalisation of rail (due to
the centrepiece of the EU’s efforts to help it exceptional delays in construction its completion
recover from the COVID-19 pandemic, speed date needed to be postponed), and the other to
up the twin transition and strengthen research and development of vaccines against
resilience against future shocks. The RRF SARS-CoV-2 (amendment of milestones due to
also contributes to implementation of the uncertainty in R&D outcomes). The Revised RRP
was approved by the Council on 14 February 2023
SDGs and helps to address the Country
for a total allocation of EUR 26.4 billion.
Specific Recommendations (see Annex 4).
Germany submitted its initial recovery and Germany’s progress in implementing its plan
resilience plan (RRP) on 28 April 2021. The is published in the Recovery and Resilience
Commission’s positive assessment on
Scoreboard (41). The Scoreboard also gives an
22 June 2021 and Council’s approval on
overview of the progress made in implementing
13 July 2021 paved the way for disbursing 25.6
the RRF as a whole, in a transparent manner. The
billion in grants under the RRF over the 2021-
graphs below show the current state of play of the
2026 period.
milestones and targets to be reached by Germany
and subsequently assessed as satisfactorily
Table A3.1: Key elements of the German RRP('s) fulfilled by the Commission.
Current RRP
Under the RRF, EUR 2.25 billion has so far
Scope Revised plan (article 21) been disbursed to Germany. It received this
amount in pre-financing on 26 August 2021,
CID adoption date 14 February 2023 equivalent to 9% of the (initial) financial
allocation.
EUR 26.4 billion in grants
Total allocation
(0.7% of 2021 GDP)
25 investments and Graph A3.1: Total grants disbursed under the RRF
Investments and reforms
15 reforms
Total number of
129
milestones and targets
Source: RRF Scoreboard
Since the entry into force of the RRF

Regulation and the assessment of the
national recovery and resilience plans,
geopolitical and economic developments
have caused major disruptions across the EU. € 2.25 billion
In order to effectively address these disruptions,
the (adjusted) RRF Regulation allows Member
States to amend their recovery and resilience plan
for a variety of reasons. In line with article 11(2)
of the RRF, the maximum financial contribution for
Germany was moreover updated on 30 June 2022
to an amount of EUR 28 billion in grants. Note: This graph displays the amount of grants disbursed so
far under the RRF. Grants are non-repayable financial
In this context, Germany submitted an contributions. The total amount of grants given to each
Member State is determined by an allocation key and the
amended RRP to the Commission on 9 total estimated cost of the respective RRP.
December 2022 due to objective circumstances Source: RRF Scoreboard
that make it no longer possible to achieve certain
milestones and targets in the RRP in line with
Article 21 of the RRF Regulation. The update to
Germany’s plan is of a technical nature. It (41) https://ec.europa.eu/economy_finance/recovery-and-
resilience-scoreboard/country_overview.html
concerns two measures in Germany’s plan, one
31
Graph A3.2: Share of RRF funds contribution to each policy pillar
60%
50%
40%
30%
20%
10%
0%
Green transition Digital Smart, Social and Health, and Policies for the
transformation sustainable and territorial economic, social next generation
inclusive growth cohesion and institutional
resilience
Note: Each measure contributes towards two policy areas of the six pillars, therefore the total contribution to all pillars displayed
on this chart amounts to 200% of the estimated cost of the RRP. The bottom part represents the amount of the primary pillar, the
top part the amount of the secondary pillar.
Source: RRF Scoreboard
32
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH
The EU budget of over EUR 1.2 trillion for measures, despite major supply chain risks and
2021-2027 is geared towards implementing the growing shortage of skilled labour. The Just
the EU’s main priorities. Cohesion policy Transition Fund will boost innovation, deliver
investment amounts to EUR 392 billion across the economic diversification and counteract
EU and represents almost a third of the overall EU deindustrialisation in the four German regions
budget, including around EUR 48 billion invested in (North Rhine-Westphalia, Saxony, Saxony-Anhalt
line with REPowerEU objectives. and Brandenburg), where the phase-out of fossil
fuel extraction and related activities are expected
Graph A4.1: Cohesion policy funds 2021-2027 in to have the strongest impacts. Under the European
Germany: budget by fund Social Fund Plus (ESF+), Germany allocates
notably EUR 1.3 billion to improving educational
4,044 outcomes of disadvantaged young people, and
10% EUR 627 million to improving lifelong learning and
career transition. This funding will strengthen
green and digital skills with a focus on vulnerable
groups, in particular people with a migrant
background and refugees.
Of the investments mentioned above, EUR

13,385
33%
22,867
4.1 billion will be invested in line with the
57% REPowerEU objectives. This is on top of the EUR
1.7 billion dedicated to REPowerEU under the
2014-2020 budget. EUR 3.5 billion (2021-2027)
and EUR 1.5 billion (2014-2020) is for improving
energy efficiency; EUR 47 million (2021-2027) and
ERDF ESF+ JTF EUR 206 million (2014-2020) for renewable
energy and low-carbon R&I; and EUR 590 million
(1) million EUR in current prices, % of total; (total amount (2021-2027) for smart energy systems.
including EU and national co-financing)
Source: European Commission, Cohesion Open Data
Graph A4.2: Synergies between Cohesion policy
funds and RRF six pillar in Germany
In 2021-2027, in Germany, cohesion policy
funds (42) will invest EUR 11.2 billion in the 16000
14000
14,329
green transition and EUR 1.2 billion in the 12000 11,214

11,527
12,213
10,529
digital transformation as part of the 10000

8000
country’s total allocation of EUR 40.3 billion. 6000 5,148
In particular, the European Regional Development 4000

2000 1,243
3,626
Fund (ERDF) will help to reduce greenhouse gas 0

247 160 15 364
Green transition Digital Smart, sustainable Social and Health, economic, Policies for the next
emissions by about 1.3 million tonnes CO2 eq./year transformation and inclusive
growth
territorial cohesion social and
institutional
generation
through investments in private companies and EU CP 2014-2020 (million EUR)

resilience
EU CP 2021-2027 (million EUR)

public buildings. Around 18.2 million inhabitants
are to benefit from protection and adaptation (1) million EUR in current prices (total amount, including EU
and national co-financing)
measures against climate-related natural Source: European Commission
disasters, including floods. The ERDF will also
support more than 112 000 companies, with a In 2014-2020, cohesion policy funds made
particular focus on small and medium enterprises
EUR 20.7 billion available to Germany (43),
(SMEs) and in line with the regional smart
innovation strategies. A key challenge will be the
implementation of ambitious climate-related
(43) Cohesion policy funds include the ERDF, ESF and the Youth
( ) European Regional Development Fund (ERDF), European
42
Employment Initiative (YEI). ETC programmes are excluded
Social Fund+ (ESF+), Just Transition Fund (JTF), excluding here. According to the ‘N+3 rule’, the funds committed for
Interreg programmes. Total amount includes national and EU 2014-2020 must be spent by 2023. REACT-EU is included in
contributions. Data source: Cohesion Open Data. all figures. Data source: Cohesion Open Data.
33
with an absorption of 73% (44). Including national Graph A4.3: Cohesion policy funds contribution to
financing, the total investment amounts to EUR 33 the SDGs in 2014-2020 and 2021-2027 in
billion - around 0.1% of GDP for 2014-2020. Germany
14,000
Germany continues to benefit from cohesion 11,188
12,000
policy flexibility to support economic
11,485 10,989
recovery, step up convergence and provide

10,000
vital support to regions following the COVID-

8,000
6,170
19 pandemic. The Recovery Assistance for 6,000

4,566
4,735 5,071
3,704
Cohesion and the Territories of Europe instrument 4,000
2,268
3,083
(REACT-EU) (45) under NextGenerationEU provides 2,000
EUR 2.4 billion on top of the 2014-2020 cohesion 0

SDG 9 Industry, SDG 8 Decent SDG 7 Affordable SDG 4 Quality SDG 1 No poverty
policy allocation for Germany. Notable investments innovation,
infrastructure
work and
economic growth
and clean energy education
include the purchase of medical equipment worth EU CP 2014-2020 (millions EUR) EU CP 2021-2027 (millions EUR)
close to EUR 80 million. REACT-EU provides

(1) 5 largest contributions to SDGs in million (EUR) current
support to SMEs particularly affected by the prices
pandemic, including for working capital, pandemic- Source: European Commission
related research, digitalisation of schools, cultural
centres, and vocational education and training In both 2014-2020 and 2021-2027, cohesion
premises, and energy efficiency measures. In policy funds have contributed substantially
addition, EUR 647 million was provisionally
to the Sustainable Development Goals
allocated to Germany through the Brexit
(SDGs). These funds support 11 of the 17 SDGs,
Adjustment Reserve (BAR), and Cohesion’s Action
for Refugees in Europe (CARE) supports Germany notably SDG 9 ‘Industry, innovation and
infrastructure’ and SDG 8 ‘Decent work and
and its regions in providing emergency assistance
to people fleeing from Russia’s invasion of economic growth’ (46).
Ukraine. With SAFE (Supporting Affordable Energy),
Other EU funds provide significant support to
the 2014-2020 cohesion policy funds may also be
mobilised by Germany to support vulnerable Germany. The common agricultural policy (CAP)
households, jobs and companies particularly made available EUR 55.1 billion in 2014-2022 and
affected by high energy prices. will keep supporting Germany with EUR 30.7 billion
in 2023-2027. The two CAP Funds (European
Agricultural Guarantee Fund and European
Agricultural Fund for Rural Development)
contribute to the European Green Deal while
ensuring long-term food security. They promote
social, environmental and economic sustainability,
and innovation in agriculture and rural areas, in
coordination with other EU Funds. The European
Maritime and Fisheries Fund made EUR 220
million available to Germany in 2014-2020 and
the European Maritime, Fisheries and Aquaculture
Fund allocates EUR 212 million in 2021-2027.
Germany also benefits from other EU

programmes, notably the Connecting Europe
Facility, which under CEF 2 (2021-2027) has so
far allocated EU funding of EUR 492.1 million to
31 specific projects on strategic transport
(44) 2014-2020 Cohesion policy EU payments by MS is updated (46) Other EU funds contribute to the implementation of the
daily on Cohesion Open Data. SDGs. In 2014-2022, this includes both the European
Agricultural Fund for Rural Development (EARDF) and the
(45) REACT-EU allocation on Cohesion Open Data. European Maritime and Fisheries Fund (EMFF).
34
networks. Similarly, Horizon Europe has so far
allocated more than EUR 1.7 billion for German
R&I on top of the EUR 10.1 billion earmarked
under the previous programme (Horizon 2020).
The Public Sector Loan Facility set up under the
Just Transition Mechanism makes EUR 188 million
of grant support from the Commission available
for projects located in Germany for 2021-2027,
which will be combined with loans by the EIB, to
support investments by public sector entities in
just transition regions.
The Technical Support Instrument (TSI)

supports Germany in designing and
implementing growth-enhancing reforms,
including those set out in its recovery and
resilience plan (RRP). Germany has received
significant support since 2018. Examples (47)
include support to mainstream gender into public
policy and budget processes, and to develop anti-
money laundering risk analysis and supervision in
the area of correspondent banking.
(47) Country factsheets on reform support are available here.
35
ANNEX 5: RESILIENCE
This Annex illustrates Germany’s relative Table A5.1: Resilience indices aggregating the
resilience capacities and vulnerabilities using country situation across RDB dimensions and
the Commission’s resilience dashboards areas
(RDB) (48). Comprising a set of 124 quantitative Dimension/Area Vulnerabilities Capacities
DE EU-27 DE EU-27
indicators, the RDB provide broad indications of Social and economic
Member States’ ability to make progress across Inequalities and social impact of
four interrelated dimensions: social and economic, the transitions
Health, education and work
green, digital, and geopolitical. The indicators show
vulnerabilities (49) and capacities (50) that can Economic & financial stability
and sustainability
become increasingly relevant, both to navigate Green
ongoing transitions and to cope with potential Climate change mitigation &
future shocks. To this end, the RDB help to identify adaptation

Sustainable use of resources
areas that need further efforts to build stronger Ecosystems, biodiversity,
and more resilient economies and societies. They sustainable agriculture
Digital
are summarised in Table A5.1 as synthetic
resilience indices, which illustrate the overall Digital for personal space
relative situation for each of the four dimensions Digital for industry
Vulnerabilities Index
and their underlying areas for Germany and the Digital for public space High
EU-27 (51).
Medium-high
Cybersecurity Medium
Medium-low
Geopolitical Low
According to the set of resilience indicators Not available
Raw material and energy supply
under the RDB, Germany generally displays Capacities Index
similar but slightly lower levels of Value chains and trade High
Medium-high
vulnerabilities compared to the EU average. Financial globalisation Medium

Medium-low
Germany exhibits medium-low vulnerabilities in Security and demography Low
Not available
the social and economic and the geopolitical (1) Data are for 2021, and EU-27 refers to the value for the
dimensions of the RDB, and medium vulnerabilities EU as a whole. Data underlying EU-27 vulnerabilities in the
in the green and the digital dimensions. Compared area ‘value chains and trade’ are not available as they
to the EU level, Germany has higher vulnerabilities comprise partner concentration measures that are not
in the area 'security and demography’, due in part comparable with MS level values.
Source: JRC Resilience Dashboards - European Commission
to high employment gaps between EU and non-EU
citizens. It shows relatively low vulnerabilities in
relation to ‘health, education and work’, Compared to the EU average, Germany shows
‘digitalisation for personal space’ and ‘financial an overall similar level of capacities across
globalisation’ (52). all RDB indicators. It displays overall medium-
high resilience capacities in the social and
economic, the digital and the green dimensions,
and medium capacities in the geopolitical
(48) For details see: https://ec.europa.eu/info/strategy/strategic- dimension. Germany shows stronger capacities
planning/strategic-foresight/2020-strategic-foresight- than the EU average in the area ‘inequalities and
report/resilience-dashboards_en; see also 2020 Strategic social impact of the transitions’ but also in
Foresight Report (COM(2020) 493).
‘cybersecurity’, ‘public space digitalisation’, ‘value
(49) Vulnerabilities describe features that can exacerbate the chains and trade’, and most areas of the green
negative impact of crises and transitions or obstacles that dimension (53). There is room for improving
may hinder the achievement of long-term strategic goals.
capacities when it comes to ‘raw material and
(50) Capacities refer to enablers or abilities to cope with crises energy supply’, ‘financial globalisation’ and the
and structural changes and to manage the transitions.
digitalisation of personal space (especially
(51) This Annex is linked to Annex 1 on SDGs, Annex 6 on the concerning the digital skills of adults and young
green deal, Annex 8 on the fair transition to climate people).
neutrality, Annex 9 on resource productivity, efficiency and
circularity, Annex 10 on the digital transition and Annex 14
on the European pillar of social rights.
(53) Inequality considerations here are different from SDG 10
(52) For example, German self-reported unmet need for medical (Annex 1); results are driven by a high household saving rate.
care, long-term unemployment rate and NIIP fall into the Germany displays high capacities also in relation to resource
lowest vulnerability category. productivity, terrestrial protected areas and organic farming.
36
ENVIRONMENTAL SUSTAINABILITY
ANNEX 6: EUROPEAN GREEN DEAL
Germany’s green transition requires objectives (58). Germany’s climate law (59) aims to
continued action on several aspects including reduce economy-wide greenhouse gas emissions
greening electricity generation, transport, by at least -65% by 2030 and by -88% by 2040,
heating networks, buildings, sustainable compared to 1990, to reach climate neutrality by
water management, and improving its carbon 2045. This could generate greenhouse gas
sinks. Implementation of the European Green Deal emission reductions in the effort sharing sectors
is underway in Germany; this Annex provides a that exceed Germany’s (new) effort sharing
snapshot of the key areas involved (54). target (60).
Germany has not yet defined all the climate Graph A6.1: Thematic – greenhouse gas emissions
policy measures it needs to reach its 2030 from the effort sharing sectors in Mt CO2eq,
2005-2021
climate target for the effort sharing
sectors (55). Data for 2021 on greenhouse gas 500
450
emissions in these sectors are expected to show
400
the country generated less than its annual
350
emission allocations (56). Current policies in
300
Germany are projected to reduce these emissions
250
by -29% relative to 2005 levels in 2030, not a
200
sufficient reduction to reach the effort sharing
150
target even before the target was raised in line
100
with the EU’s 55% objective, let alone Germany’s
50
new target, -50% (57). In its recovery and resilience
0
plan, Germany has allocated at least 42% of its 2005 2021
Recovery and Resilience Facility grants to key Waste
reforms and investments to attain climate Small industry
Agriculture
(54) The overview in this Annex is complemented by the Buildings (under ESR)
information provided in Annex 7 on energy security and Domestic transport (excl. aviation)
affordability, Annex 8 on the fair transition to climate
Source: European Environmental Agency.
neutrality and environmental sustainability, Annex 9 on
resource productivity, efficiency and circularity, Annex 11 on
innovation, and Annex 19 on taxation. Germany’s net carbon removals from the
( ) Member States’ greenhouse gas emission targets for 2030
55 land use sector have become emissions in
(‘effort sharing targets’) were increased by Regulation (EU) recent years, with a growing distance to the
2023/857 (the Effort Sharing Regulation) amending
Regulation (EU) 2018/842, aligning the action in the
2030 target. Germany’s forests contribute a
concerned sectors with the objective to reach EU-level, major share of carbon removals. The conservation
economy-wide greenhouse gas emission reductions of at and restoration of peatlands, other forms of
least 55% relative to 1990 levels. The Regulation sets carbon farming and forest adaptation measures in
national targets for sectors outside the current EU Emissions
Trading System, notably: buildings (heating and cooling), road
particular have significant mitigation potential and
transport, agriculture, waste, and small industry. Emissions would yield added co-benefits for biodiversity (61).
covered by the EU ETS and the Effort Sharing Regulation are
complemented by net removals in the land use sector, (58) For example, investments in green hydrogen, support for
regulated by Regulation (EU) 2018/841 (the Land Use, Land electric cars, and energy efficiency renovations in residential
Use Change and Forestry (LULUCF) Regulation) amended by buildings.
Regulation (EU) 2023/839.
(59) Bundesklimaschutzgesetz (KSG); 2021.
(56) Germany’s annual emission allocations for 2021 were some
428.8 Mt CO2eq, and its approximated 2021 emissions were (60) Under Germany’s national climate law and energy and
405.7 Mt. See European Commission, Accelerating the climate plan. An update of the plan, mandated by Regulation
transition to climate neutrality for Europe’s security and (EU) 2018/1999 (the Governance Regulation), is underway.
prosperity: EU Climate Action Progress Report 2022, (61) 92% of Germany’s peat soils are currently drained, releasing
SWD(2022)343. greenhouse gases of around 53 Mt CO2eq, about 7.5% of
(57) See the information on the distance to the 2030 climate Germany’s total emissions in 2020. See also
policy target in Table A6.1. Existing and additional measures Umweltbundesamt (ed.) Emissionen der Landnutzung, -
as of 15 March 2021. änderung und Forstwirtschaft.
37
For 2030, Germany’s target for the land use, land renewable energy in Germany’s electricity mix in
use change and forestry (LULUCF) sector implies 2021. Renewables accounted for 41% of the
the removal of 30 840 kt CO2eq (see Table electricity mix in 2021, compared to 46% in 2020.
A6.1) (62). Wind and solar energy provided 20% and 8% of
the total electricity mix respectively. Germany
In 2021, Germany’s energy mix was still national energy and climate plan (NECP) sets a
dominated by fossil fuels. The energy carriers 30% target of renewable sources in gross final
with the highest share in the energy mix were oil energy consumption by 2030, which was
and oil products (excluding biofuels) (33% % of considered as adequate. Germany will need to
total energy consumption) and natural gas (26%), increase its renewable energy target in the
followed by solid fuels (mainly coal and lignite) updated NECP, to reflect the more ambitious EU
(18%) and renewable energy and biofuels (17%). climate and energy targets in the Fit for 55
The share of nuclear energy was almost halved in Package and in the REPowerEU Plan.
the last decade, to 6% in 2021.
Germany needs to step up energy efficiency
Graph A6.2: Energy mix (top) and electricity mix improvements. NECP targets for final and
(bottom), 2021 primary energy consumption were (FEC and PEC)
considered modest and as of sufficient ambition,
respectively in the 2020 Commission assessment.
Based on the energy consumption trajectory for
17% 18%
2018-2021, Germany is expected to be on track to
Solid fossil fuels, peat
and oil shale meet its 2030 target for FEC and for PEC, as these
6% Gas were notified in its NECP. But Germany achieved
only 88 % of the energy savings required under
Oil
Art. 7 of the Energy Efficiency Directive (63).
Nuclear
26% More action is needed to decarbonise
Renewables
transport. Germany aims to reach 15 million
33% electric vehicles registered by 2030, and the share
of electric passenger cars on its roads is rising
fast. More action is needed to expand the charging
12%
infrastructure, increase the use of sustainable
30% Solid fossil fuels, peat public transport and promote a modal shift, in
and oil shale
Gas
particular towards rail, for both passenger and
freight transport. Given the success of the
Oil EUR 9/month ticket for regional and local public
Renewables
transportation in summer 2022, Germany brought
in the Deutschlandticket, which aims to offer an
41% Nuclear attractive alternative to more polluting transport
16% modes. Digitalising the railway system is a
1%
challenge ahead, including improvements to the
security of rail communications. Over half of
Germany’s railway network is electrified, but this is
The energy mix is based on gross inland consumption, and below the EU average. Improving the quality and
excludes heat and electricity. The share of renewables
includes biofuels and non-renewable waste.
service of rail operations should stimulate demand
Source: Eurostat. for public transport. This would ease road
congestion, on which Germany scores worse than
Germany needs to step up efforts to increase the EU average and reduce fossil fuel dependence.
Despite significant improvements in recent years,
electricity generation from renewable
sources. There was a decrease in the share of
(63) After the conclusion of the negotiations for a recast EED,
including REPowerEU, the ambition of both the EU and
national targets as well as of the national measures for
(62) This value is indicative and will be updated in 2025 (as energy efficiency to meet these targets is expected to
mandated by Regulation (EU) 2023/839). increase.
38
air quality in Germany remains a cause for implement the 2030 EU biodiversity strategy are
concern (64). In 2021, three air quality zones estimated at EUR 4 billion per year (68).
registered exceedances of the EU air quality limits
for NO2. Climate change has physical risks and
impacts in Germany in several areas,
Graph A6.3: Thematic- Environmental investment including forest management, water
needs and current investment, p.a. 2014-2020 management and agriculture ( ). Since 2018,
69
18000.0
15,872
extreme weather events have caused damages of
16000.0
at least EUR 80 billion in Germany, including
losses of EUR 25.6 billion in forestry and
14000.0
13,792 11,523 agriculture (70). Climate monitoring shows an
increase in the impacts of heatwaves, droughts,
EUR million (at current prices)
12000.0
10000.0 8,227 floods, heavy rain, and flash floods in urban areas
on human health, vegetation, and ecosystems (71).
8000.0
Some areas in the north-west and the east in
6000.0 4,206
particular experienced unprecedented levels of
3,042
4000.0
5,327
water scarcity, with negative impacts on water
2000.0 2,739
supply and quality, energy management and
1,094
2,118
agriculture (72). Urgent action is needed to
0.0
Pollution Water (industries, Circular Economy Biodiversity and R&I&D and other minimise the growing risks of extreme heat,
prevention and excl. protection) (incl. waste) ecosystems
control drought and flood events and their impacts on
Current investment Total need human health, biodiversity, agriculture, forestry,
transport, and infrastructure (73). Sustainable water
management will be key to improving climate
adaptation and resilience (74). Additional efforts
Germany would benefit from investing more
are required to reach the government’s target of
in meeting its environmental targets and
30% of utilised agricultural area under organic
objectives. Between 2014 and 2020, the annual farming by 2030. Concerning water, problems with
environmental investment needs (65) were eutrophication in the Baltic and North Seas and
estimated to be at least EUR 42.9 billion while with groundwater persist. Livestock density has
investment was at about EUR 25.1 billion, leaving decreased slightly in Germany but varies strongly
a gap of at least EUR 17.8 billion per year (see between regions – West Germany belongs to the
Graph A6.3) (66). Germany’s land Natura 2000 cluster of regions with the highest livestock
network covers 15.5% of its land (67), but it has density in Europe (75), which exerts pressure on
not yet allocated sufficient resources to protect sustainable water management. Germany has the
and manage these areas. The resources needed to potential to rely more on environmental taxes to
(68) European Commission, Biodiversity financing and tracking,

(64) See the data in table A6.5 below. For details on the 2022.
methodology, see European Environment Agency, Air quality
in Europe –2021 report, p.106. (69) European Environmental Agency, Advancing towards climate
resilience in Europe, forthcoming.
(65) Environmental objectives include pollution prevention and
control, water management and industries, circular economy (70) https://www.prognos.com/de/folgen-klimakrise
and waste, biodiversity and ecosystems (European (71) Dürremonitor Deutschland - Helmholtz-Zentrum für
Commission, 2022, Environmental Implementation Review, Umweltforschung UFZ. Germany monitors climate change
country report Germany). impacts and publishes a 4-year-cycle adaptation strategy.
(66) When also accounting for needs estimated at EU level only (72) Monitoringbericht 2019 zur Deutschen Anpassungsstrategie
(e.g., water protection, higher circularity, biodiversity an den Klimawandel (umweltbundesamt.de)
strategy).
(73) Umweltbundesamt (Eds.). Klimawirkungs- und Risikoanalyse
(67) In 2021, Germany had 37.4% terrestrial protected areas 2021 für Deutschland.
(Natura 2000 and nationally designated areas), against the
EU average of 26.4% (European Environment Agency, 2023, (74) Konferenz Klimawandel und Wasser, Abschlussbericht, 2021
Natura 2000 Barometer).
(75) Eurostat, Livestock density in 2020.
39
further internalise the cost of air pollution and to
promote waste reduction (76)(see Annex 19).
Germany provides fossil fuel and other

environmentally harmful subsidies that could be
considered for reform, while ensuring food and
energy security and mitigating social effects. In
2021, it spent EUR 11.8 billion on fossil fuel
subsidies (cf. Table A6.1.), which puts low-carbon
alternatives at a disadvantage. Environmentally
harmful subsidies have been identified, via an
initial assessment, in the agriculture, forestry and
fishing, electricity, gas, steam and air conditioning,
transportation and storage, manufacturing and
services sectors. Examples of such subsidies
include company car tax benefits, the excise tax
refund for diesel fuel used in agriculture, the
reduced energy tax rate for light fuel oil used in
mobile machinery, the excise tax exemption and
tax relief for natural gas for industrial consumers
or the reduced CO2 tax rate on diesel used in
agriculture (77). The coalition agreement
acknowledges the need to address such subsidies,
but the timeline and practical follow-up is unclear.
(76) European Commission, 2021, Green taxation and other

economic instruments – Internalising environmental costs to
make the polluter pay, Ensuring that polluters pay
(europa.eu)
(77) Fossil fuel figures in EUR of 2021 from the 2022 State of
the Energy Union report. Initial assessment of
environmentally harmful subsidies done by the Commission
in the 2022 toolbox for reforming environmentally harmful
subsidies in Europe, using OECD definitions, and based on the
following datasets: OECD Agriculture Policy Monitoring and
Evaluations; OECD Policy Instruments for the Environment
(PINE) Database; OECD Statistical Database for Fossil Fuels
Support; IMF country-level energy subsidy estimates. Annex 4
of the toolbox contains detailed examples of subsidies on
the candidates for reform.
40
Table A6.1: Indicators tracking progress on the European Green Deal from a macroeconomic perspective
'Fit for 55'
2030 Distance
2005 2017 2018 2019 2020 2021 target/value WEM WAM
Greenhouse gas emission reductions in effort sharing sectors (1) Mt CO2eq; %; pp 477.8 -2% -9% -7% -15% - -50% -21 -21
Progress to policy targets
Net carbon removals from LULUCF (2) kt CO2eq 7,832 -10,705 -7,657 -6,822 4,197 3,998 -30840 n/a n/a
National contribution to 2030 EU

2005 2017 2018 2019 2020 2021 target
Share of energy from renewable sources in gross final consumption
% 7% 15% 17% 17% 19% 19% 30%
of energy (3)
Energy efficiency: primary energy consumption (3) Mtoe 321.6 298.1 292.0 285.2 262.1 267.0 216.0
Energy efficiency: final energy consumption (3) Mtoe 219.7 218.6 215.2 214.7 201.9 209.7 185.0
Germany EU
2016 2017 2018 2019 2020 2021 2019 2020 2021
Environmental taxes (% of GDP) % of GDP 1.9 1.8 1.8 1.8 1.7 1.8 2.4 2.2 2.2
Fiscal and financial
Environmental taxes (% of total taxation) (4) % of taxation 4.8 4.6 4.5 4.4 4.3 4.4 5.9 5.6 5.5
indicators
Government expenditure on environmental protection % of total exp. 1.3 1.2 1.3 1.3 1.3 1.1 1.7 1.6 1.6
Investment in environmental protection (5) % of GDP 0.4 0.4 0.4 0.4 - - 0.4 0.4 0.4
Fossil fuel subsidies (6) EUR2021bn 15.3 15.0 14.5 13.4 13.8 11.8 53.0 50.0 -
Climate protection gap (7) score 1-4 1.6 1.7 1.5
Net greenhouse gas emissions 1990 = 100 73.0 73.0 70.0 67.0 60.0 62.0 76.0 69.0 72.0
Climate
Greenhouse gas emission intensity of the economy kg/EUR'10 0.34 0.33 0.31 0.29 0.28 - 0.31 0.30 0.26
Energy intensity of the economy kgoe/EUR'10 0.11 0.11 0.11 0.10 0.10 - 0.11 0.11 -
Final energy consumption (FEC) 2015=100 101.9 102.8 101.1 100.9 91.9 95.5 102.9 94.6 -
Energy
FEC in residential building sector 2015=100 103.6 103.3 101.6 105.1 105.5 106.9 101.3 101.3 106.8
FEC in services building sector 2015=100 98.7 98.6 89.5 85.3 83.1 89.3 100.1 94.3 100.7
Smog-precursor emission intensity (to GDP) (8) tonne/EUR'10 0.77 0.77 0.76 0.69 0.61 - 0.93 0.86 -
Pollution
Years of life lost due to air pollution by PM2.5 per 100.000 inh. 588.9 576.6 617.0 439.6 356.3 - 581.6 544.5 -
Years of life lost due to air pollution by NO2 per 100.000 inh. 231.7 209.5 205.1 171.6 123.5 - 309.6 218.8 -
Nitrates in ground water mg NO3/litre 27.9 27.3 27.1 26.3 25.1 - 21.0 20.8 -
Land protected areas 30.6 37.7 - 37.6 37.6 37.4 26.2 26.4 26.4
Biodiversity
% of total
Marine protected areas % of total 45.9 - - 45.9 - 45.4 10.7 - 12.1
% of total utilised
Organic farming 6.8 6.8 7.3 7.8 9.6 9.7 8.5 9.1 -
agricultural area
2017 2018 2019 2020 2021 2022 2020 2021 2022

% in new
Share of zero-emission vehicles (9) registrations
0.7 1.0 1.7 6.6 13.4 14.7 5.4 8.9 10.7
Mobility
Number of AC/DC recharging points (AFIR categorisation) - - - 43719 62223 82084 188626 330028 432518
Share of electrified railways % 52.9 52.9 53.1 53.1 53.1 53.2 56.6 n/a 56.6
Hours of congestion per commuting driver per year 29.9 29.3 29.4 29.2 n/a n/a 28.7 n/a n/a
Sources: (1) Historical and projected emissions, as well as Member States’ climate policy targets and 2005 base year emissions
under the Effort Sharing Decision (for 2020) are measured in global warming potential (GWP) values from the 4th Assessment
Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ climate policy targets and 2005 base
year emissions under the Effort Sharing Regulation (for 2030) are in GWP values from the 5th Assessment Report (AR5). The
table above shows the base year emissions 2005 under the Effort Sharing Decision, using AR4 GWP values. Emissions for 2017-
2021 are expressed in percentage change from 2005 base year emissions, with AR4 GWP values. 2021 data are preliminary. The
table shows the 2030 target under Regulation (EU) 2023/857 that aligns it with the EU’s 55% objective, in percentage change
from 2005 base year emissions (AR5 GWP). Distance to target is the gap between Member States’ 2030 target (with AR5 GWP
values) and projected emissions with existing measures (WEM) and with additional measures (WAM) (with AR4 GWP values), in
percentage change from the 2005 base year emissions. Due to the difference in global warming potential values, the distance to
target is only illustrative. The measures included reflect the state of play as of 15 March 2021.
(2) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2023
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839
amending Regulation (EU) 2018/841 (LULUCF Regulation) – Annex IIa, kilotons of CO2 equivalent, based on 2020 submissions.
(3) Renewable energy and energy efficiency targets and national contributions are in line with the methodology established under
Regulation (EU) 2018/1999 (Governance Regulation).
(4) Percentage of total revenue from taxes and social contributions (excluding imputed social contributions). Revenue from the EU
Emissions Trading System is included in environmental tax revenue.
(5) Expenditure on gross fixed capital formation for the production of environmental protection services (abatement and
prevention of pollution) covering government, industry, and specialised providers.
(6) European Commission, Study on energy subsidies and other government interventions in the European Union, 2022 edition.
(7) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters. This
indicator is based on modelling of the current risk from floods, wildfires and windstorms as well as earthquakes, and an
estimation of the current insurance penetration rate. The indicator does not provide information on the split between the
private/public costs of climate-related disasters. A score of 0 means no protection gap, while a score of 4 corresponds to a very
high gap (EIOPA, 2022).
(8) Sulphur oxides (SO2 equivalent), ammonia, particulates < 10 µm, nitrogen oxides in total economy (divided by GDP).
(9) Battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV).
41
ANNEX 7: ENERGY SECURITY AND AFFORDABILITY
Germany managed to reduce its heavy 15 April 2023 (82). Germany operates around 40
dependence on Russian oil and gas underground storage facilities managed by 27
effectively through a variety of measures, storage operators, with a total capacity of around
but more remains to be done. Before Russia 25.2 billion cubic metres, representing around 25%
invaded Ukraine, Germany was already heavily of its total yearly demand. Before Russia stopped
exposed to Russian gas and oil, notably 65% and exporting gas to Germany in August 2022, it was
34% respectively in 2021 and thus well above the its main gas supplier, covering half of its gas
EU average (78). However, it managed to reduce its consumption. The main natural gas suppliers are
reliance on Russian oil to below 25% (79) and gas currently Norway, the Netherlands, Belgium,
to nearly zero, after Russia stopped delivering gas Switzerland and France. The latter started
in August 2022. Still, Germany is highly dependent supplying gas in October 2022, with a maximum
on imported fossil fuels in general. This makes its handover capacity of 100 GWh/day.
economy particularly sensitive to global price
developments, requiring it to step up efforts on the Graph A7.1: Underground storage levels in
energy transition. This Annex (80) sets out actions Germany
carried out by Germany to achieve the REPowerEU
objectives, including through the implementation
of its recovery and resilience plan, in order to
improve energy security and affordability while
accelerating the clean energy transition, and
contributing to enhancing the EU’s competitiveness
in the clean energy sector (81).
Germany has achieved a high level of gas

supply security in the face of challenging
circumstances. Its planned natural gas Source: JRC calculation based on AGSI+ Transparency
infrastructure, six floating storage regasification Platform, 2022 (Last update 2 May 2023)
units (FSRUs), one floating regasification unit (FRU)
and two stationary liquefied natural gas (LNG) Germany is implementing energy efficiency
terminals will replace Russian gas imports measures to contribute to energy security
completely in the medium term. It will also help
further, including on the demand side. Almost
protect the security of supply in Europe, e.g. the
half of the electricity mix in Germany still relies on
FSRUs in Lubmin could contribute to the supply in
a combination of fossil fuels (46%), with the other
other Member States. Germany fulfilled its gas
half coming mainly from renewables (see Annex
storage obligations last winter, reaching 99.21%
6). The German government initially planned to
by 1 November 2022 (almost 20 percentage
phase out nuclear energy by the end of 2022 but
points above its legal obligation), and ended the
agreed to keep its three active nuclear power
heating season with a storage filled at 64.51% by
plants in operation until April 2023 in order to
secure the power supply for winter 2022/2023.
Germany also allowed for the temporary
reactivation of hard coal and lignite power plans to
(78) Eurostat (2021)
save gas. Germany adopted several energy
(79) BMWK (2022) efficiency measures, including two energy
(80) This annex is complemented by Annex 6 as the European conservation ordinances (83) which contribute to
Green Deal focuses on the clean energy transition, by Annex
8 on the actions taken to mitigate energy poverty and
protect the most vulnerable ones, by Annex 9 as the (82) Regulation of the European Parliament and of the Council
transition to a circular economy will unlock significant energy amending Regulations (EU) 2017/1938 and (EC) No
and resource savings, further strengthening energy security 715/2009 on gas storage and Implementing Regulation (EU)
and affordability, and by Annex 12 on industry and single 2022/2301 of 23 November 2022 set the filling trajectory
market complementing ongoing efforts under the European with intermediary targets for 2023 for each Member State
Green Deal and REPowerEU. with underground gas storage facilities on its territory and
directly interconnected to its market area.
(81) In line with the Green Deal Industrial Plan COM(2023) 62
final, and the proposed Net-Zero Industry Act COM(2023) (83) EnsikuMaV: Energy savings in buildings in the public arena;
161 final EnsimiMaV: Optimisation of heating systems in buildings.
42
energy security and are targeted to industry and prepare for the transition to smart grids. Storage
households, among the biggest gas consumers in plays a significant role in the electricity system.
Germany in 2021 (Graph A7.2). These prescribe Short-term storage helps to balance the grid. A
measures in public buildings (valid until 28 relevant and increasing share of new household
February 2023, with an extension until 15 April PV installations comes with a battery storage.
2023, in preparation), the optimisation of heating Long-term storage to bridge unfavourable
in buildings and an obligation for companies to meteorological conditions is also expected to play
implement energy efficiency measures (valid until a key role in a renewables-based electricity
30 September 2024). At the same time, gas and system. Hydrogen infrastructure will become
heating suppliers launched awareness-raising increasingly important.
campaigns for customers. Over the period August
2022 – March 2023, 16% of gas consumption has Graph A7.3: Gas consumption per industrial sector,
been saved in Germany compared to the previous 2021 (% of total gas consumption in industry)
5-year average.
Textile and leather
Graph A7.2: Share of gas consumption per sector, Construction
Wood and wood products

2021
Paper, pulp and printing
Food, beverages and tobacco

0.3%
Mining and quarrying
25.2% Industry Machinery
31.5% Transport equipment

Energy
Non-metallic minerals
Non-ferrous metals
Transport
Chemical and petrochemical
Services and public sector Iron and steel
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
Households
Source: Eurostat
13.4% Agriculture, forestry and
fishery
In 2022, Germany adopted several relief

0.7% 28.9%
instruments to support consumers, suppliers

Source: Eurostat and small and medium sized companies in
financial trouble. In addition to three relief
The expansion of the grid infrastructure packages (from a total of EUR 95 billion), Germany
would allow to further accommodate a implemented a ‘protective shield’ of up to
higher share of renewable electricity and EUR 200 billion to finance temporary relief
improve interconnection for cross-border instruments, including ‘price brakes’, for natural
energy flows. Germany adopted a series of gas, heat and electricity consumers, small and
energy action investments and reforms (formerly medium-sized enterprises, and gas suppliers. The
known as ‘Easter’, ‘Spring’ and ‘Summer’ packages) corporate sector, including energy-intensive
in July 2022, including legislation on renewable industries (see Annex 12), was generally hit by the
energy sources and specific laws on on- and increase in energy prices before households. It has
offshore wind energy and grid expansion been introducing different measures to counteract
acceleration. These measures and further action the high energy prices while trying to remain
are expected to speed up and simplify planning competitive. This includes reducing production
and permitting (see Annex 12) procedures for (especially energy-intensive industry),
renewable energy generation and electricity implementing energy efficiency measures (e.g.
networks. Germany plans to cover at least 80% of efficient lighting, heating and cooling technology
gross electricity consumption with renewable or behavioural changes), and fuel switching. Still,
energy by 2030. It could accelerate the expansion energy prices stagnating at higher levels raises the
of high-voltage transmission grids, including question of how long German industry will remain
through the swift implementation of Projects of competitive as it is experiencing growing pressure
Common Interest. In addition, distribution grids to either raise prices to safeguard margins or
could be upgraded to accommodate new reduce production due to the high share of energy
producers and millions of owners of solar panels, consumption. Large gas consumers and
heat pumps and electric vehicles as well as to households benefit from the natural gas and heat
43
price brake as they receive support based on the undersubscribed, mainly due to an increase in the
difference between the price agreed in their action value combined with low remunerations. For
contracts and the guaranteed maximum price by 2023, the remunerations are expected to increase
the federal government. in order to make auctions more attractive. The
impact of the energy action packages adopted in
Graph A7.4: Germany´s retail energy prices for July 2022 are still to be seen. The national energy
industry (top) and households (bottom) and climate plan contains a comprehensive set of
300
measures to address building renovation. These
mainly comprise fiscal support measures,
250
information campaigns and support mechanisms
from energy service companies. The recovery and
200
€/MWh
150
resilience plan includes EUR 2.5 billion for a large-
100
scale renovation programme to increase the
50 energy efficiency of residential buildings. Germany
0 is carrying out a number of checks on products
covered by eco-design and energy labelling that
Gas Germany Gas EU Electricity Germany Electricity EU
may be too low. This generates concerns with
400 respect to the level playing field among economic
350 operators and uncertainty as to the compliance
300 levels of the concerned products, and therefore
250
possible missed energy and CO2 savings (84).
€/MWh
200
150
100 Germany has a traditionally strong
50 manufacturing base of low-carbon
0
technologies and clean energy components.
These include wind, solar thermal, solar PV,
Gas Germany Gas EU Electricity Germany Electricity EU energy-efficient appliances and energy-efficient
construction and renovation. The competitiveness
(1) For industry: the band consumption is ID for electricity and
I4 for gas of high-quality products is sensitive to import
(2) For households, the band consumption is DC for electricity prices of many raw materials and energy costs.
and D2 for gas Circularity of critical components could enhance
Source: Eurostat the resilience of sensitive supply chains. In the last
two years (Q4 2021 to Q1 2023), around 40% of
Germany has high ambitions to transform its businesses in clean energy-relevant manufacturing
energy system, and more effective policy have had labour shortages that limit their
implementation could accelerate the production. In 2021, over 344 000 persons worked
decarbonisation of the economy. Its overall in Germany in renewable energy jobs (85).
deployment of renewable energy reached 17% in Enhancing workers’ skills and appropriate
2021. In 2022, renewables growth was fastest in vocational training can address the recruitment
the electricity sector. Most of this growth was in challenges. In order provide the manufacturing
solar panels (67 GW in total, up 7 GW in 2022) capacity for the clean energy technologies, in line
and onshore wind (58 GW, up 2 GW in 2022). with Net Zero Industry Act, the acceleration of
According to the German Ministry of Economic planning and permitting processes is an important
Affairs and Climate Action, there was an increase factor.
of around 5% in renewable energy in the
electricity mix in 2022, reaching 46.2% in the Germany ranks fifth in the world in the
electricity mix. However, Germany needs to install patenting of high-value inventions in solar
at least 10 GW per year in wind and 22 GW per PV. In connection to this, the EU having the
year in solar to reach at least 80% by 2030. To highest share of the global market for clean
integrate renewable electricity, including energy technologies is notably driven by Germany,
Germany’s ambitious goals for offshore
renewables, the government has significantly (84) The internet-supported information and communication
increased planned auction volumes for electricity system for the pan-European market surveillance
from renewable sources, especially from wind and (85) Source: DIW/DLR/GWS (2022)
solar. However, recent auctions have been greatly
44
which accounted for 10% of the world market in
2019. Public and private funding for research and
innovation (R&I) activities grew in parallel to
economic growth between 2010 and 2019. In
2019, private R&I spending exceeded public
funding by a factor of 14 (EUR 936.4 million vs
EUR 13 391.2 million; see Annex 11). The German
federal government is providing EUR 10 billion for
an equity fund for technologies of the future, the
“future fund” (Zukunftsfonds). The fund will
primarily benefit start-ups in the growth phase
with high capital requirements. Together with
further private and public partners, the fund is
projected to mobilise at least EUR 30 billion in
venture capital for start-ups in Germany, and
combined with existing financial instruments, over
EUR 50 billion in venture capital are expected to be
mobilised for start-ups in energy technologies in
the next few years, together with private investors.
(Federal Ministry of Finance, 2021).
Since 2014, half of the EU Member States

have increased their patenting activity in line
with the Energy Union R&I priorities, with
green innovation champions such as
Germany performing strongly both in
absolute numbers and in the share of green
patents in its overall innovation portfolio. On
hydrogen technologies, in 2011-2020, patenting is
led by the EU (28%) and Japan (24%), with the US
(20%) the only major innovation centre to lose
ground in the past decade. Germany (11%) ranks
first in Europe for patenting hydrogen
technologies, and Europe is gaining an edge in
electrolyser manufacturing capacity.
Graph A7.5: Patent families in Energy Union R&I

priorities
4,098 4,671
3,040
Total
1% 1% 0%
42%
53%
62% CCUS
[% per priority]
Nuclear safety
17% Sustainable transport

Efficient systems
17%
14% Smart system
19%
14% Renewables
25% 10%
15%
8%
2010 2014 2019
Source: JRC SETIS (2022)
45
Table A7.1: Key Energy Indicators
GERMANY EU
2018 2019 2020 2021 2018 2019 2020 2021
Import Dependency [%] 63% 67% 64% 63% 58% 61% 57% 56%
ENERGY DEPENDENCE
of Solid fossil fuels 42% 47% 44% 48% 44% 44% 36% 37%
of Oil and petroleum products 95% 97% 97% 96% 95% 97% 97% 92%
of Natural Gas 96% 100% 89% 90% 83% 90% 84% 83%
Dependency from Russian Fossil Fuels [%]
of Hard Coal 42% 47% 48% 53% 40% 44% 49% 47%
of Crude Oil 36% 32% 34% 34% 30% 27% 26% 25%
of Natural Gas 49% 49% 65% 65% 40% 40% 38% 41%
2015 2016 2017 2018 2019 2020 2021 2022

Gross Electricity Production (GWh) 648,309 650,449 653,723 640,468 606,917 575,462 588,343 -
Combustible Fuels 410,318 419,596 404,286 385,445 334,214 302,330 328,342 -
Nuclear 91,786 84,634 76,324 76,005 75,071 64,382 69,130 -
Hydro 24,898 26,134 26,155 23,863 25,671 25,275 24,973 -
ELECTRICITY
Wind 80,624 79,924 105,693 109,951 125,894 132,102 114,647 -

Solar 38,726 38,098 39,401 43,459 44,383 49,496 49,340 -
Geothermal 133 175 163 178 197 231 244 -
Other Sources 1,824 1,888 1,701 1,567 1,487 1,646 1,667 -
Net Imports of Electricity (GWh) - 48,282 - 50,525 - 52,459 - 48,736 - 32,667 - 19,029 - 18,575 -
As a % of electricity available for final consumption -9.1% -9.5% -9.9% -9.3% -6.4% -3.9% -3.7% -
Electricity Interconnection (%) 8.9% 10.5% 10.9% 11.4% 11.0% 11.5%
2015 2016 2017 2018 2019 2020 2021 2022

Gas Consumption (in bcm) 81.3 89.1 92.5 85.3 91.8 89.3 93.6 79.3
Gas Imports - by type (in bcm) 102.5 97.4 118.7 88.3 94.8 80.4 84.8 n.a.
Gas imports - pipeline 102.5 97.4 118.7 88.3 94.8 80.4 84.8 n.a.
DIVERSIFICATION OF GAS SUPPLIES
Gas imports - LNG 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.a.
Gas Imports - by main source supplier (in bcm) (1)
Russia 43.6 58.7 62.1 43.1 46.2 52.5 55.4 n.a.
Norway 22.0 10.7 11.1 2.5 2.6 16.5 16.2 n.a.
Not specified 3.0 28.0 45.5 42.8 45.9 1.3 13.2 n.a.
Netherlands 33.9 0.0 0.0 0.0 0.0 10.2 0.0 n.a.
2019 2020 2021 2022

LNG Terminals
Number of LNG Terminals (2) 0 0 0 1
LNG Storage capacity (m3 LNG) 0 0 0 174,000
Underground Storage
Number of storage facilities 57 57 60 60
Operational Storage Capacity (bcm) 24.9 24.9 25.2 25.2
2019 2020 2021 2022

VC investments in climate tech start-ups and scale-ups
327.4 1120.0 1255.5 n.a.
(EUR Mln) (3)
CLEAN ENERGY
as a % of total VC investments in Germany 5.7% 16.4% 8.0% n.a.

Research & Innovation spending in Energy Union R&i
priorites
Public R&I (EUR mln) 946.5 945.5 1027.9 n.a.
Public R&I (% GDP) 0.027% 0.028% 0.029% n.a.
Private R&I (EUR mln) 13391.2 n.a. n.a. n.a.
Private R&I (% GDP) 0.39% n.a. n.a. n.a.
(1) The ranking of the main suppliers is based on the latest available figures (for 2021)
(2) FSRU included
(3) Venture Capital investments include Venture Capital deals (all stages) and Private Equity Growth/Expansion deals (for
companies that have previously been part of the portfolio of a VC investment firm).
Source: Eurostat, Gas Infrastructure Europe (Storage and LNG Transparency Platform), JRC SETIS (2022), JRC elaboration based
on PitchBook data (06/2022)
46
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY
This Annex monitors Germany’s progress in around 41 000 workers in 2021, while 19 430
ensuring a fair transition towards climate people were directly employed in the lignite mining
neutrality and environmental sustainability, sector alone in 2020. Along with the decline of
notably for workers and households in coal and lignite mining, the number of jobs in the
vulnerable situations. In Germany, the number environmental goods and services sector grew by
of jobs in the green economy has quickly risen in 16.6% (to 657 035) in 2015-19 (EU-27: +8.3%),
recent years. To ensure a fair green transition in reaching 1.5% of total employment, close to the
line with the Council Recommendation (86), the EU average (2.2%) (see Annex 9 for circular jobs
European Social Fund Plus (ESF+), Germany’s specifically). A significant share of ESF+ funding
recovery and resilience plan (RRP) (87) and the Just contributes to fostering green skills. The federal
Transition Mechanism (see Annex 4) are providing programme „Berufsbildung für nachhaltige
crucial support in promoting skills for the green Entwicklung befördern” (88), co-financed by the
transition. The latter notably finances measures ESF, provides training and guidance to promote
for skills development meant to prevent job losses climate and resource-saving awareness and action
and facilitate job-to-job transitions as part of in daily work.
decarbonisation.
Upskilling and reskilling in declining and
Graph A8.1: Fair transition challenges in Germany transforming sectors has the potential for
further improvement, while labour shortages
EU Latest DE Latest (vs EU Latest) DE 2015 (vs EU Latest)
are prevalent. In energy-intensive industries,
GHG per worker
1.4
workers’ participation in education and training
1.2 declined from 9.8% in 2015 to 7.9% in 2022 and
1
Carbon 0.8
Employment EII
is below the EU average (10.4%), while 38% of
inequality
German citizens believe they do not have the
0.6
0.4
0.2
0
necessary skills to contribute to the green
transition (89). Furthermore, the job vacancy rate is
Transport
poverty
Education & relatively high, including in construction which is
training EII
(proxy)
key for the green transition (7.4% vs 4.0% in the
EU-27, 2022) (90). To address this challenge, the
Energy poverty
Just Transition Mechanism provides training for
workers in regions affected by the transition,
Source: Eurostat, EMPL-JRC GD-AMEDI/AMEDI+ projects and together with a broader training offer at national
World Inequality Database (see table A8.1) and Länder levels to encourage re- and upskilling.
A significant share of the ESF+ for Germany also
While the green economy is expanding, aims to improve green skills.
employment in Germany’s energy-intensive
industries remains stable, but workers in Energy poverty indicators have overall
declining activities need active support. The declined in recent years. The share of the
greenhouse gas (GHG) emissions intensity of population unable to keep their homes adequately
Germany’s workforce declined from 17.8 to 13.7 warm decreased from 4.1% in 2015 to 2.5% in
tonnes per worker between 2015 and 2021 and is 2019 (91). Between 2020 and 2021, it declined by
now at the EU average (see Graph A8.1 and
Table A8.1). Employment in Germany’s energy-
intensive industries (EII) represented a slightly
declining share of 4.0% of total employment in (88) Link to project by ESF Bund (2019-22):
2020 (EU average: 3.0%). Employment in mining https://www.esf.de/portal/SharedDocs/PDFs/DE/Programme-
2014-
and quarrying decreased by 30.5% since 2015 to 2020/BMU/bbne_rl_2017.pdf?__blob=publicationFile&v=6
(89) Special Eurobarometer 527. Fairness perceptions of the
(86) Council Recommendation of 16 June 2022 on ensuring a fair green transition (May – June 2022).
transition towards climate neutrality, 2022/C 243/04 covers
employment, skills, tax-benefit and social protection (90) Eurostat (JVS_A_RATE_R2)
systems, essential services and housing.
(91) Energy poverty is a multi-dimensional concept. The indicator
(87) See 2022 Country Report (Annex 6) and Annex 3 for an used focuses on an outcome of energy poverty. Further
overview. indicators are available at the Energy Poverty Advisory Hub.
47
3.8 percentage points (pps), reaching 3.2% (92). In 19.1 pps, respectively) (94). Expenditure shares of
2021, compared to the EU average, only 7.7% of low and lower-middle income groups for gas
the at-risk-of-poverty (AROP) population (EU: would have increased the most (95), as shown in
16.4%) and 3% of lower-middle income Graph A8.2. Among the (expenditure-based) AROP
households (in deciles 4-5) (EU: 8.2%) were population, the share of individuals living in
considered to be affected. Before the energy price households with budget shares for private
hikes, 23.6% of the total population and 49.4% of transport fuels above 6% (96) would have
the (expenditure-based) AROP population had increased more than the EU average (11.0 pps vs
residential expenditure budget shares on 5.3 pps) to 52.3% in January 2023 due to the
electricity, gas, and other fuels (93) above 10% of increase in transport fuel prices. The RRP includes
their household budget (EU average: 26.9% and measures to increase energy efficiency via
48.2%, respectively). renovation of the building stock.
Graph A8.2: Distributional impacts of energy prices Access to public transport shows an urban-
due to rising energy expenditure (2021-2023) rural divide, among the worst perceptions of
DE Gas EU Gas
affordability in the EU. Citizens have mixed
2.0% perceptions concerning public transport being
1.8%
available (51% vs 55% in the EU), affordable
(43% vs 54% in the EU) and of good quality (57%
1.6%
1.4%
1.2%
vs 60% in the EU). As regards these perceptions,
1.0% rural areas in Germany perform worse than urban
0.8% areas, and worse when compared to rural areas in
0.6%
the EU overall (97). The average carbon footprint of
the top 10% of emitters among the population in
0.4%
0.2%
0.0%
Germany is about 5.4 times higher than that of
Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas
the bottom 50% (see Graph A8.1), i.e. slightly
D1 D2 D3 D4 D5 D6 D7 D8 D9 D10
more pronounced than the EU average (5.0 times).
Mean change of energy expenditure as a percentage (%) of
total expenditure per income decile (D) due to observed price
Germany’s RRP includes support for sustainable
changes (August 2021 – January 2023 relative to the 18 transport as well as a tax exemption for e-
months prior), excl. policy support and behavioural responses. vehicles. In Germany, the average levels of air
Source: EMPL-JRC GD-AMEDI/AMEDI+ projects, based on pollution in 2020 stood below the EU average (9.1
Household Budget Survey 2015 and Eurostat inflation data vs 11.2 µg/m PM2.5), with 15% of the population
for CP0451 and CP045
living in regions exposed to critical levels of air
pollution (98), leading to significant health impacts,
The increased energy prices in 2021-2023
in particular on vulnerable groups, and 28 910
negatively affected households’ budgets, premature deaths annually. (99)
with a particularly hard situation for low-
income groups. As a result of energy price
changes during the August 2021 to January 2023
period relative to the 18 months prior (cf. Annex
7), in the absence of policy support and
behavioural responses, the portion of individuals
living in households which spend more than 10%
of their budget on energy would have increased by
14.7 pps for the whole population and by 14.9 pps (94) EMPL-JRC GD-AMEDI/AMEDI+ ; see details in the related
technical brief.
among the (expenditure-based) AROP population,
less than the EU-level increases (16.4 pps and (95) For Germany, the disaggregated expenditure data for
CP0451, CP0453 and CP0455 are missing in the HBS-2015.
(96) ECOICOP: CP0722.
(97) EU (rural): 46%, 48%, 56% respectively. Special
(92) A break in the time series hinders comparison of the levels Eurobarometer 527.
before 2019 (inclusive) with the levels from 2020 onwards.
(98) Two times higher than the recommendations in the WHO Air
(93) Products defined according to the European Classification of Quality Guidelines (annual exposure of 5µg/m3)
Individual Consumption according to Purpose (ECOICOP):
CP045. (99) EEA- Air Quality Health Risk Assessment
48
Table A8.1: Key indicators for a fair transition in Germany
Indicator Description DE 2015 DE Latest EU Latest
GHG per worker Greenhouse gas emissions per worker - CO2 equivalent tonnes 17.8 13.7 (2021) 13.7 (2021)
Employment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20),
Employment EII 4.2 4 (2020) 3 (2020)
minerals (C23), metals (C24), automotive (C29) - %
Education & training EII Adult participation in education and training (last 4 weeks) in energy-intensive industries - % 9.8 7.9 (2022) 10.4 (2022)
Energy poverty Share of the total population living in a household unable to keep its home adequately warm - % 4.1 3.3 (2021) 6.9 (2021)
Transport poverty (proxy) Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport - % 41.4 52.3 (2023) 37.1 (2023)
Carbon inequality Average emissions per capita of top 10% of emitters vs bottom 50% of emitters 5.5 5.4 (2020) 5 (2020)
Source: Eurostat (env_ac_ainah_r2, nama_10_a64_e, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-
JRC GD-AMEDI/AMEDI+ projects and World Inequality Database (WID).
49
PRODUCTIVITY
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY
The circular economy transition is key to unchanged, as has the amount of waste
delivering on the EU’s climate and generated. It has the highest recycling rate
environmental goals and provides large across the EU. In 2021 Germany recycled 71.1 %
socio-economic benefits. It spurs job growth, of its municipal waste, which is well above the EU
innovation and competitiveness and fosters 2020 recycling target of 50% of municipal waste.
resilience and resource security. The circularity Given the overall high level of municipal waste of
transition of industry, the built environment and 646 kg per head, waste prevention measures
agri-food can generate significant environmental taken so far have not been impactful enough or
improvements (see Annex 6), as they rank among have yet to show their impact.
the most resource-intensive systems.
Graph A9.1: Trend in material use
Germany is on track to meet the EU’s circular 18.0 120.0
economy goals, although there are still areas 16.0
100.0
where improvement is needed. The EU’s 2020 14.0
circular economy action plan (CEAP) aims at 12.0 80.0
tonnes/capita
doubling the circular material use rate between
kg/capita
10.0
60.0
2020 and 2030. Germany’s use of circular 8.0
materials rose from 11.8% in 2017 to 12.7% in 6.0 40.0
2021, compared to the EU average of 11.7%. This 4.0

20.0
shows a steady increase in recent years, but 2.0
Germany needs to make additional efforts to 0.0 0.0

2016 2017 2018 2019 2020 2021
catch up with EU leaders, for example to promote
Material footprint Germany (tonnes/capita)
not only circular construction materials, but also Material footprint EU-27 (tonnes/capita)
the re-use of materials in the built Trade in recyclable raw materials Germany (imports extra EU, kg/capita)
environment. The CEAP also aims to significantly Trade in recyclable raw materials EU-27 (imports extra EU, kg/capita)
decrease the EU’s material footprint. Although on

Source: Eurostat
a slight downward trend, Germany’s material
footprint (15 tonnes per head) was above the EU-
27 average (13.7 tonnes per head) in 2020. The Graph A9.2: Treatment of municipal waste
reduction path is not constant, and the footprint 700 633 627
609
641 646
606
increased in 2017. The labour market benefits of
the circular transition remain limited, with no 600
growth in 2019.
500
Germany recently adopted new policies to

Kg per capita
400
address circular economy challenges, and
300
more measures are planned. For example, in
2020, Germany – as the first EU Member State – 200
introduced a new general ’duty of care‘ in its
Circular Economy Act (Kreislaufwirtschaftsgesetz), 100
obliging producers and distributors to prevent 0

goods from becoming waste by introducing certain 2016 2017 2018 2019 2020 2021
measures, for example selling goods at a reduced Difference waste generated/treatment
rate or donating goods. Germany will finally Landfill/disposal

Total incineration (including energy recovery)
develop a comprehensive circular economy Composting and digestion
strategy, work on which began in December 2022. Material recycling
It will be key that this strategy contains concrete EU-27
and measurable targets, including for the different Source: Eurostat
sectors, and monitoring and control mechanisms.
Further accelerating the circular economy
Germany was the top recycler of municipal transition of the industrial system is
waste in 2020, but the share of incineration, important for Germany’s strategic
including with energy recovery, has remained
50
Table A9.1: Overall and systemic indicators on circularity
Latest year
AREA 2016 2017 2018 2019 2020 2021 EU-27 EU-27
Overall state of the circular economy
Material footprint (tonnes/capita) 15.7 16.1 16.0 15.7 15.0 - 13.7 2020
1
YoY growth in persons employed in the circular economy (%) 2.8 1.4 2.0 0.0 - - 2.9 2019
Water exploitation index plus (WEI+) (%) 6.2 4.8 5.7 2.6 - - 3.6 2019
Industry
Resource productivity (purchasing power standard (PPS) per kilogram) 2.3 2.4 2.5 2.7 2.7 2.7 2.3 2021
2
Circular material use rate (%) 12.2 11.8 12.4 12.9 12.9 12.7 11.7 2021
Recycling rate (% of municipal waste) 67.1 67.2 67.1 66.7 70.3 71.1 49.6 2021
Built environment
3
Recovery rate from construction and demolition waste (%) - - 93.0 - 94.0 - 89.0 2020
4
Soil sealing index (base year = 2006) 103.2 - 106.0 - - - 108.3 2018
Agri-food
5
Food waste (kg per capita) - - - - 131.0 - 131.0 2020
Composting and digestion (kg per capita) 116.0 114.0 109.0 114.0 143.0 150.0 100.0 2021
(1) Persons employed in the circular economy only tracks direct jobs in selected sub-sectors of NACE codes E, C, G and S; (2) the
circular material use rate measures the share of material recovered and fed back into the economy in overall material use; (3) the
recovery rate of construction and demolition waste includes waste which is prepared for reuse, recycled or subject to material
recovery, including through backfilling operations; (4) soil sealing: 2016 column refers to 2015 data; (5) food waste includes
primary production, processing and manufacturing, retail and distribution, restaurants and food services, and households.
Source: Eurostat, European Environment Agency
independence and resilience. Currently, The agri-food system needs to be adapted to

Germany’s material import dependency stands at reduce pollution and food waste, but
40.6% compared to 22.9 % for the EU, however Germany is advanced as regards composting
the economy, particularly industry, is more and digestion. In 2020, food waste per person
efficient at using materials to produce wealth than was 131 kg – at EU average. Intense agriculture
the EU average, with a resource productivity of 2.7 continues to exert high pressure on the
purchasing power standard per kilogram vs. 2.3 for environment: groundwater quality improved only
the EU average (see Annex 5). Making better use marginally, and water pollution caused by nitrates
of the potential of circularity, including remains a serious concern. There are continuing
strengthening secondary raw material use in acute problems with excess plant and algae
industry will help reduce resource dependency, in growth due to high concentrations of nutrients in
particular on fossil fuel-based raw materials. the Baltic and North Seas. Still, Germany is well
above the EU average as regards anaerobic
The built environment system continues to digestion: 150 kg per head compared to 100 kg in
exacerbate the depletion of resources 2021. Anaerobic digestion can help Germany’s
despite recent improvements. At 94%, the strategic autonomy by generating biomethane
recovery rate of construction and demolition waste and/or producing organic fertilisers. Germany is
is well above the EU average of 89%. But the use advanced on the recovery of phosphorus from
of re-used and recycled building materials is still sewage sludge.
hampered by building regulations. Germany ranks
above the EU average with a net land take (100) of There remains a financing gap in the circular
119.9 m2/km2 (EU-27 average: 83.8 m2/km2) (101). economy, including waste management.
Germany will need to take more measures to meet Additional investments will be required to address
its national target of restricting daily land-take to growing needs. The financing gap was estimated
under 30 ha by 2030. Daily land take for the at EUR 6 billion per year between 2014 and 2020,
period 2017-2020 was 54 ha. while investment needs were estimated to be at
least EUR 11.5 billion per year, and investment
baselines were EUR 5.5 billion per year (see Annex
(100) The net land take concept combines land take with land 6). Additional investments are necessary to
return to non-artificial land categories (re-cultivation).
upgrade plastic recycling and digitalise waste
(101) European Environment Agency, 2023, Land take in Europe. treatment infrastructure.
51
ANNEX 10: DIGITAL TRANSFORMATION
Digital transformation is key to ensuring a on basic digital skills, but above average for the
resilient and competitive economy. In line with percentage of ICT specialists and matches the EU
the Digital Decade Policy Programme, and in average for female ICT specialists. The German
particular with the targets in that Programme for RRP includes several measures that support digital
digital transformation by 2030, this Annex skills and notably digital education, such as
describes Germany’s performance on digital skills, investment in digital devices for teachers (as part
digital infrastructure/connectivity and the of the broader infrastructure measure Digital Pact
digitalisation of businesses and public services. for Schools (DigitalPakt Schule)), an education
Where relevant, it makes reference to progress on platform and educational centres of excellence.
implementing the Recovery and Resilience Plan Moreover, Germany is implementing some
(RRP). As of May 2023, Germany allocates more measures to support the up- and reskilling of its
than 51% of its total RRP budget to digital workforce, including in the context of measures
(EUR 13.5 billion) (102). that focus on the digitalisation of businesses (e.g.
European Digital Innovation Hubs or the Digital
The Digital Decade Policy Programme sets Now (Digital Jetzt) investment support scheme).
out a pathway for Europe’s successful digital
transformation by 2030. The Programme Very high capacity network (VHCN) coverage
provides a framework for assessing the EU’s and in rural areas and fibre coverage in general
Member States’ digital transformation, notably via remain a key challenge for Germany. Despite
the Digital Economy and Society Index (DESI). It recent improvements, Germany is still below the
also provides a way for the EU and its Member EU average for VHCN in rural areas (30% (106)
States to work together, including via multi- compared to 45% in 2022). Fibre coverage and
country projects, to accelerate progress towards take-up, overall and in rural areas in particular, are
the Digital Decade digital targets and general increasing very slowly and remain considerably
objectives (103). More generally, several aspects of below the EU average (19% overall and 17%
digital transformation are particularly relevant in rural). However, Germany scores above the EU
the current context. In 2023, the European Year of average in overall 5G coverage in 2022 (93% vs
Skills, building the appropriate skillset to make full the EU average of 81%). 5G coverage on the 3.4-
use of the opportunities that digital transformation 3.8 GHz spectrum band, which is essential for
offers is a priority. A digitally skilled population enabling advanced applications requiring large
increases the development and adoption of digital spectrum bandwidth, is 36% in Germany, below
technologies and leads to productivity gains (104). the EU average of 41%. The German RRP does not
Digital technologies, infrastructure and tools all include measures to support the deployment of
play a role in the fundamental transformation fibre connections, but the Federal Government
needed to adapt the energy system to the current allocated EUR 12 billion (107) for this purpose. In
structural challenges (105). July 2022, a gigabit strategy was adopted (108),
which includes goals of 15 million new fibre to the
Germany has a mixed performance on digital premises (FTTP) connections by the end of 2025
skills. The country scores below the EU average and on the availability of FTTP connections for all
German households by 2030. A revised funding
programme came into effect in 2023. These
(102) The share of financial allocations that contribute to digital
objectives has been calculated using Annex VII of the RRF measures are expected to accelerate fibre
Regulation. deployment in Germany.
(103) The Digital Decade targets as measured by DESI indicators
and complementary data sources are integrated to the The country has a mixed performance on
extent currently available and/or considered particularly digitalisation of businesses. Germany scores
relevant in the MS-specific context. above the EU average for most indicators in this
(104) See for example OECD (2019): OECD Economic Outlook, area, e.g. digital intensity for SMEs and the
Digitalisation and productivity: A story of complementarities,
OECD Economic Outlook, Volume 2019 Issue 1 | OECD
iLibrary (oecd-ilibrary.org). (106) Key Indicators — Digital Scoreboard - Data & Indicators
( ) The need and possible actions for a digitalisation of the
105 (digital-agenda-data.eu)
energy system are laid out in the Communication (107) BMDV - Die Gigabitförderung 2.0 (bund.de)
‘Digitalisation the energy system – EU action plan’
(COM(2022)552. (108) BMDV - Gigabitstrategie der Bundesregierung verabschiedet
52
adoption of advanced digital technologies like big if implemented timely and effectively. These
data and artificial intelligence, except for uptake of measures account for more than 50% of digital
cloud computing services, which is slightly below investments under the plan.
the EU average. The performance of SMEs is
around the EU average for several indicators. The
proportion of SMEs selling online is 19% (in line
with the EU average), their e-commerce turnover is
12% (just above the EU average of 11%) and the
share of SMEs selling online cross-border is at
10% (slightly above the EU average of 9%). There
are several initiatives in Germany that support
SMEs in their digital transformation, such as the
Digital Hub initiative, the national SME strategy
(Mittelstandsstrategie), and the ‘Mittelstand-
Digital’ (SMEs Digital) programme - which itself
consists of the three pillars: (i) the ‘Mittelstand
Digital Innovation Hubs’ network; (ii) the Digital
Now (Digital Jetzt) investment support scheme;
and (iii) the ‘Cybersecurity for SMEs Initiative’, (IT-
Sicherheit-in-der-Wirtschaft). The German RRP
includes several measures to support the
digitalisation of enterprises and the development
and integration of advanced digital technologies.
These measures include the Important Project for
Common European Interest (IPCEI) on Next
Generation Cloud Infrastructure and Services and
the IPCEI on Microelectronics and Communication
Technologies, as well as a vehicle manufacturer
and supplier investment programme.
Germany is starting to improve in the

digitalisation of public services, but
implementation remains slow and a crucial
reform issue in Germany (see Annex 13 for
more details on structural challenges). The
country scores slightly below the EU average on
the provision of digital public services for
businesses and slightly above the EU average for
citizens. Germany has three electronic
identification (eID) schemes at level of assurance
‘high’ that are notified under the eIDAS regulation.
Regarding access to electronic health records,
Germany scores 71 out of 100, in line with the EU
average. The National Regulatory Control Council
acknowledges Germany’s work on the
digitalisation of its public administration but
considers that the country is still lagging behind as
regards quantifiable results (109). The German RRP
includes several measures to support the
implementation of digital public services, which
are expected to improve performance in this area
(109) Source: National Regulatory Control Council: Monitor Digital

Administration, Number 6
53
Table A10.1: Key Digital Decade targets monitored by DESI indicators
Digital Decade
Germany EU target by 2030
DESI 2021 DESI 2022 DESI 2023 DESI 2023 (EU)
Digital skills
At least basic digital skills NA 49% 49% 54% 80%
% individuals 2021 2021 2021 2030
1
ICT specialists ( ) 4.7% 4.9% 4.9% 4.5% 20 million
% individuals in employment aged 15-74 2020 2021 2021 2021 2030
Digital infrastructure/connectivity
Fixed Very High Capacity Network (VHCN) coverage 56% 75% 70% 73% 100%
% households 2020 2021 2022 2022 2030
2
Fibre to the Premises (FTTP) coverage ( ) 14% 15% 19% 56% -
% households 2020 2021 2022 2022 2030
Overall 5G coverage 18% 87% 93% 81% 100%
% populated areas 2020 2021 2022 2022 2030
5G coverage on the 3.4-3.8 GHz spectrum band NA NA 36% 41% -
% populated areas 2022 2022 2030
Digitalisation of businesses
SMEs with at least a basic level of digital intensity NA NA 77% 69% 90%
% SMEs 2022 2022 2030
Big data (3) 18% 18% 18% 14% 75%
% enterprises 2020 2020 2020 2020 2030
Cloud (3) NA 32% 32% 34% 75%
% enterprises 2021 2021 2021 2030
Artificial Intelligence (3) NA 11% 11% 8% 75%
% enterprises 2021 2021 2021 2030
Digitalisation of public services
Digital public services for citizens NA 76 78 77 100
Score (0 to 100) 2021 2022 2022 2030
Digital public services for businesses NA 80 81 84 100
Score (0 to 100) 2021 2022 2022 2030
Access to e-health records NA NA 71 71 100
Score (0 to 100) 2023 2023 2030
(1) The 20 million target represents about 10% of total employment.

(2) The Fibre to the Premises coverage indicator is included separately as its evaluation will also be monitored separately and
taken into consideration when interpreting VHCN coverage data in the Digital Decade.
(3) At least 75 % of Union enterprises have taken up one or more of the following, in line with their business operations: (i) cloud
computing services; (ii) big data; (iii) artificial intelligence.
Source: Digital Economy and Society Index
54
ANNEX 11: INNOVATION
This Annex provides a general overview of the the effect of which has still to materialise (114).
performance of Germany’s research and Furthermore, Germany’s recovery and resilience
innovation system, which is essential for delivering plan (RRP) contains various measures to support
the twin green and digital transition. SME innovation for green technologies, e.g., linked
to renewable hydrogen and climate-friendly
Germany is a ‘strong innovator’, but its construction and innovation.
performance is increasing at a lower rate
than the EU’s. According to the 2022 edition of Germany accounts for the largest share of
the European Innovation Scoreboard (110) the unicorns (privately owned company reaching
country’s performance stands at 117.5% of the EU a valuation of $ 1 billion or more) in the
average and is above the average of the strong EU (115), but the available venture capital
innovators (114.5%). However, its performance market remains small in international
lead over the EU is shrinking. Amongst the main comparison. While the country’s venture capital
reasons are weakness related to human resources, increased between 2020 and 2021 (from 0.054%
in particular for small and medium-sized to 0.076% of GDP), it remains just above the EU
enterprises (SMEs), and the relatively low level of average (0.074% in 2021). Particularly in
venture and growth capital. international comparison, the availability of
venture capital remains low (116). The government
Total R&D intensity (111) was 3.13% in 2021, has put in place support programmes for start-
above the EU target of 3%. However, it is still ups, e.g. the Future Fund (117), but the majority of
below Germany’s own target of 3.5% for 2025, set the funds focus on start-ups at an early stage of
in 2018 (112), and it has been declining compared their development. Therefore, firms’ access to
to its 2019 value (3.17%). The latest report by the growth and later-stage capital remains a major
Expert Commission on Research and Innovation challenge and has led many high-potential
welcomed the pursuit of the 3.5% target and German start-ups to turn to foreign investors (118).
highlighted the need to allocate more resources to
green and digital research and innovation,
Graph A11.1: Venture Capital in Germany (2022) as
particularly in support of radical innovations (113).
% of GDP
0.16%
While the private sector contributes Seed Start-up and other early stage
significantly to R&D spending, innovation 0.12%
Later stage venture No breakdown available
activity in SMEs continues to decline. SMEs’ 0.08%
share of business R&D expenditure (as % of GDP)

0.04%
in Germany has stagnated at a low level over the
last decade and remains significantly below the EU 0.00%
average (Germany: 0.19% in 2019, EU: 0.34%).

Innovation expenditure remains concentrated in
relatively few and mainly large businesses (see Source: OECD (2022), ‘Venture capital investments’,
Annex 12). To improve the situation, Germany Structural and Demographic Business Statistics (database),
introduced a R&D tax incentive system in 2020, accessed on 10/01/2023
The lack of skilled workers is hampering

investment in innovation and digitalisation.
(110) 2022 European Innovation Scoreboard, Country profile:
Germany https://ec.europa.eu/assets/rtd/eis/2022/ec_rtd_eis-
country-profile-de.pdf The EIS provides a comparative
analysis of innovation performance in EU countries, including (114) Bundesbericht Forschung und Innovation 2022 - Hauptband
the relative strengths and weaknesses of their national (bundesbericht-forschung-innovation.de)
innovation systems (also compared to the EU average).
(115) SRIP report (europa.eu)
(111) defined as gross domestic expenditure on R&D as a
percentage of GDP (116) https://soet-pdf.s3.eu-west-
2.amazonaws.com/State_of_European_Tech_2021.pdf
(112) The target was reiterated in the Coalition Agreement of the
new German government in 2021. (117) BMWK - Future Fund
(113) Gutachten zu Forschung, Innovation und Technologischer (118) OECD Innovation Review 2022, *50b32331-en.pdf (oecd-
Leistungsfähigkeit Deutschlands 2022, e-fi.de. ilibrary.org).
55
Table A11.1: Key innovation indicators
EU
Germany 2010 2015 2019 2020 2021 average (1)
Key indicators
R&D intensity (GERD as % of GDP) 2.73 2.93 3.17 3.13 3.13 2.26
Public expenditure on R&D as % of GDP 0.9 0.92 0.98 1.04 1.05 0.76
Business enterprise expenditure on R&D (BERD) as % of GDP 1.83 2.01 2.18 2.09 2.09 1.49
Quality of the R&I system
Scientific publications of the country within the top 10% most cited
11.2 11.2 10.47 : : 9.8
publications worldwide as % of total publications of the country
Patent Cooperation Treaty patent applications per billion GDP (in
7.7 6.5 5.9 : : 3.3
PPS)
Academia-business cooperation
Public-private scientific co-publications as % of total publications 9.4 9.9 10.8 10.9 10.8 7.1
Public expenditure on R&D financed by business enterprise
0.105 0.117 0.117 : : 0.054
(national) as % of GDP
Human capital and skills availability
New graduates in science & engineering per thousand pop. aged
15.1 17.1 19.7 17.6 : 16.0
25-34
Public support for business enterprise expenditure on R&D (BERD)
Total public sector support for BERD as % of GDP : 0.082 0.084 : : 0.194
Green innovation
Share of environment-related patents in total patent applications
17.1 14.2 13.5 : : 13.3
filed under Patent Cooperation Treaty (%)
Finance for innovation and economic renewal
Venture capital (market statistics) as % of GDP 0.032 0.026 0.049 0.054 0.076 0.074
Employment in fast-growing enterprises in 50% most innovative
5.9 4.6 6.1 : : 5.5
sectors
(1) EU average for the latest available year or the year with the highest number of country data
Source: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO's Patent Statistical database), Invest Europe
High-growth firms in Germany account for a lower severe (120). Reforms under the Act are currently
share of employment than the EU average underway and, in November 2022, the Federal
(Germany: 13.54%, EU: 15.90% in 2019). This is government decided on key points for improving
underlined by a recent OECD study pointing to and modernising immigration law, aimed at
shortages of highly skilled staff in 7 out of 10 increasing the immigration of skilled workers (121).
high-skilled occupations, one of the highest rates In its 2023 report (122), the Commission of Experts
in the OECD (119) (see Annex 14). To overcome the for Research and Innovation, reiterated the need to
shortage of skilled labour, the RRP includes various secure the skilled labour base and underlined the
measures to encourage skills-upgrading and necessity to make better use of the existing skilled
address labour shortages, such as the Digital labour base and to attract foreign skilled workers.
Education Platform and Educational Centres of
Excellence. Furthermore, the Federal Government
is focusing more on skilled migration and, in 2020,
introduced the Skilled Immigration Act, which aims
to ease administrative burdens and simplify
requirements for the recognition of qualifications (120) https://www.deutschland.de/en/topic/business/the-skilled-
labour-immigration-act-working-in-germany.
in the information and communications technology
sector, where skill shortages are particularly (121) https://www.bmi.bund.de/SharedDocs/pressemitteilungen
/DE/2022/11/eckpunkte-fachkraefte.html.
(122) https://www.e-
fi.de/fileadmin/Assets/Gutachten/2023/EFI_Summary_2023.
pdf
(119) OECD Innovation Review 2022: *50b32331-en.pdf (oecd-
ilibrary.org).
56
ANNEX 12: INDUSTRY AND SINGLE MARKET
Productivity in Germany has recovered from employment levels high. (124) While the long-term
the disruptions caused by the pandemic but slowdown in productivity is a global phenomenon,
growth remains subdued. The World productivity growth in Germany is also hampered
Competitiveness Ranking by the International by country-specific structural weaknesses,
Institute for Management Development (IMD) including in respect to digitalisation (see Annex
places Germany as the 15th most competitive 10), research and innovation (see Annex 11) as
economy in the world, partly due to its economic well as skills shortages and mismatches (see
strength, stable and predictable framework Annex 14). Entrepreneurship can also further
conditions, skilled workforce and effective legal contribute to boosting innovation and productivity.
environment. (123) At 122% of the EU average in In July 2022, the German government adopted a
2022, labour productivity is high in Germany (GDP comprehensive start-up strategy (125) aimed at
per hour worked). Productivity was strongly improving regulatory framework conditions,
affected by the COVID-19 pandemic, causing strengthening financing for start-ups and
significant fluctuations in 2020 and 2021 (see facilitating spin-offs from science and universities.
Graph A12.1). Per capita labour productivity
declined by 2.7% in 2020, but recovered the year Graph A12.2: Productivity by sector
after, increasing by 2.5% in 2021. In 2022, the
150
soaring costs for energy and other inputs caused
further disruption, but productivity is expected to
recover in 2023-2024 in line with the EU average. 130
Cumulated total factor productivity gains remain
above the EU average, driven in particular by
manufacturing and ICT, though growth has slowed
2003=100
110
over the last years.
Graph A12.1: Total factor productivity 90
3 70
03 05 07 09 11 13 15 17 19 21
2 Market services (G_N) Manufacturing (C)
1 Construction (F) Tradable (A_E, G_J)
Non tradable (F, K_U)
% change
0
-1
-2 Germany has been hit particularly hard by

-3 the energy crisis because of its large
-4 manufacturing base. The soaring prices imposed
-5 new challenges in particular for energy-intensive
00 02 04 06 08 10 12 14 16 18 20 22 sectors, such as metals processing, chemicals,
Actual TFP, Germany paper, and non-metal mineral products, where
Trend TFP, Germany production declined by 10% in 2022. (126) Industry
Trend TFP, EU
contributed noticeably to the overall gas savings.
Source: European Commission. In the last quarter of 2022, its gas consumption
was 23% below the average of the last four
The German National Productivity Board sees the
future competitiveness of the German economy as (124) German Council of Economic Experts, Annual Report 2022/23
depending largely on its ability to provide the right "Managing the Energy Crisis in Solidarity and Shaping the
framework conditions for using innovations and New Reality", 9 November 2022,
new technologies to increase productivity and keep https://www.sachverstaendigenrat-wirtschaft.de
(125) BMWK, 27.7.2022 BMWK - Startup roadmap ready: Federal
Cabinet adopts first comprehensive startup strategy
(126) Federal Statistical Office of Germany,
(123) Institute for Management Development, World Produktionsentwicklung in energieintensiven
competitiveness ranking 2022. Industriezweigen, https://www.destatis.de/
57
years. (127) Large firms which produce globally find beginning of 2021 to mid-2022, goods worth
it easier to balance out fluctuations in energy and almost EUR 64 billion could not be manufactured
raw material prices and to pass on the higher due to supply bottlenecks and that German GDP
costs to their customers, while for many SMEs the could have been 1.2% higher in 2021 and 1.5%
recent cost increases pose a major. (128) Insolvency higher in mid-2022 if all new orders had been
cases increased towards the end of 2022, though processed. (132) Dependencies exist for a broad
the numbers were still relatively low in a long- range of raw materials and components, including
term comparison. (129) The German government critical raw materials necessary for the green and
has adopted substantial measures to help private digital transition. While supply disruptions have
households and firms cope with the soaring costs started to ease, in the last quarter of 2022 77%
for gas, heat and electricity (see Annex 7). In of firms were still affected by shortages of
October 2022, producer prices started to decline important materials and primary products,
for the first time in two and a half years, but price considerably above the EU average (48%). The
levels are set to remain elevated. automotive and mechanical engineering industries
have been particularly affected.
High energy costs are increasing the
pressure on firms to reduce their energy Barriers to private and public investment
intensity and accelerate structural change. include skills shortages, capacity constraints,
The soaring energy prices strongly affected the bureaucratic burden and slow progress in
business environment and bear the risk that firms digitalisation. According to the EIB Investment
in energy-intensive industries, which are in Survey 2022, firms cite as most important
particularly strong competition with companies impediments the availability of skilled staff (93%),
outside the EU, may shift at least parts of their energy costs (83%) and uncertainty about the
production abroad. (130) The German Council of future (74%). The lack of skills and workforce (see
Economic Experts sees the following sectors also Annex 14) has become a major bottleneck
particularly concerned, as they have the highest particularly for SMEs and risks delaying the digital
gas consumption per euro of sales: the metal and green transition. (133) However, other obstacles
production and processing industries, the also hamper investment: Capacity constraints and
manufacture of glass and glassware, ceramics, lack of digitalisation in public administration (see
processing of stone and earth, as well as energy- also Annex 13), especially at municipal level, also
intensive products in the basic chemical affect private investment. Moreover, innovation
industry. (131) expenditure is increasingly concentrated in large
companies and few sectors, whereas SMEs’
Germany's industry would benefit from innovation activity is modest (see also Annex 11).
strengthening the resilience of strategic
value chains. The supply disruptions caused by Germany still has scope to further improve
the pandemic and Russia’s war against Ukraine the business environment by reducing the
have affected large parts of the German economy administrative burden for SMEs and
and revealed its sensitivity to disruptions in global streamlining planning and permitting
value chains. Studies estimated that from the procedures. Germany still has substantial scope
to reduce the administrative burden for SMEs,
(127) Bundesnetzagentur, 6.1.2023, Gasversorgung 2022, including by modernising registers and digitalising
https://www.bundesnetzagentur.de/ public services in the context of the Online Access
(128) DIHK Konjunkturumfrage, February 2023,
Act and beyond. However, progress in this respect
https://www.dihk.de/ has been slow and the related measures in the
(129) Statistisches Bundesamt, 11.1.20203,
https://www.destatis.de/DE/Presse/Pressemitteilungen/
(132) Institut für Makroökonomie und Konjunkturforschung (IMK),
(130) Leibniz-Institut für Wirtschaftsforschung Halle, https://www.imk-boeckler.de/de/pressemitteilungen-15992-
Pressemitteilung 10 November 2022, https://www.iwh- lieferengpasse-kosteten-deutsche-industrie-bis-mitte-2022-
halle.de/presse/pressemitteilungen/ knapp-64-milliarden-euro-44984.htm
(131) German Council of Economic Experts, Annual Report 2022/23 (133) SME Performance Review 2021/2022 and country fact sheet
"Managing the Energy Crisis in Solidarity and Shaping the for Germany, 20.6.2022, https://single-market-
New Reality", 9 November 2022, economy.ec.europa.eu/smes/sme-strategy/sme-
https://www.sachverstaendigenrat-wirtschaft.de performance-review_en
58
German recovery and resilience plan do not improvement, for example regarding the number
encompass the full scope of the Online Access Act of procurements advertised on Tenders Electronic
(see also Annex 10). Germany plays an important Daily (TED) and the quality of information
role in Europe’s transition to climate neutrality, in provided. Reducing administrative burden could
line with the Green Deal Industrial Plan (134) and also promote competition in public procurement,
Europe’s ambitious climate targets, in respect to where the percentage of single bids has increased
both supply of and demand for clean technologies. from 19% to 25% in the last two years. (139)
However, lengthy planning and permitting
procedures for investment projects risk Graph A12.3: Business environment and
compromising progress in respect to the green productivity drivers
transition, in particular regarding wind power,
energy infrastructure and clean tech projects (see
also Annexes 6 and 7). Federal and regional 1) Business
investments
authorities have already taken a number of steps
to streamline planning and permitting 5) Single bids
2) EIF access to
procedures (135), including in the context of an finance index
ongoing project by the Single Market Enforcement

Taskforce. However, efficient implementation and
adequate resources will be needed at all levels of 4) Labour 3) Payment gap -
shortage G2B
administration.
Germany has scope for further improvement 4) Material 3) Payment gap -

shortage B2B
in enforcing Single Market rules. While
Germany’s trade integration in the Single Market
for goods is above the EU average, it is relatively
low for services. The Single Market Scoreboard (136) European Union Germany
indicates scope for further improvement, for Source: 1) % of GDP, 2021 Eurostat;
example with respect to ongoing infringement 2) composite indicator, 2021 European Investment Fund
cases. While the number of infringements has access to finance index;
decreased slightly, Germany has the second 3) average payment delay in number of days, 2022 Intrum;
highest number of pending cases in the EU (up 4) % of firms in manufacturing facing constraints, 2022
European Commission business consumer survey;
from the 4th place in 2020). Problematic areas 5) proportion of contracts awarded with a single bidder, 2022
include taxation, environment and transport, as Single Market Scoreboard.
well as compliance with the Professional
Qualifications Directive (137) and Proportionality Reducing restrictive regulation in services
Test Directive. (138) Germany’s SOLVIT centre, could boost competition and productivity.
designed to help citizens and businesses deal with Restrictions on regulated professions remain high
potential breaches of EU rights in other EU in comparison to the EU average for architects,
countries, would benefit from additional human civil engineers, accountants/tax advisers,
resources. As regards public procurement, patent/trademark agents and lawyers, despite
Germany’s performance is in line with the EU some recent reforms, mostly concerning
average, but there still seems room for restrictions on company ownership and
multidisciplinary partnerships in 2021 in tax and
(134) Green Deal Industrial Plan for the Net-Zero Age. COM(2023) legal professions. Exclusive rights to exercise tax
62 final advice and legal services remain very broad,
(135) Übersicht über wichtige umgesetzte preventing development of innovative services and
Beschleunigungsmaßnahmen des BMWK zum Erneuerbaren- the up-take of modern IT solutions (“LegalTech” in
Ausbau und zum Stromnetzausbau, 8.2.2023
legal services). Significant requirements remain for
beschleunigungsmassnahmen-des-bmwk-zum-
erneuerbaren-ausbau.pdf accountants on shareholding and joint exercise of
activities, and for architects in relation to
(136) Single Market Scoreboard, https://single-market-
scoreboard.ec.europa.eu/performance-overview_en restrictions on shareholding and company
(137) 2005/36/EC
(139) https://single-market-scoreboard.ec.europa.eu/business-
( ) 2018/935/EU
138
framework-conditions/public-procurement_en
59
Table A12.1: Industry and the Single Market
EU27
POLICY AREA INDICATOR NAME 2018 2019 2020 2021 2022
average (*)
Net private investment, level of private capital stock, net of
HEADLINE INDICATORS
2.8 2.8 1.9 2 2 3.7

depreciation, % GDP (1)
Economic
Net public investment, level of public capital stock, net of
Structure 0.1 0.1 0.3 0.2 0 0.4
depreciation, % GDP (1)
(2)
Real labour productivity per person in industry (% yoy) -0.9 -1.8 -5 5.7 -0.4 1.4
Cost
competitive- Nominal unit labour cost in industry (% yoy)(2) 3 4.2 3.1 -2.5 3.9 2.9
ness
Material shortage (industry), firms facing constraints, % (3) 21 15 13 56 77 47
Labour shortage using survey data (industry), firms facing
Shortages 25 19 10 23 39 28
constraints, % (3)
RESILIENCE
Vacancy rate (business economy)(4) 3.3 3.5 2.6 3.5 4.8 3.1
Concentration in selected raw materials, Import concentration

0.21 0.18 0.15 0.17 0.19 0.18
Strategic index based on a basket of critical raw materials (5)
dependencies
Installed renewables electricity capacity, % of total electricity
52.8 54.6 56.9 58.1 n.a. 50.9
produced (6)
Single Market
EU trade integration, % (7) 22.9 23.0 21.0 23.4 25.6 45.8
integration
MARKET
SINGLE
Restrictions EEA Services Trade Restrictiveness Index (8) 0.05 0.05 0.05 0.05 0.05 0.05
Public
Single bids, % of total contractors (9) 20 22 19 20 25 29
procurement
Investment Impact of regulation on long-term investment, % of firms
37.1 29.4 31.5 29.1 31.8 29.6
obstacles reporting business regulation as major obstacle (10)
Business Bankruptcies, Index (2015=100)(11) 83.5 81.1 68.6 60.5 63.2 86.8
BUSINESS ENVIRONMENT - SMEs
demography Business registrations, Index (2015=100) (11) 90 88.5 77.5 79 78.1 121.2
Payment gap - corporates B2B, difference in days between
-5 1 20 12 12 13
offered and actual payment (12)
Payment gap - public sector, difference in days between
Late payments 4 2 24 11 13 15
offered and actual payment (12)
Share of SMEs experiencing late payments in past 6 months, %
(13) n.a. 33.5 35 33.4 33.2 43
EIF Access to finance index - Loan, Composite: SME external

0.63 0.72 0.71 n.a. n.a. 0.46
financing over last 6 months, index values between 0 and 1 (14)
Access to
finance
EIF Access to finance index - Equity, Composite: VC/GDP,
0.4 0.3 0.2 n.a. n.a. 0.23
IPO/GDP, SMEs using equity, index values between 0 and 1 (14)
(*) Last available year

Source: (1) AMECO, (2) Eurostat: NAMA_10_LP_A21, (3) ECFIN BCS, (4) Eurostat: jvs_a_rate_r2, (5) COMEXT, (6) Eurostat:
nrg_inf_epc, (7) Eurostat: BOP_C6_A, (8) OECD, (9) Single Market Scoreboard, (10) EIB survey, (11) Eurostat: sts_rb_a, (12) Intrum,
(13) SAFE Survey, (14) EIF SME Access to Finance Index.
form. (140) Restrictiveness also remains standards and consumer interests, could boost
comparatively high in retail, in particular for competition and productivity.
establishment of shops, where Germanys is
among the most restrictive Member States. (141)
Reducing restrictive regulation in regulated
professions and retail, while safeguarding quality
(140) European Commission, Communication on updating the

reform recommendations for regulation in professional
services, COM(2021)385.
(141) European Commission, Retail Restrictiveness Indicator (2022
update), forthcoming.
60
ANNEX 13: PUBLIC ADMINISTRATION
This Annex outlines the performance of the public administration was the sixth lowest in
Germany’s public administration, which is the EU-27 in 2022 (Graph A13.2).
essential for providing services and carrying
out reforms. Overall, Germany’s government Graph A13.1: Germany. E-government maturity and
effectiveness ranks above the EU average (142). e-government users
The country has a long-standing tradition of high 100
quality and professional public administration, with 90
a strong commitment to delivering services well. 80
70
The digitalisation of the public 60
administration remains a crucial reform 50
issue in Germany. Digital public services can 40
reduce burdens for businesses and citizens. The 30
recovery and resilience plan (RRP) includes 20
significant measures on the digital transformation 10
of the public administration. Germany still scores 0

User Transparency
Key enablers
Cross-border Total
below the EU average in terms of the proportion of centricity services
people using e-Government services and in various E-govt.
aspects of the e-Government benchmark E-government maturity users
indicators, such as transparency, the existence of DE EU-27

key enablers and the accessibility of digital public
(1) 2022 data for the e-government maturity indicator and
services to citizens from abroad (Graph A13.1 and 2021 data for the e-government users’ indicator.
Annex 10). The benchmark also shows that Source: E-government benchmark report and Eurostat
Germany is behind the EU average on digitalising
both front and back offices of public service The justice system performs efficiently
providers. Moreover, the objectives of the Online overall. The new Federal Government’s agenda
Access Act were only partially achieved by the
includes the improvement of planning and
target date of end-2022. Due to Germany's
approval processes, and a reform for the
federal system, many public administration tasks
acceleration of administrative court procedures.
and their digitalisation are handled at the Länder
However, challenges remain in administrative
and municipal levels. Against this backdrop, the
cases, with the time it takes to hand down a
Federal Government and the Länder are stepping
decision (422 days in first instance in 2021) and
up their collaboration and have prioritised the
the high number of pending cases (0.9 per 100
nationwide delivery of digital public services.
inhabitants in 2021). The clearance rate, however,
has also remained high (110% in 2021). The
The ageing of public sector staff in Germany
overall quality of the justice system is good. The
presents a risk. The ratio of 25- to 49-year-olds level of digitalisation is advancing and digital tools
to 50- to 64-year-olds is lower than the EU are widely used in courts and prosecution services,
average, which could have a potential negative including an electronic case management system,
effect on the delivery of public services (Table technology for secure remote working by judges
A13.1). The reduced attractiveness of the civil and staff and for remote communication, and an
service as a place to work is reflected in a electronic case allocation system. However, there
decreasing proportion of young employees. are some challenges concerning human resources
in the justice system. For example, the effects of
The participation of public administration the ageing of the work population and the
employees in adult learning is below the EU declining attractiveness of the government as
average, as is the share of employees with employer. No systemic deficiencies in judicial
higher education (Graph A13.2a). Germany has independence have been reported (143).
launched upskilling and reskilling programmes.
Gender parity in senior management positions in
(143) For a more detailed analysis of the performance of the
justice system in Germany, see the 2023 EU Justice
Scoreboard (forthcoming) and the country chapter for
(142) Worldwide Governance Indicators, 2021 data Germany in the 2023 Rule of Law Report (forthcoming).
61
Table A13.1: Public administration indicators
DE Indicator (1) 2017 2018 2019 2020 2021 2022 EU-27(2)

E-government and open government data
Share of individuals who used the internet within the last year to
1 58.5 60.8 62.9 69.3 54.5 (b) n/a 64.8
interact with public authorities (%)
2 E-government benchmark overall score (3) n/a n/a n/a 62.1 63.2 65.1 72.9
3 Open data and portal maturity index n/a 0.6 0.7 0.9 0.9 0.8 0.8
Educational attainment level, adult learning, gender parity and ageing
Share of public administration employees with tertiary education
4 41.0 41.5 41.9 42.7 (b) 44.2 (b) 45.1 52.0
(levels 5-8, %)
Participation rate of public administration employees in adult
5 9.6 9.4 9.3 8.0 (b) 8.2 (b) 9.5 16.9
learning (%)
6 Gender parity in senior civil service positions (4) 47.2 45.0 36.6 39.0 39.6 38.2 11.0
7 Ratio of 25-49 to 50-64 year olds in NACE sector O 1.3 1.2 1.2 1.3 (b) 1.4 (b) 1.3 1.5
Public financial management
8 Medium term budgetary framework index 0.5 0.6 0.6 0.6 0.7 n/a 0.7
9 Strength of fiscal rules index 1.4 1.4 1.4 1.4 1.5 n/a 1.5
Evidence-based policy making
10 Regulatory governance 2.31 n/a n/a n/a 2.27 n/a 1.7
( ) High values denote a good performance, except for indicator # 6. ( ) 2022 value. If not available, the 2021 value is shown.
1 2
(3) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as the
existence of key enablers for the provision of those services. (4) Defined as the absolute value of the difference between the
percentage of men and women in senior civil service positions.
Flags: (b) break in time series; (d) definition differs; (u) low reliability.
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Labour Force
Survey, Eurostat (# 4, 5, 7), European Institute for Gender Equality (# 6); Fiscal Governance Database (# 8, 9); OECD Indicators of
Regulatory Policy and Governance (# 10).
Overall, Germany is less advanced in transparent overview of a public body’s financial

implementing accrual accounting for position and performance and can support
government government relative to the EU sustainability and intergenerational equity.
average (Graph A13.2c). This applies in particular
at the federal and state levels of government.
Accrual accounting as a public accounting
standard provides a comprehensive and
Graph A13.2: Germany. a) Participation rate of 25-64 year olds in adult learning (%) by sector and
occupation; b) Share of women and men in senior positions and c) Accounting maturity by government
sector
a) Adult learning b) Gender bal;ance in senior posittions c) Public accounting maturity
25 0 10 20 30 40 50 60 70 80 90 100 0.8
0.7
20
0.6
15
DE 0.5
10 0.4
5 0.3
0.2
0
DE EU-27 DE EU-27 DE EU-27 DE EU-27 0.1
EU-27
Public admin., Education Healthcare Total economy 0
defence and Central State Local Social sec. General
social security gov. gov. gov. Funds gov.
High-skilled occupations Medium-skilled occupations Subcomponents Total
Unskilled occupations Armed forces Men Women DE EU-27
Source: Source: a) Eurostat; b) European Institute for Gender Equality; c) table 3 at Updated accounting maturities of EU
governments and EPSAS implementation cost
62
FAIRNESS
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF
THE EUROPEAN PILLAR OF SOCIAL RIGHTS
The European Pillar of Social Rights is the annual basis, in line with the growth rate in 2022.
compass for upward convergence towards However, according to the Commission’s 2022
better working and living conditions in the Autumn Economic Forecast, wage growth is set to
EU. This Annex provides an overview of Germany’s increase, reaching 5% in 2022 reflecting also a
progress in implementing the Pillar’s 20 principles tight labour market and sizeable increases in the
and EU headline and national targets for 2030 on minimum wage. Real wages were set to decrease
employment, skills, and poverty reduction. by 2% and 1.2% in 2022 and 2023 respectively.
Recently reached wage agreements have
confirmed these trends.
Table A14.1: Social Scoreboard for Germany
Policy area Headline indicator The overall labour market situation is good,
Early leavers from education and training
(% of population aged 18-24, 2022)
12.2 but some groups still face challenges.
Share of individuals who have basic or above basic overall
48.92
Germany has one of the highest employment rates
Equal opportunities
digital skills (% of population aged 16-74, 2021)
Youth NEET rate
of women in the EU, with 76.8% in 2022 (vs the
and access to the
labour market
8.6
EU average of 69.3%). However, the gender gap in
Gender employment gap
(percentage points, 2022)
7.8 part-time employment remains one of the highest
Income quintile ratio
4.98
in the EU at 36.7 percentage points (pps). The
(S80/S20, 2021)
Employment rate
unadjusted gender pay gap is wide at 17.6pps
80.7
compared to the EU average of 12.7pps in 2021,
Dynamic labour
Unemployment rate
(% of active population aged 15-74, 2022)
3.1 which also reflects the lower number of hours
markets and fair
working conditions Long term unemployment
1
worked by women. In 2022, the employment rate
(% of active population aged 15-74, 2022)
GDHI per capita growth
of women aged 25-49 with children aged less
113.41
(2008=100, 2021) than 6 years was 18.6pps lower than the rate of
those of the same age without children. Although
At risk of poverty or social exclusion rate
21
(% of total population, 2021)
At risk of poverty or social exclusion rate for children
23.7 taxation opportunities for couples have been
Impact of social transfers (other than pensions) on poverty adjusted within the Faktorverfahren (144), there is
40.3
reduction (% reduction of AROP, 2021)
still a significant disincentive for second earners,
Social protection Disability employment gap
and inclusion (percentage points, 2021)
30.5 many of whom are women, to work more hours.
Housing cost overburden
(% of total population, 2021)
11 This, together with high taxes on labour and
Children aged less than 3 years in formal childcare insufficient availability of childcare and all-day
31.4
(% of population under 3-years-old, 2021)
school facilities, is a major factor in women’s
Self-reported unmet need for medical care
(% of population 16+, 2021)
0.1
lower participation in the labour market. Access to
childcare for children aged less than 3 years is
Critical Weak but Good but to
To watch On average Better than average Best performers
situation improving monitor
Update of 27 April 2023. Members States are classified on steadily increasing and was 31.4% in 2021 (vs
the Social Scoreboard according to a statistical methodology 36.2% for the EU, see also Annex 15). Germany’s
agreed with the EMCO and SPC Committees. It looks jointly at
RRP contributes to addressing this challenge by
levels and changes of the indicators in comparison with the
respective EU averages and classifies Member States in seven providing for 90 000 additional childcare places.
categories. For methodological details, please consult the However, this is still below the supply gap of
Joint Employment Report 2023. Due to changes in the 347 600 estimated in 2020. Furthermore,
definition of the individuals' level of digital skills in 2021,
Germany’s employment gap of persons with
exceptionally only levels are used in the assessment of this
indicator; NEET: neither in employment nor in education and disabilities was one of the highest in 2021 at
training; GDHI: gross disposable household income. 30.5pps vs 23.1pps in the EU. More than 300 000
Source: Eurostat persons with disabilities are employed in sheltered
workshops, and there is a very low transition rate
The German economy and labour market to the primary labour market. Addressing those
made a robust recovery in 2022, despite the challenges would help Germany reach its 2030
uncertainties over the impact of Russia’s war employment target of 83%.
of aggression against Ukraine. Employment
remained robust at 80.9% in Q4-2022. The
(144) The Faktorverfahren is a tax deduction feature within the
unemployment rate remained low at 3% (January joint income tax method for spouses or life partners
2023). By Q4-2022, the growth in nominal (Ehegattensplitting).
compensation per employee reached 5% on an
63
The impact of socio-economic and migrant poverty or social exclusion remained broadly
backgrounds on educational outcomes stable at 21%, compared to 20.4% in 2020, below
remains a challenge. Early school leaving has the EU average (21.7%). The share of children at
deteriorated significantly in the past decade and risk of poverty and social exclusion increased from
was significantly above the EU average in 2022 22.3% in 2020 to 23.7% in 2021, although this
(12.2% vs 9.6%); for non-EU born people, the rate remained below the EU average (24.4%). The
is as high as 28.8%. The impact of socio-economic share of persons with disabilities in the same
background on educational outcome has situation (30.1%) continued to be higher than the
increased, and about one fifth of 10-year-olds do EU average (28.8%). To address these challenges,
not meet basic standards in German and Germany is allocating a considerable share of
mathematics (see Annex 15). Moreover, at 49% in funding under the European Social Fund Plus
2021, Germany is below the EU average of 54% (ESF+) to programmes that foster social inclusion
of individuals aged 16-74 with at least basic in general (32.8%) and for children specifically
digital skills (see Annex 10). The Work of (5.9%). Moreover, the percentage of people living
Tomorrow Act expanded the funding of in households with housing costs above 40% of
qualifications in continuing education and training their total income is higher than the EU average
to respond to the digital transformation, while the (11% vs 8.3%). According to a recent study (145),
Training Assistance Act (BAföG) was amended to the estimated housing shortage, including social
provide more financial help to students. and affordable housing, has increased to 700 000
dwellings. In 2021, 21 000 new social rental
It is crucial to boost the availability of adult apartments were built with government subsidies.
learning and provide stronger incentives for More efforts are therefore needed to meet the
up- and reskilling to tackle skills shortages. federal government’s revised annual targets for
Skills shortages increased, during the recovery the 2021-2025 legislative period of 400 000 new
from the pandemic, particularly for engineers or housing units, including 100 000 social housing
programmers, crafts, science, technology, units. Overall, a more targeted approach could
engineering and mathematics specialists, logistics, better reach the different groups concerned and
care and health professions, as well as social help achieve Germany’s target on poverty
workers. At the same time the employment rate of reduction.
low-educated adults was 15.4pps lower than the
overall employment rate (of the 20-64 age group). Table A14.2: 2030 National targets for Germany
Population ageing and an increasing need for skills National EU
Latest Trend
related to the digital and green transitions are Indicators
data (2015-2022)
target by target
2030 by 2030
expected to exacerbate labour and skills shortages. 81.0
Employment (%) 83 78
The Public Employment Service (Bundesagentur für (2022)
Arbeit) estimates that the country needs a net 1
Adult learning (%)
46.4
65 60
(2016)
migration balance at around 400 000 per year in Poverty reduction
2,3
+623
-1 200 -15 000
order to offset the decreasing level in the potential (thousands) (2021)
labour force. Although upskilling and reskilling are (1) Adult Education Survey, adults in learning in the past 12
essential in this context, adult participation in months. (2) The EU target is expressed in terms of number of
learning activities (over the past 4 weeks) has persons at risk of poverty or social exclusion (AROPE),
reference year 2019. (3) Germany expresses its national
remained stable in Germany for the last 10 years target as a reduction in the number of persons living in
and below the EU average (8.1% vs 11.9% in households with very low work intensity (VLWI), reference
2022). The rate is as low as 4% for low qualified year 2020. Break in series in 2020 for AROPE and VLWI.
people (vs 4.7% for the EU). The funding of the Source: Eurostat, DG EMPL
Upgrading Training Assistance Act (AFBG) was
increased in 2022. EU cohesion policy funds
support upskilling and reskilling to address labour
shortages and skills gaps and help meet the needs
of the labour market. They are key to reaching
Germany’s 2030 national target of at least 65%
(145) Pestel Institut, Arbeitsgemeinschaft fuer zeitgemaesses
of adults in training per year. Bauen e.V. Kiel (2023). https://bauen-und-wohnen-in-
deutschland.de/wp-content/uploads/2023/01/Studie-Bauen-
Social indicators still point to challenges in und-Wohnen-in-der-Krise.pdf.
Germany. In 2021, the share of people at risk of
64
ANNEX 15: EDUCATION AND TRAINING
This Annex outlines the main challenges for education and care by 2030 (150). Lack of qualified
Germany’s education and training system in light staff is a key obstacle to improving the quality of
of the EU-level targets and other contextual services. The ECEC quality law 2022 continues (151)
indicators under the European Education Area to provide federal funding of EUR 4 billion for
strategic framework, based on the 2022 Education quality and participation improvement.
and Training Monitor.
Graph A15.1: Low-achieving 15-year-olds in
Attracting, training and recruiting enough reading in 2015 and 2018 (PISA)
teachers will remain a challenge in the
coming years. At the start of school year 25%
2022/23, between 32 000 and 40 000 teachers
were lacking (146). Several factors - such as more
pupils, expanding all-day school places, and 20%
replacing retiring teachers - could aggravate
teacher shortages, to varying degrees depending
on the Laender and school level. Around 39% of 15%
German teachers in primary and secondary
education (ISCED 1-3) are aged 50 or older. Lower
secondary schools are especially affected, being 10%
able to recruit only 72% of required staff (147).
Shortages emerge predominantly in science,
technology, engineering and mathematics (STEM) 5%
subjects. Comparing the number of teachers Germany EU average
needed in the future with the expected supply of
2015 2018 EU target
teachers points at a gap of over 150 000 by
2035 (148). Source: OECD (PISA 2018).
Early childhood education and care (ECEC) in

Educational outcomes and choices remain
Germany continues to lack available places
heavily influenced by socio-economic and
and qualified staff, but there is potential to
migrant background. According to the 2018 PISA
improve quality. In 2022, 93.7% of children
(Programme for International Student
between 3 and school age attended ECEC – around
Assessment), overall performance is above the EU
the EU average (93%), but still below the EU-level average, but has weakened over time (see Graph
target of 96%. In 2021, even though Germany A15.1). The share of young people not reaching
expanded capacity by 84 000 places compared level 2 in PISA increased between 2015 and 2018
with the previous year, 13% of demand for under- to about 20% in all three areas tested. In 2018, it
3-year-olds could not be satisfied in the west of remained just below the EU average, but far above
the country, and 8% in the east. Municipalities the EU-level target (15%). Socio-economically
have a legal obligation to provide an ECEC place disadvantaged students (often but not only
for children above the age of one, which they are students with a migrant background) lag behind:
expected to fulfil only by 2025 in the east and by by 1 year in mathematics and even up to 2 years
2028 in the west (149). An acute shortage of staff in science (152). This is reflected in a slightly higher
triggered lowering the requirements to enter ECEC equity indicator value in Germany compared to the
professions. According to forecasts (Good Kita EU average. National testing in 2021 shows
report 2021), up to 266 300 additional qualified declining outcomes for fourth grade pupils in
educators will be needed in early childhood
(146) Schuljahr 2022/23 - Lehrermangel verschärft sich weiter

(deutsches-schulportal.de)
(150) BMFSFJ - Gute-KiTa-Bericht 2021
(147) Autor:innengruppe Bildungsberichterstattung, (2022).
(151) The Good ECEC law (2019) provided funding of EUR 5.5
(148) Expertise Lehrkräftebedarf & Angebot bis 2035 billion.
(149) Autor:innengruppe Bildungsberichterstattung, (2022). (152) European Commission, Education and Training Monitor 2021.
65
German and mathematics (153). In addition, about Tertiary education attainment is increasing,
one fifth of these 10-year-olds do not reach but remains low. Tertiary education attainment
minimum standards in German and mathematics. continues to increase but, at 37.1% in 2022 lags
Education policy is the responsibility of the federal behind the 45% EU-level target and the 42% EU
states; however, a federal programme provides average. While 29% of men choose STEM subjects
EUR 3.5 billion for the expansion of all-day at bachelor’s level, only 9% of women do so. The
schooling and care services at primary school share at master’s level is 24% and 12%
level (154). respectively, an imbalance also identified by OECD
(2021).
Germany is promoting digital education. Of all
16-19-year-olds, only 50% had at least basic While overall participation in vocational education
digital skills in 2021, 19 pps below the EU and training (VET) is significant, participation in
average. The Digital Pact for Schools provides adult learning remains weak (see Annex 14).
EUR 6.5 billion in federal support to a programme
to digitise schools. Just under 80% of the original
EUR 5 billion had been allocated by end-2022.
EUR 1.5 billion was added due to the pandemic,
with one third earmarked to support IT
administrators in schools and to provide laptops
both to students and to teachers. The latter is
supported by the Recovery and Resilience Facility
in addition to a meta platform on digital learning
that encompasses existing platforms in Germany
and a quality training programme for teacher
education.
(153) Testing shows an overall decline in average skills compared

with 2011 and 2016 and an increased impact of socio-
economic and migrant background (Stanat, P. et al (2022).
(154) German National Reform Programme 2022.
66
Table A15.1: EU-level targets and other contextual indicators under the European Education Area
strategic framework
2015 2022
Indicator Target Germany EU27 Germany EU27
1 2020 2020
Participation in early childhood education (age 3+) 96% 96.0% 91.9% 93.7% 93.0%
2018 2018
Reading < 15% 16.2% 20.0% 20.7% 22.5%
2 2018 2018
Low achieving 15-year-olds in: Mathematics < 15% 17.2% 22.3% 21.1% 22.9%
2018 2018
Science < 15% 17.0% 21.1% 19.6% 22.3%
3
Total < 9% 10.1% 11.0% 12.2% 9.6%
3
Men 10.4% 12.5% 13.7% 11.1%
By gender
Women 9.8% 9.4% 10.7% 8.0%
4
Cities 10.3% 9.6% 12.3% 8.6%
Early leavers from education and training (age 18-24) By degree of urbanisation
Rural areas 8.3% 12.2% 9.8% 10.0%
Native 8.6% 10.0% 9.4% 8.3%
5
By country of birth EU-born : 20.7% 30.7% 20.3%
Non EU-born : 23.4% 28.0% 22.1%
6 2018 2018
Equity indicator (percentage points) : : 20.1 19.3
7 u
Exposure of VET graduates to work based learning Total ≥ 60% (2025) : : 94.9% 60.1%
8
Total 45% 29.6% 36.5% 37.1% 42.0%
8
Men 28.6% 31.2% 34.9% 36.5%
By gender
Women 30.6% 41.8% 39.5% 47.6%
9
Cities 37.5% 46.2% 44.5% 52.2%
Tertiary educational attainment (age 25-34) By degree of urbanisation
Rural areas 21.7% 26.9% 28.9% 30.2%
Native 29.9% 37.7% 38.2% 43.0%
10
By country of birth EU-born : 32.7% 32.5% 39.5%
Non EU-born : 27.0% 34.5% 35.7%
11 2020 2020
Share of school teachers (ISCED 1-3) who are 50 years or over 44.6% 38.3% 38.8% 39.2%
Source: (1,3,4,5,7,8,9,10,11) = Eurostat; 2 = OECD (PISA); 6 = European Commission (Joint Research Centre). Notes: Data are not
yet available for the remaining EU-level targets under the European Education Area strategic framework, covering
underachievement in digital skills and participation of adults in learning. The equity indicator shows the gap in the share of
underachievement in reading, mathematics and science (combined) among 15-year-olds between the lowest and highest quarters
of socio-economic status.
67
ANNEX 16: HEALTH AND HEALTH SYSTEMS
A healthy population and an effective, The high number of beds is coupled, however, with
accessible and resilient health system are a low staff-to-bed ratio. In response, the current
prerequisites for a sustainable economy and government set up a commission of experts to
society. This Annex provides a snapshot of develop recommendations to reform the financing
population health and the health system in of the German hospital sector. The government
Germany. aims to develop a draft proposal taking into
account these recommendations by summer
Life expectancy in Germany is above the EU 2023 (156).
average, but started to fall in the first year
Spending on preventive care remained quite stable
of the COVID-19 pandemic. The further
during the pandemic, while most other countries
decrease in life expectancy in 2021 is linked to an
raised this expenditure drastically. Spending on
increased number of COVID-19 deaths (155).
prevention in Germany amounts to 3.2% of total
Germany fares comparatively well in avoiding
spending on healthcare (compared to 3.4% for the
deaths from treatable causes. The main mortality
EU overall in 2020). Public expenditure on health is
causes are cardiovascular diseases and cancer.
projected to increase by 0.4 percentage points
(pps) of GDP by 2070 (compared to 0.9 pps for the
Graph A16.1: Life expectancy at birth, years
EU overall).
81.3
81.0 81.1 81.0 81.1
80.8
Graph A16.2: Projected increase in public
expenditure on healthcare over 2019-2070
80.9 80.9
80.4
80.1
2016 2017 2018 2019 2020 2021
Germany EU Germany 7.4 0.4

2019
Source: Eurostat EU 6.6 0.9 2070

increase
Germany has the highest spending on 4 6 8

healthcare in relation to GDP in the EU. % of GDP
Spending on healthcare increased from 2019 to

2020 (in relative and in absolute terms). Most AWG reference scenario
Source: European Commission / EPC (2021)
health spending is publicly funded; out-of-pocket
payments are comparatively low (12.4% of total
health expenditure, compared to an EU average of Numbers of doctors and nurses per
14.4% in 2020). Next to the statutory health population are well above the EU average.
insurance system, there is a substitutive private However, workforce and skills shortages in
health insurance scheme for certain population combination with demographic change are a
groups, such as civil servants, self-employed and concern, also in terms of long-term accessibility of
people with earnings above a certain threshold, health services. More than 44% of active
meaning they can opt out from the solidarity- physicians in Germany were over 55 years old in
based statutory health insurance. 2020. Several reforms and laws have aimed to
increase the number of nurses in hospitals and the
Spending on outpatient care (in relation to total attractiveness of the profession. This concerns for
healthcare spending) is below the EU average, instance higher salary levels, improved working
while spending on inpatient care is slightly above conditions and the planned implementation of a
the EU average, with an ongoing separation / lack staffing measurement tool. Since 2020, the costs
of coordination between these sectors. This tallies of nursing personnel are excluded from the
with the fact that Germany has one of the highest hospital payment system based on diagnosis-
numbers of hospital beds per population in the EU.
(155) Based on data provided directly by Member States to ECDC (156) See:
under the European Surveillance System (data current as of https://www.bundesgesundheitsministerium.de/themen/gesun
13 April 2023) dheitswesen/krankenhausreform.html
68
Table A16.1: Key health indicators
EU average
2017 2018 2019 2020 2021
(latest year)
Treatable mortality per 100 000 population (mortality avoidable through optimal
85.5 85.3 81.7 80.8 NA 91.7 (2020)
quality healthcare)
Cancer mortality per 100 000 population 246.6 245.9 243.7 240.3 NA 242.2 (2020)
Current expenditure on health, % GDP 11.3 11.5 11.7 12.8 NA 10.9 (2020)
Public share of health expenditure, % of current health expenditure 84.4 84.1 84.0 85.1 NA 81.2 (2020)
Spending on prevention, % of current health expenditure 3.2 3.2 3.3 3.2 NA 3.4 (2020)
Acute care beds per 100 000 population 602 601 595 587 NA 387.4 (2019)
Doctors per 1 000 population * 4.2 4.3 4.4 4.5 4.5 3.9 (2020)
Nurses per 1 000 population * 11.1 11.5 11.8 12.1 NA 8.3 (2020)
Consumption of antibacterials for systemic use in the community, daily defined dose
12.6 11.7 11.4 8.9 8.1 14.5 (2021)
per 1 000 inhabitants per day (total consumption for CY and CZ) **
Note: The EU average is weighted for all indicators, except for (*) and (**), for which the EU simple average is used. The simple
average for (*) uses data for 2020 or most recent year if former not available. Doctors' density data refer to practising doctors in
all countries except EL, PT (licensed to practice) and SK (professionally active). Nurses' density data refer to practising nurses in all
countries except FR, PT, SK (professionally active) and EL (nurses working in hospitals only).
Source: Eurostat; except: ** ECDC
related groups. This is expected to remediate the

current low staff-to-bed ratio over time.
Through its recovery and resilience plan,

Germany plans to invest EUR 4.3 billion
(16.2% of the plan’s total value) in
healthcare. Investments mainly focus on the
digital transition of the healthcare system (IT-
related investments in hospitals and public health
services, including the related construction and
refurbishment of buildings). Most of the
milestones and targets have not been completed
yet. The digital transition of the healthcare system
is an ongoing challenge in Germany.
69
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL
This Annex showcases the economic and well as in Bremen (-6.7%) but milder in less
social regional dynamics in Germany, developed eastern regions and Berlin, where the
providing an update on economic, social and fall in GDP per capita ranged from -3.0% to -3.7%.
territorial cohesion in and among the German
regions compared with the rest of the EU and the Disparities in GDP per capita are strongly
main regional economic recovery challenges. driven by labour productivity gaps between
the more and less developed regions. Average
Regional disparities have steadily decreased labour productivity, measured as gross value
since reunification, in 1990, but remain high. added per person employed, stood at 105% of the
In 2021, Hamburg's GDP per capita (in purchasing EU average (in PPS) in 2021. It ranged from 126%
power standard, PPS) was 191% of the EU or more in Oberbayern, Hamburg and
average, followed by Oberbayern (174%) and Braunschweig to 87% or less in Mecklenburg-
Stuttgart (153%). Some regions continued to score Vorpommern, Chemnitz and Thüringen.
below the EU average, however, with GDP per
capita at 86% or lower in the eastern regions of Labour productivity gaps have been
Brandenburg, Chemnitz, Sachsen-Anhalt and decreasing, contributing to the convergence
Mecklenburg-Vorpommern, as well as in Lüneburg. of economic output. Annual real productivity
Gaps between urban and rural areas also persist. growth was highest in the least developed regions
in 2011-2020, ranging from a moderate 0.4% in
Convergence was relatively modest in 2011- Dresden and Lüneburg to 0.9% in Leipzig and
2020 due to uneven regional growth (Graph Mecklenburg-Vorpommern and 1.0% in Thüringen.
A17.1). However, annual GDP per capita growth in Annual real productivity fell in some regions,
Germany’s less developed regions (157) slightly notably Darmstadt, Bremen and Saarland (-0.5%).
exceeded both the national (0.7%) and EU (0.6%)
averages. Graph A17.2: Evolution of labour productivity in
Germany (2000-2020)
Graph A17.1: GDP per capita (2010) and real GDP
growth (2011-2020) in Germany 95
thousands of EUR per person
85
Capital region Other NUTS2 regions National average EU27
1,8 75
Annual real GDP per head growth
1,5 65
1,2
55
2011-2020 in %
0,9
0,6 45
0,3 35
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
0,0
-0,3 Capital region Other NUTS2 regions EU27 National average
-0,6
(1) Unit: real gross value added (GVA) in million EUR (2015
110
130
150
170
190
210
70
90
GDP (PPS) per head in 2010 (EU = 100) prices) by employment in thousands of persons.
Source: EUROSTAT
(1) Bubble sizes correspond to population size.
Source: EUROSTAT
All regions rank above the EU average for
The COVID-19 pandemic caused the first competitiveness (158). This is the case, in
economic decline since the financial crisis in particular, for the western and southern regions,
2007. In 2020, GDP per capita fell in all regions, Hamburg and Berlin. However, there are significant
though with varying degrees. The impact of the differences in regional innovation performance.
pandemic and ensuing supply chain disruptions Many of the most developed regions are
was particularly severe in the most populated, innovation leaders (159), while less developed
prosperous and southern regions – such as regions are mostly classified as moderate
Braunschweig (-6.9%) and Schwaben (-6.0%) – as
(158) 2022 regional competitiveness index.
(157) For this Annex, ‘less/least developed regions' are defined as
having a GDP per capita (PPS) in 2020 lower than the EU (159) The 2021 regional innovation scoreboard methodology
average (100); ‘developed regions’: 101 to 125; ‘more/most defines innovation leaders as regions with a relative
developed’ regions: 126 or higher. These terms should not be performance of more than 125% of the EU average (strong
confused with the classification used for EU cohesion policy. innovators: 100-125%; moderate innovators (70-100%).
70
Table A17.1: Selected indicators at regional level
GDP per head GDP per head Productivity (GVA, PPS) Total population aged
NUTS 1 Region Population growth Unemployment rate R&D expenditure
(PPS) growth per person employed >65
EU-27 = 100, ⌀ change p.a. in ⌀ change p.a. in Increase in %, 2011- % of active population,
EU-27=100, 2020 % of GDP, 2019
2021 %, 2011-20 ‰, 2011-20 19 2021
European Union 100 0,6 100 1,7 17.6 7,0 2,3
Germany 120 0,7 106 3,6 9.7 3,6 3,2
Baden-Württemberg 136 0,6 113 5,8 11.5 3,1 5,7
Bayern 141 0,8 113 5,9 11.9 2,7 3,4
Berlin 124 1,1 106 11,1 9.9 5,7 3,3
Brandenburg 86 0,8 94 2,8 13.3 3,0 1,8
Bremen 141 -0,2 104 4,3 4.3 6,8 3,0
Hamburg 191 0,0 130 8,3 3.1 4,4 2,2
Hessen 135 0,1 114 5,3 10.8 3,8 3,1
Mecklenburg-Vorpommern 85 1,1 87 -0,3 14.8 3,8 1,8
Niedersachsen 110 0,9 103 2,8 9.9 3,2 3,1
Nordrhein-Westfalen 115 0,5 103 2,1 7.2 4,1 2,1
Rheinland-Pfalz 111 0,5 100 2,6 11.3 3,7 2,6
Saarland 102 -0,3 91 -1,8 8.3 2,9 1,9
Sachsen 93 1,1 87 -0,2 6.5 3,3 3,0
Sachsen-Anhalt 86 0,8 90 -5,2 6.5 4,4 1,5
Schleswig-Holstein 100 0,9 97 3,9 11.4 3,4 1,7
Thüringen 87 1,2 85 -3,5 10.4 3,2 2,3
Source: EUROSTAT
innovators (except Dresden, Thüringen, Trier and Mecklenburg-Vorpommern, Sachsen-Anhalt and

Chemnitz, which are strong innovators). Chemnitz actually increased, even if at a slower
pace than in the previous decade.
There are considerable differences in R&D
expenditure between the regions. R&D Major demographic changes may reinforce
expenditure was particularly high in Braunschweig existing regional differences. Nationally, the
(representing 7.8% of 2019 GDP, largely because population grew by 3.6% in 2011-2020, with
it hosts the Volkswagen Group's headquarters) and significant increases in the western regions of
Stuttgart (7.3%) and was overall above 3.2% in Hamburg (8.3%) and Oberbayern (9.0%) as well as
many southern regions, Dresden and Berlin. R&D in the metropolitan areas of Leipzig (8.6%) and
expenditure was lowest (less than 1.5% of GDP) in Berlin (11.1%). Certain regions, especially less
many western regions and was below 1% in the developed eastern regions Thüringen (-3.5%),
less developed western regions of Weser-Ems, Sachsen-Anhalt (-5.2%) and Chemnitz (‑6.3%),
Lüneburg, Trier and Koblenz. experienced a demographic decline. This change
reflects rural-urban shifts across Germany, which
Labour market conditions are among the result in rising urban populations and in declining
strongest in the EU, but disparities remain. In rural areas.
2021, the unemployment rate fell to 1.8 and 2.0%
in Niederbayern and Trier and reached 5.7 and The population expanded primarily due to the
6.8% in Berlin and Bremen (3.6% for Germany as impact of positive net migration (+5.7% in
a whole and 7.0% for the EU-27). The employment 2011-2020). Increases in net migration were
rate reached 83% in Chemnitz and several significant in most western regions and especially
southern regions but was as low as 75% in the strong in Leipzig (11%) and Berlin (10%). Other
western regions of Bremen and Düsseldorf regions, especially the less developed eastern
(Germany as a whole: 79.6%; EU-27: 73.1%). regions Chemnitz, Sachsen-Anhalt and Thüringen,
registered little net migration.
The labour market’s initial recovery from the
pandemic was quicker in eastern regions Population ageing is a challenge with clear
than in more developed ones. By 2021, regional disparities and contributing to
unemployment returned to below 2019 levels in increasing labour shortages. The number of
10 eastern regions out of the 38 NUTS 2 regions, people above 65 increased by 9.7% in 2011-2020
while the rate was still higher elsewhere, notably and their share of the population rose to 22%,
in Mittelfranken and Bremen (1.5-1.8 percentage slightly above the EU-27 average (21%). Increases
points above pre-COVID-19 levels). The employ- in the population aged over 65 amounted to less
ment rate declined severely in some of the less than 5.5% in Hamburg, Bremen, Düsseldorf and
developed western regions (Trier, Gießen and Braunschweig, around 6% in Dresden, Chemnitz
Lüneburg). Employment in the eastern regions of and Sachsen-Anhalt, but more than 12% in many
71
southern regions and 13-14% in Lüneburg,
Brandenburg and Mecklenburg-Vorpommern.
72
MACROECONOMIC STABILITY
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS
Germany hosts the second largest banking ratio stands at 77.3% in 2022 compared to the EU
sector by assets in the EU. A distinguishing average of 60.6%.
feature of this banking sector is the large number
of institutions. These institutions are organised Rising interest rates will improve net
along three “pillars”: In October 2022 (i) the first interest margins and boost banks’ profits,
pillar comprised 244 commercial banks (47% of but the swift increase in rates may create
assets); (ii) the second pillar comprised public- temporary challenges. As in other countries,
sector banks, among which were 362 saving banks rising interest rates create valuation losses in the
(Sparkassen) and 5 regional banks (Landesbanken) short term on the security portfolios held in
(22% of assets); and (iii) the third pillar comprised German banks’ trading books. Loans with a long
738 cooperative banks (10% of assets). Mergers interest fixation period are subject to interest rate
and acquisitions reduced the number of banks in risk as refinancing costs on short duration
Germany from more than 3 000 in 1999 to 1 386 liabilities increase. The share of mortgage loans
in December 2022. These mergers typically with a fixation period of 5 years or more increased
occurred within and not across pillars because of in recent years to more than 80% of new lending
the quite different ownership structure. With business. Still the banks’ susceptibility to interest-
banking-sector assets equivalent to 258% of rate risk related to ‘maturity transformation
Germany’s GDP, the size of the banking sector is appears manageable.
below the EU average of 277%. German banks’
international presence is also relatively modest As in other countries, risks in the banks’ loan
and largely confined to other EU Member States, books are increasing as businesses are
although an increasing number of foreign banks impacted by higher interest rates and
has entered the German market in recent years, inflation. Falling corporate income in a low-
especially in the investment-banking sector. growth environment interlocking with greater
expenditure on interest could increase the risk of
German banks have loan books of default in the business sector. At the end of 2021,
outstanding quality and are well capitalised. 73% of business loans were to companies with an
Despite some deterioration in asset quality as a above-average debt-overhang ratio, while 70% of
result of the pandemic and the energy crisis (160), loans had a below-average interest-coverage ratio.
German banks still have one of the lowest ratios Insolvencies began to increase towards the end of
of non-performing exposures in the EU at 1.0% in 2022 but are still below their long-term average.
Q3-2022, even slightly down from pre-pandemic Although experts expect insolvencies to continue
times (1.2% in 2019). Moreover, German banks rising further in the coming months, they don’t
have maintained stable capital ratios. The average expect them to go above long-term averages. The
Common Equity Tier 1 (CET1) ratio stood at 15.3% banks themselves consider the risks of company
in Q3-2022. defaults to be low. The energy-intensive sector
could be especially at risk of default, but this
On the other hand, German banks have sector accounts for only 6% of total corporate
continuously underperformed in their loans.
profitability. The banks’ return-on-equity of 1.9%
is considerably below the EU average of 6.1% and Even though the household sector remains
barely sufficient to cover their cost of capital. This largely resilient, risks have increased. With
has been compounded by heavy reliance on the cost of living going up and real incomes being
interest income in what was until recently a low- squeezed, the most vulnerable households may
interest-rate environment. Furthermore, banks struggle to service their debt. In this context, the
face high administrative costs and net interest overvalued housing market is of concern. House
expenses compared to income. The cost-to-income prices declined by 3.6% y-o-y in Q4-2022 for the
first time since 2010, Still, the Bundesbank
(160) The deterioration in asset quality is visible in the rise of the reckons that home prices in urban areas are
share of loans that are classified as increased risk (stage 2) overvalued by 25%-40% relative to what
according to International Financial Reporting Standards,
10.% in Q3-2022, up from 5.6% in Q1-2020, (EBA Risk economic fundamentals would historically warrant.
Dashboard). Commission calculations also show that house
prices appear overvalued by 20-40%. The buoyant
73
Table A18.1: Financial Soundness Indicators
2017 2018 2019 2020 2021 2022 EU Median
Total assets of the banking sector (% of GDP) 236.0 231.1 239.3 262.6 254.7 273.0 276.8 207.9
Share (total assets) of the five largest banks (%) 29.7 29.1 31.2 34.0 31.8 - - 68.7
1
Share (total assets) of domestic credit institutions (%) 93.1 89.0 87.1 83.7 81.8 78.1 - 60.2
NFC credit growth (year-on-year % change) 4.2 6.5 5.8 4.2 6.1 10.2 - 9.1
HH credit growth (year-on-year % change) 3.2 3.9 4.4 4.8 5.1 4.3 - 5.4
1
Financial soundness indicators:
- non-performing loans (% of total loans) 1.8 1.4 1.2 1.2 1.1 1.0 1.8 1.8
- capital adequacy ratio (%) 18.8 18.4 18.1 18.8 18.5 18.1 18.6 19.8
2
- return on equity (%) 2.9 2.4 2.1 2.2 4.0 1.9 6.1 6.6
1
Cost-to-income ratio (%) 74.0 76.8 75.5 70.7 68.8 77.3 60.6 51.8
1
Loan-to-deposit ratio (%) 89.4 90.2 87.7 80.8 81.0 83.1 88.6 78.0
Central bank liquidity as % of liabilities 1.6 1.4 1.2 4.7 5.5 3.1 - 2.9
Private sector debt (% of GDP) 107.1 109.6 112.7 121.2 120.4 - - 120.7
Long-term interest rate spread versus Bund (basis points) 0.0 0.0 0.0 0.0 0.0 0.0 - 93.3
Market funding ratio (%) 54.1 53.6 52.0 50.7 51.0 - 50.8 40.0
Green bonds issued to all bonds (%) 0.3 0.5 1.0 1.9 3.5 4.9 3.9 2.3
1-3 4-10 11-17 18-24 25-27 Colours indicate performance ranking among 27 EU Member States.
(1) Last data: Q3 2022.
(2) Data is annualized.
Source: ECB, Eurostat, S&P Global Capital IQ Pro.
housing market has supported mortgage lending, market-funding ratio for non-financial
which expanded to 40.7% of GDP in September corporations is 51%, in line with the EU average.
2022 from 36.4% of GDP in December 2011. As a Germany has 10 regulated stock markets, the
result, loan-to-value ratios declined while debt-to- largest of which is the Frankfurt stock exchange,
income and debt-service-to-income (DSTI) ratios operated by Deutsche Börse. Nevertheless, the
went up. The aggregate DSTI ratio climbed to 31% market capitalisation of all companies listed on
in the first half of 2022 from 28% a year earlier, the Frankfurt stock exchange is quite modest
while the share of new loans with a high DSTI ratio relative to Germany’s GDP.
(i.e. above 40%) increased. There are no loan-to-
value limits in place, even though the Federal Germany has the second largest insurance
Financial Supervisory Authority (BaFin) has the market in the EU. Life and non-life insurers
authority to set such limits, and the ESRB wrote premiums of EUR 252 bn in 2021. The
recommended authorities to limit the loan-to- market exhibits low concentration and is highly
value ratio (161). To contain the risks from the competitive, with the three biggest insurers taking
housing market, BaFin introduced a countercyclical a share of only 27% of premium income, and the
capital buffer of 0.75% and a sectoral-systemic top 10 insurance groups generating just 65% of
risk buffer specifically for the housing market of premium income. German insurers have the
2% on German mortgages. These measures were highest solvency ratios in the EU. Solvency
announced in January 2022, and banks must improved further to 325% in September 2022, up
comply with them as of 1 February 2023. from 312% at the end of 2021, as Solvency II
total assets declined. Meanwhile the rise in
Immediate financial risks stemming from the interest rates caused a decline in the value of
Russian military aggression against Ukraine liabilities and would have further strengthened the
appear manageable. German banks have a own-funds of German insurers, but this was offset
relatively small exposure to Russian clients. Their by higher risk premiums. However, rising rates
credit exposure to Russian counterparts was may entail liquidity risks especially for life
EUR 6.0 bn in September 2022. insurers. The Bundesbank reckons that a wave of
policy lapses could occur should ten-year bund
In addition to banks, German companies also yields rise to exceed 3%. In such a scenario,
turn to financial markets for funding. The insurers would also need additional liquidity to
meet margin calls on the hedges that they often
(161) Recommendation of the European Systemic Risk Board of 2
use to protect themselves from interest-rate and
December 2021 on medium-term vulnerabilities in the exchange-rate risks.
residential real estate sector in Germany (ESRB/2021/10).
74
ANNEX 19: TAXATION
This Annex provides an indicator-based taxes is below the EU aggregate, both as a share
overview of Germany’s tax system. It includes of GDP and as a share of total tax revenues. As
information on the tax structure (the types of the right-hand panel of Graph A19.1 illustrates,
taxes that Germany derives most of its revenue the low rate of environmental taxation in Germany
from), the tax burden on workers, and the relative to the EU aggregate is driven by all types
progressivity and redistributive effect of the tax of environmental taxes: both energy and transport
system. It also provides information on tax taxation are below the EU average in Germany.
collection and compliance. Germany applies carbon prices in the transport
and heating sectors through a national emissions
Germany’s tax revenues in relation to GDP trading system. Unlike many other Member States,
are almost the same as for the EU Germany does not levy resource or pollution taxes.
aggregate, with the highest contribution Furthermore, Germany has some environmentally
coming from labour taxation. Table A19.1 harmful subsidies, such as fossil fuel subsidies
shows that Germany’s tax revenues as a and the company car privilege (see also Annex 6).
percentage of GDP remained fairly stable between Phasing out these subsidies could – along with
2020 and 2021. The share of labour taxes of total addressing the issue of low environmental
tax revenues was substantially above the EU taxation – improve the tax mix and promote more
aggregate (by 4.7 percentage points (pps) in sustainable and inclusive growth. Concerning its
2021), but revenues from consumption and capital national emissions trading system, Germany
taxes as share of total taxation were considerably agreed in 2022 to postpone the increase of target
lower than the EU aggregate. Property taxes were prices by one year in the context of the energy
significantly below the EU aggregate, in particular crisis. Also, a broadening of the scope of the
because recurrent property taxes were system to include coals- and waste-derived fuels
considerably lower in Germany (see Graph was adopted. Overall, tax bases that are less
A19.1). Income from selling or renting real harmful to inclusive and sustainable growth
estate remains subject to far-reaching tax remain underused.
exemptions in Germany.
Germany has introduced a variety of tax-
In addition, environmental taxes have been related measures to address the effects of
consistently below the EU aggregate in the energy crisis. The performance of the tax
recent years. Germany’s share of environmental system should be viewed in the context of high
Table A19.1: Taxation indicators

Germany EU-27
2010 2019 2020 2021 2022 2010 2019 2020 2021 2022
Total taxes (including compulsory actual social contributions) (% of
37.3 40.1 39.6 41.1 37.9 39.9 40.0 40.6
GDP)
Labour taxes (as % of GDP) 21.0 23.0 23.3 23.0 20.0 20.7 21.3 20.9
Consumption taxes (as % of GDP) 10.7 10.2 9.6 10.3 10.8 11.1 10.7 11.2
Tax structure
Capital taxes (as % of GDP) 5.6 6.9 6.7 7.7 7.1 8.1 8.0 8.5
Total property taxes (as % of GDP) 0.8 1.2 1.3 1.3 1.9 2.2 2.2 2.2
Recurrent taxes on immovable property (as % of GDP) 0.4 0.4 0.4 0.4 1.1 1.2 1.2 1.1
Environmental taxes as % of GDP 2.2 1.8 1.7 1.8 2.4 2.4 2.2 2.2
Tax wedge at 50% of average wage (Single person) (*) 41.7 42.1 41.6 41.3 40.5 33.9 32.3 31.9 32.1 31.7
Tax wedge at 100% of average wage (Single person) (*) 49.0 49.3 48.8 48.1 47.8 41.0 40.1 39.9 39.6 39.7
Progressivity &
Corporate income tax - effective average tax rates (1) (*) 28.3 28.0 26.6 19.5 19.4 19.1
fairness
Difference in Gini coefficient before and after taxes and cash social
9.5 7.9 10.3 10.0 8.6 7.7 8.1 7.8
transfers (pensions excluded from social transfers) (2) (*)
Outstanding tax arrears: total year-end tax debt (including debt
Tax administration & 1.0 1.6 31.6 40.7
considered not collectable) / total revenue (in %) (*)
compliance
VAT Gap (% of VAT total tax liability, VTTL) 9.0 4.8 11.0 9.1
(1) Forward-looking effective tax rate (OECD).

(2) A higher value indicates a stronger redistributive impact of taxation.
(*) EU-27 simple average
For more data on tax revenues as well as the methodology applied, see European Commission, Directorate-General for Taxation
and Customs Union, Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United Kingdom:
2021 edition, Publications Office of the European Union, 2021, https://data.europa.eu/doi/10.2778/843047 and the ‘Data on
Taxation’ webpage (data https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en).
For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in the
EU: report 2022, Publications Office of the European Union, 2022, https://data.europa.eu/doi/10.2778/109823.
Source: European Commission, OECD.
75
Graph A19.1: Tax revenues from different tax types as % of total taxation
Tax revenue shares in 2021, Germany (outside) Environmental and property taxation as % of
and EU (inside) total tax revenue, Germany and the EU
6 0.19
5 0.00 1.00
18.73
4 0.68 2.75
3
2 3.69 4.32 2.19
21.01 1 2.64
1.01
51.43 0
27.54 56.08 Germany - EU - Germany - EU - property

25.19 environmental environmental property taxation taxation
taxation taxation
Energy taxes Transport taxes

Resource/pollution taxes Recurrent property taxes
Taxes on labour Taxes on consumption Taxes on capital Other property taxes
Note: Values for EU are GDP-weighted EU averages (EU aggregates)

levels of uncertainty due to fluctuating energy more pronounced than those for single persons at
prices. The German government has introduced tax 67% of the average wage. The difference between
measures to alleviate the burden on business and the tax wedge for high and low wage earners
households caused by energy price increases. (167% and 50% of the average wage), which is an
These new measures include a temporary indicator of the progressivity of the labour tax
reduction of the VAT rate on gas, the temporary system, is considerably lower for Germany than
reduction to the EU minimum of the energy tax on for the EU average. The tax-benefit system helped
fuels and additional expenditure (e.g. one-off lump reduce inequality, as measured by the Gini
sum payments, including an energy bonus, and the coefficient, by slightly less than the EU average in
accelerated abolition of the surcharge for 2021 (Table A19.1).
renewable energy). Most of these measures,
however, do not appear to be targeted to the most Graph A19.2: Tax wedge for single and second
vulnerable households and firms. In 2023 the earners as % of total labour costs, 2022
main energy measures are a natural gas and heat 55
price brake and an electricity price brake that cap
Tax wedge, % of total labour costs
52.9
50 50.0
energy prices for households, small and medium- 45 47.8
43.7
sized enterprises and for industrial companies, set 40 40.5
to last until April 2024. The price caps are based 35
on consumption levels over the previous year and 30
cover 80% of past consumption by households 25
and small and medium enterprises and 70% for 20

50 100 150
industrial companies. Any amount beyond this Earnings in % of the average wage
share will be subject to the market prices.
Single earner - DE Single earner - EU average
Second earner - DE Second earner - EU average
Germany’s labour tax burden is considerably
higher and less progressive than the EU Note: Second earners are members of a family with the
primary earner earning 100% of the average wage and no
average. Graph A19.2 shows that the labour tax children. For the methodology of the tax wedge for second
wedge for Germany in 2022 was much higher earners see OECD (2016) “Taxing Wages 2014-2015”
than the EU average not only for single people at Source: European Commission
the average wage level, but also for those earning
low wages at 50% and 67% of the average wage While Germany performs relatively well on
and high wages at 167% of the average wage. tax compliance and tax administration, there
Also the tax wedge for second earners at 67% of remains room for improvement. Germany’s
the average wage was clearly above the EU recovery and resilience plan (RRP) contributes to
average. It was also substantially higher than the digitalising public administration, including
tax wedge for single persons at the same wage potentially also aspects of the tax administration.
level, which indicates that work disincentives for Outstanding tax arrears have increased slightly
second earners moving into employment are even from 1.0% to 1.6% of total net tax revenue
76
between 2019 and 2020 but still remain well
below the EU average (Table A19.1). This is
significantly below the EU-27 average of 40.7% in
2020, but the average is inflated by very large
values in a few Member States. The Annual Report
on Taxation 2022 highlights scope for
improvement in the rate of electronic filing of
personal and corporate income tax returns. (162)
Tax compliance has improved in Germany; the VAT
gap (an indicator of the effectiveness of VAT
enforcement and compliance where a low gap
indicates high effectiveness) fell from 9% to 4.8%
between 2019 and 2020, which is considerably
below the EU-wide gap of 9.1% in 2020 (Table
A19.1). These results should be interpreted with
some caution though, given that Germany’s VAT
burden was lowered by way of a significant
reduction of its standard and in particular its
reduced VAT rates and also that the year 2020
was influenced by the COVID-pandemic.
(162) European Commission, Directorate-General for Taxation and

Customs Union, Annual report on taxation 2022: review of
taxation policies in the EU Member States, Publications
Office of the European Union, 2022.
77
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS
Table A20.1: Key economic and financial indicators

forecast
2004-07 2008-12 2013-19 2020 2021 2022 2023 2024
Real GDP (y-o-y) 2.2 0.7 1.6 -3.7 2.6 1.8 0.2 1.4
Potential growth (y-o-y) 1.3 1.0 1.4 0.8 0.8 0.5 0.6 1.1
Private consumption (y-o-y) 0.6 0.9 1.5 -5.7 0.4 4.3 0.0 1.8
Public consumption (y-o-y) 0.7 2.1 2.2 4.0 3.8 1.2 -0.3 1.4
Gross fixed capital formation (y-o-y) 2.9 0.7 2.2 -2.3 1.2 0.4 -0.7 2.0
Exports of goods and services (y-o-y) 9.8 2.2 3.1 -9.3 9.7 2.9 1.5 3.1
Imports of goods and services (y-o-y) 7.8 2.3 4.1 -8.5 9.0 6.0 0.4 3.4
Contribution to GDP growth:

Domestic demand (y-o-y) 1.0 1.0 1.6 -2.6 1.3 2.5 -0.2 1.7
Inventories (y-o-y) 0.0 -0.4 0.1 -0.2 0.5 0.4 -0.1 -0.3
Net exports (y-o-y) 1.1 0.1 -0.2 -0.8 0.8 -1.1 0.5 0.0
Contribution to potential GDP growth:

Total Labour (hours) (y-o-y) 0.2 0.2 0.4 0.0 0.0 -0.2 -0.1 0.2
Capital accumulation (y-o-y) 0.3 0.2 0.3 0.3 0.3 0.2 0.2 0.2
Total factor productivity (y-o-y) 0.8 0.6 0.7 0.6 0.5 0.5 0.5 0.6
Output gap -0.3 -0.7 0.5 -3.2 -1.5 -0.2 -0.6 -0.3
Unemployment rate 9.6 6.3 4.0 3.7 3.7 3.1 3.2 3.1
GDP deflator (y-o-y) 0.9 1.2 1.8 1.8 3.1 5.5 6.1 2.4
Harmonised index of consumer prices (HICP, y-o-y) 1.9 1.7 1.2 0.4 3.2 8.7 6.8 2.7
HICP excluding energy and unprocessed food (y-o-y) 1.4 1.3 1.4 0.9 2.3 5.0 6.5 3.8
Nominal compensation per employee (y-o-y) 0.7 2.2 2.7 0.4 3.1 4.2 5.5 5.3
Labour productivity (real, hours worked, y-o-y) 1.3 0.5 0.9 1.0 0.9 0.4 -0.2 0.8
Unit labour costs (ULC, whole economy, y-o-y) -0.8 2.3 2.2 3.4 0.6 3.7 5.9 4.1
Real unit labour costs (y-o-y) -1.7 1.1 0.4 1.6 -2.4 -1.7 -0.2 1.6
Real effective exchange rate (ULC, y-o-y) -2.9 0.3 1.3 -1.0 0.4 0.2 0.1 0.6
Real effective exchange rate (HICP, y-o-y) 0.4 -1.2 0.5 0.8 1.0 -1.6 . .
Net savings rate of households (net saving as percentage of net disposable

income) 10.6 10.3 10.3 16.4 15.1 11.4 . .
Private credit flow, consolidated (% of GDP) 0.2 1.2 3.9 6.4 5.7 . . .
Private sector debt, consolidated (% of GDP) 125.9 119.0 109.3 121.2 120.4 . . .
of which household debt, consolidated (% of GDP) 65.9 59.0 53.7 57.0 56.7 . . .
of which non-financial corporate debt, consolidated (% of GDP) 60.1 60.0 55.6 64.1 63.7 . . .
Gross non-performing debt (% of total debt instruments and total loans and . 2.1 1.7 1.1 1.0 . . .
advances) (1)
Corporations, net lending (+) or net borrowing (-) (% of GDP) 1.6 2.4 1.4 2.0 3.2 0.6 1.6 0.4
Corporations, gross operating surplus (% of GDP) 26.4 25.1 23.9 23.2 24.5 23.9 24.2 22.5
Households, net lending (+) or net borrowing (-) (% of GDP) 5.9 5.4 5.3 9.0 7.8 5.4 5.9 5.9
Deflated house price index (y-o-y) -2.0 0.7 4.1 7.1 8.2 -1.5 . .
Residential investment (% of GDP) 5.2 5.4 6.0 7.0 7.2 7.6 . .
Current account balance (% of GDP), balance of payments 5.5 6.1 7.8 7.1 7.7 4.2 5.9 5.7
Trade balance (% of GDP), balance of payments 5.6 5.5 6.7 5.8 5.5 2.1 . .
Terms of trade of goods and services (y-o-y) -0.7 -0.5 0.8 2.0 -2.6 -4.7 3.3 -0.1
Capital account balance (% of GDP) -0.1 0.0 0.0 -0.3 0.0 -0.5 . .
Net international investment position (% of GDP) 14.1 23.0 40.7 63.8 70.1 71.1 . .
NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2) 9.6 19.1 39.6 54.7 54.3 49.7 . .
IIP liabilities excluding non-defaultable instruments (% of GDP) (2) 125.9 164.2 148.8 162.2 164.2 164.6 . .
Export performance vs. advanced countries (% change over 5 years) 14.4 -1.0 -1.1 2.4 -0.8 . . .
Export market share, goods and services (y-o-y) -0.4 -3.6 0.5 2.1 -3.7 -1.0 -1.1 -0.7
Net FDI flows (% of GDP) 1.7 1.2 1.5 -0.1 2.8 3.2 . .
General government balance (% of GDP) -2.0 -1.7 1.1 -4.3 -3.7 -2.6 -2.3 -1.2
Structural budget balance (% of GDP) . . 1.0 -2.7 -2.9 -2.3 -2.0 -1.0
General government gross debt (% of GDP) 65.9 76.2 68.6 68.7 69.3 66.3 65.2 64.1
(1) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches.
(2) Net international investment position (NIIP) excluding direct investment and portfolio equity shares.
Source: Eurostat and ECB as of 2 May 2023, where available; European Commission for forecast figures (Spring forecast 2023).
78
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS
This Annex assesses fiscal sustainability indicating that the country has room for corrective
risks for Germany over the short, medium action. At the same time, the baseline projections
and long term. It follows the same multi- up to 2033 benefit from a favourable (although
dimensional approach as the European diminishing) snowball effect with real GDP growth
Commission’s 2022 Debt Sustainability Monitor, at around 0.8% of GDP over 2025-2033.
updated based on the Commission 2023 spring Government gross financing needs are expected to
forecast. reach around 17% of GDP in 2033, slightly above
the level forecast for 2024.
1 - Short-term risks to fiscal sustainability
are low overall. The Commission’s early- The baseline projections are stress tested
detection indicator (S0) does not signal major against four alternative scenarios to assess
short-term fiscal risks (Table Ax.3). (163) Gross the impact of changes in key assumptions
financing needs are expected to be around 16% of (Graph A21.2). For Germany, reverting to
GDP in the short term (i.e. over 2023-2024) and to historical fiscal trajectories under the ‘historical
decline compared with the recent peak in 2020 structural primary balance (SPB)’ scenario would
(Table Ax.1). Financial markets’ perceptions of lead to a smaller government debt ratio. If the SPB
sovereign risk are investment grade, as confirmed gradually converged to a surplus of 1.4% of GDP
by the main rating agencies. (its historical 15-year average), the projected
debt-to-GDP ratio would be around 10 pps. of GDP
2 - Medium-term risks to fiscal sustainability lower compared to the baseline in 2033. A
are medium overall. permanent worsening of the macro-financial
conditions, as reflected under the ‘adverse
The Debt Sustainability Analysis (DSA) for interest-growth rate differential’ scenario (i.e. 1 pp.
Germany shows that, under the baseline, the higher than the baseline) would result in a higher
government debt ratio is projected to decline government debt-to-GDP ratio, by around 5 pps. of
slightly to 63.5% of the GDP by 2033 (Graph GDP by 2033, as compared with the baseline. A
A21.1) (164), (165) The assumed structural primary temporary worsening of financial conditions, as
balance (a deficit of 0.1% of GDP as of 2024) reflected in the ‘financial stress ‘scenario (i.e.
contributes to these developments. It appears temporarily increase of interest rates by 1 pp.),
plausible compared with past fiscal performance, would lead to a broadly similar public debt-to-GDP
ratio by 2033 compared with the baseline. The
‘lower structural primary balance (SPB)’ scenario
(163) The S0 is a composite indicator of short-term risk of fiscal (i.e. SPB level permanently reduced by half of the
stress. It is based on a wide range of macro-financial and cumulative forecast change), would lead to a
fiscal variables that have proven to perform well in the past significantly higher government debt-to-GDP ratio
in detecting situations of upcoming fiscal stress.
by 2033 (around +7 pps. of GDP) compared to the
(164) The assumptions underlying the Commission’s ‘no-fiscal baseline.
policy change’ baseline notably comprise: (i) a structural
primary deficit, before ageing costs, of 0.1% of GDP as of
2024; (ii) inflation converging linearly towards the 10-year Additionally, stochastic debt projections
forward inflation-linked swap rate 10 years ahead (which indicate low risk (Graph A21.2). (166) These
refers to the 10-year inflation expectations 10 years from stochastic simulations point to a 35% probability
now); (iii) the nominal short- and long-term interest rates on
new and rolled over debt converging linearly from current
of the debt ratio in 2027 being greater than in
values to market-based forward nominal rates by T+10 (as 2022, entailing low risk given the initial moderate
for all Member States); (iv) real GDP growth rates from the debt level. In addition, such shocks point to low
Commission 2023 spring forecast until 2024, followed by uncertainty (i.e. the difference between the 10th
EPC/OGWG ‘T+10 methodology projections between T+3 and
T+10, i.e. for 2025-2033 (on average 0.8%); (v) ageing costs
and 90th debt distribution percentiles) surrounding
in line with the 2021 Ageing Report (European Commission, the government debt baseline projections.
Institutional Paper 148, May 2021). For information on the
methodology, see the 2022 Debt Sustainability Monitor
(European Commission, Institutional Paper 199, April 2023).
(165) Table 1 shows the baseline debt projections and its (166) These projections show the impact on debt of 2000 different
breakdown into the primary balance, the snowball effect (the shocks affecting the government’s primary balance,
combined impact of interest payments and nominal GDP economic growth, interest rates and exchange rates. The
growth on the debt dynamics) and the stock-flow cone covers 80% of all simulated debt paths, therefore
adjustment. excluding tail events.
79
3 - Long-term risks to fiscal sustainability
are medium overall. (167)
The S2 sustainability gap indicator (at 2.3

pps. of GDP) points to medium risk,
suggesting that Germany would need to
improve its structural primary balance to
ensure debt stabilisation over the long term.
This result is mostly due to increasing ageing costs
(2.1 pps. of GDP), mostly due to an increase of
pension spending (1.0 pp. of GDP) together with
health care and long-term care expenditure (joint
contribution of 0.5 pp. of GDP) (Table A21.1).
Given low long-term debt vulnerabilities, as

highlighted by the S1 indicator, overall long-
term risks are assessed as medium. The S1
sustainability gap indicator signals that only a
limited consolidation effort of 1.6 pps. of GDP
would be needed to reduce debt to 60% of GDP by
2070. This result is mainly driven by expected
ageing costs (contribution of 1.7 pps. of GDP)
(Table A21.1).
Finally, several additional risk factors need

to be considered in the assessment. On the
one hand, risk-increasing factors are related to the
recent increase of interest rates and a relatively
high share of short-term government debt. On the
other-hand, risk-mitigating factors include the
lengthening of debt maturity in recent years,
relatively stable financing sources (with a
diversified and large investor base), a low share of
public debt held in foreign currency and Germany’s
positive net international investment position.
(167)The S2 fiscal sustainability gap indicator measures the

permanent fiscal effort (SPB adjustment) in 2024 that would
be required to stabilise public debt over the long term. It is
complemented by the S1 fiscal sustainability gap indicator,
which measures the permanent fiscal effort required in 2024
to bring the debt-to-GDP ratio to 60% in the long term (by
2070). For both the S1 and S2 indicators, the risk
assessment depends on the amount of fiscal consolidation
needed: ‘high risk’ if the required effort exceeds 6 pps. of
GDP, ‘medium risk’ if it lies between 2 pps. and 6 pps. of
GDP, and ‘low risk’ if the effort is negative or below 2 pps. of
GDP. The overall long-term risk classification brings together
the risk categories derived from S1 and S2. S1 may notch up
the risk category derived from S2 when it signals a higher
risk than S2. See the 2022 Debt Sustainability Monitor for
further details.
80
Table A21.1: Debt sustainability analysis - Germany
Table 1. Baseline debt projections 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Gross debt ratio (% of GDP) 68.7 69.3 66.3 65.2 64.1 63.1 62.4 61.8 61.5 61.4 61.7 62.2 62.8 63.5
Changes in the ratio 9.1 0.5 -3.0 -1.0 -1.2 -0.9 -0.8 -0.6 -0.3 0.0 0.2 0.5 0.6 0.7
of which
Primary deficit 3.7 3.2 1.9 1.5 0.3 0.3 0.4 0.5 0.6 0.8 0.9 1.1 1.2 1.4
Snowball effect 1.8 -3.2 -4.1 -3.1 -1.5 -1.3 -1.1 -1.1 -0.9 -0.8 -0.7 -0.6 -0.6 -0.7
Stock-flow adjustments 3.6 0.6 -0.8 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Gross financing needs (% of GDP) 20.3 18.7 15.6 16.4 14.9 14.8 14.8 14.9 15.1 15.3 15.6 16.0 16.3 16.6
% of GDP Graph 1. Deterministic debt projections % of GDP Graph 2. Stochastic debt projections 2023-2027
75 80
70 p90
65 70 p80
60 p60
60 p40
55
50 p20
50 p10
45
40 40
35
30 30
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2020 2021 2022 2023 2024 2025 2026 2027
Historical SPB scenario Lower SPB scenario
Financial stress scenario Adverse 'r-g' scenario Median Baseline
Baseline
Table 2. Breakdown of the S1 and S2 sustainability gap indicators

S1 S2
Overall index (pps. of GDP) 1.6 2.3
of which
Initial budgetary position -0.1 0.2
Debt requirement 0.1
Ageing costs 1.7 2.1
of which Pensions 0.8 1.0
Health care 0.3 0.4
Long-term care 0.2 0.1
Others 0.4 0.5
Source: Commission services.
Table A21.2: Heat map of fiscal sustainability risks - Germany

Short term Medium term - Debt sustainability analysis (DSA) Long term
Deterministic scenarios
Overall Stochastic Overall
Overall Historical Lower Adverse Financial S2 S1
(S0) Baseline projections (S1 + S2)
SPB SPB 'r-g' stress
Overall LOW LOW MEDIUM MEDIUM LOW LOW
Debt level (2033), % GDP 63.5 54.0 70.2 68.9 64.0
LOW MEDIUM Debt peak year 2022 2022 2033 2033 2022 MEDIUM LOW MEDIUM
Fiscal consolidation space 66% 39% 78% 66% 66%
Probability of debt ratio exceeding in 2027 its 2022 level 35%
Difference between 90th and 10th percentiles (pps. GDP) 25.2
(1) Debt level in 2033. Green: below 60% of GDP. Yellow: between 60% and 90%. Red: above 90%. (2) The debt peak year indicates whether debt is projected to increase overall over the next decade.
Green: debt peaks early. Yellow: peak towards the middle of the projection period. Red: late peak. (3) Fiscal consolidtation space measures the share of past fiscal positions in the country that were more
stringent than the one assumed in the baseline. Green: high value, i.e. the assumed fiscal position is plausible by historical standards and leaves room for corrective measures if needed. Yellow:
intermediate. Red: low. (4) Probability of debt ratio exceeding in 2027 its 2022 level . Green: low probability. Yellow: intermediate. Red: high (also reflecting the initial debt level). (5) the difference
between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 2000 different shocks. Green, yellow and red cells indicate increasing uncertainty.
Source : European Commission (for further details on the Commission's multidimensional approach, see the 2022 Debt Sustainability Monitor)
Source: Commission services.
81
ANNEX 22: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX
The Macroeconomic Imbalance Procedure has been moderating somewhat as house prices
matrix presents the main elements of the in- started declining while inflation has been high.
depth review undertaken for Germany (168). Although increased since 2010, housing supply
Germany was selected for an in-depth review in cannot catch up with demand and housing
the 2023 Alert Mechanism Report. This in-depth completions have declined since 2020, remaining
review on the prevention and correction of below government targets.
macroeconomic imbalances presents the main
findings on the gravity and evolution of the The current account surplus is expected to
challenges identified, as well as policy responses rebound towards 6% of GDP, remaining
and potential policy needs. Findings cover all areas below the MIP threshold. The current account
of vulnerability assessed in the in-depth review. surplus is expected to increase, but stay below
pre-pandemic levels as well as below the MIP
Germany’s persistently large current account threshold, due to a lower balance of trade in goods
surplus has eased gradually since 2015, and services. In particular, energy prices are
reflecting a decline in net export of goods expected to fall from their 2022 highs but remain
and services, and fell to 4.2% in 2022. In above earlier levels, affecting the value of imports
2011 to 2021 the current account surplus and weighing on cost competitiveness, while
exceeded 6% of GDP, reflecting a substantial incentivising investments. Wage growth is
demand shortfall with a gap between output and expected to accelerate reflecting continued labour
domestic consumption and investment. After shortages, with unit labour cost growth exceeding
peaking in 2015 at 8.6% of GDP, the current the euro area average. While in the late 2010s the
account balance started declining, easing to 7.6% government registered consecutive surpluses, in
of GDP in 2019 and 7.7% in 2021. The fall was the future government deficits are forecast. The
driven primarily by a declining surplus in the trade house price overvaluation and the ongoing price
in goods that fell from 8.2% of GDP in 2015 to correction can have implications for the financial
6.3% of GDP in 2019 and 5.4% in 2021, while sector, meriting close monitoring, even if no major
manufacturing intensity receded. In 2022, the disruption is expected.
current account surplus dropped abruptly to 4.2%
of GDP, reflecting price increases for imported Several policy initiatives supported
energy, loss of export market shares in non-energy consumption and contributed to increased
goods, higher imports of equipment and domestic investment. The government increased
intermediate goods as well as higher tourism the minimum wage by 25% between December
imports after the expiry of COVID-19 related 2021 and November 2022 setting it at EUR 12 per
restrictions. From the savings and investment hour and took ambitious measures against
perspective, the decline in the current account heightened energy costs to stabilise domestic
surplus also reflected the shrinking surplus of demand and cushion the burden on household
savings of corporates and households relative to disposable income and corporate income. The
domestic investment, as excess private savings timely and effective implementation of Germany’s
related to the pandemic started to unwind while recovery and resilience plan, implementing
the investment ratio continued increasing. reforms to tackle administrative bottlenecks
Domestically, the investment ratio increased, also related to planning and permitting and to address
reflecting record inventory growth. The shortages of skilled labour are expected to benefit
government contributed to narrowing the current investment, and help effectively channel the funds
account balance becoming a net borrower in 2020, from the recently set up or expanded special
with a deficit of -4.3% of GDP. The deficit purpose vehicles for defence and for the green
decreased to -3.7% in 2021 and to -2.6% in 2022. transition. This could reinforce the adjustment of
House prices have been growing in the decade the external position. In the housing sector,
preceding 2022, leading to overvaluation, which construction supply is hampered by administrative
burden, divergent construction rules across Länder,
insufficient digitalisation of administrative
(168) European Commission (2023), In-Depth Review for procedures and barriers to employment of skilled
Germany, Commission staff working document, (COM(2023) labour. Social housing remains very limited.
629 final), in accordance with Article 5 of Regulation (EU) No
1176/2011 on the prevention and correction of
macroeconomic imbalances. Based on this assessment, the Commission
considered in its communication European
82
Table A22.1: Assessment of macroeconomic imbalances matrix
Gravity of the challenge Evolution and prospects Policy response
Unsustainable trends, vulnerabilities and associated risks
External Over the past decade, Germany had a Germany's current account surplus has been declining from its peak in The government took ambitious measures
position persistently large current account surplus, 2015, driven in particular by a declining balance of trade in goods and against heightened energy costs to stabilise
considerably above what fundamental services. The current account balance dropped abruptly in 2022 to 4.2% of domestic demand, lower consumer price
factors suggest. GDP, reflecting price increases for imported energy, loss of export market inflation and cushion the burden on
shares in non-energy goods and higher import of equipment and household disposable income. The measures
The surplus has reflected a substantial gap intermediate goods. The balance of services moved to a deficit of -0.8% implemented include a wide range of
between domestic demand and output, with of GDP from a roughly balanced position in 2021, mainly reflecting support (one-time bonuses and increased
consumption and investment both relatively normalisation as tourism resumed after the expiry of COVID-19 related allowances, price brakes on heating and
limited. The domestic under-investment has restrictions. electricity, temporary VAT relief). As a
impeded capital deepening and potential permanent measure, the renewable energy
growth, while it has been accompanied by The gradual decline in the current account surplus after 2015 was aligned surcharge was abolished and it is planned to
direct investments in other EU countries and with the shrinking excess savings of corporates as they increased their systematically adjust the income tax
internationalisation of value chains. investment, while the rapid decline in 2022 was only partly explained by a schedule to inflation.
rebound of domestic demand, and showed the effect of temporary factors
which are likely to reverse to some extent. Reflecting both the contraction
of GDP that reduced government revenues and generous support
measures, the government became a net borrower in 2020-2022, running
deficits of 2-4% of GDP.
The current account surplus is expected to bounce back towards 6% of Overall, Germany’s government sector
GDP in 2023 and 2024. This reflects a partial reversal of the energy price provided ample crisis policy support and the
shock, while moderate external demand is expected to limit exports, in fiscal balance turned negative contributing
particular from the manufacturing sector. Effects that still weighed on to the reduction in the current account
consumption in 2022 (COVID-19 related restrictions still in place in early surplus. In addition, special purpose vehicles
2022 and soaring inflation resulting in loss of purchasing power) are were set up with the objective of enhancing
expected to ease. As real wage growth resumes and economic uncertainty public investment in defence and promoting
diminishes, this will benefit household incomes, while the growth of unit the green transition, and funds allocated to
labour costs are expected to exceed that of other euro area economies. broadband rollout and rail also increased.
Investment is expected to be weak in 2023 reflecting high energy prices
and increasing interest rates; and is expected to pick up in 2024, reacting Measures to reduce planning and
to high order books, pressing needs for the green and digital transition, as implementation bottlenecks and to reduce
well as the desire to enhance security of supply. Moderate gGovernment red tape are expected to intensify public and
deficits are projected to persist in the coming years also due to increased private investment.
spending by the various extra-budgetary funds.
The effective implementation of allocated
public investment funding and reforms that
remove obstacles to investment could
reinforce the adjustment of the external
position.
Housing market House prices have been growing for a Following a decade of steady growth, in 2022 house prices in nominal Construction supply is hampered by
decade, leading to overvaluation. terms were on average 80% higher than in 2012, having expanded with a administrative burden, divergent
peak annual growth rate at 12% during the pandemic. Housing construction rules across Länder,
Although increased since 2010, housing affordability declined considerably, the price-to-income ratio has insufficient digitalisation of administrative
supply cannot catch up with demand and increased by 40% and the house price-to-rents ratio by 58% between procedures and barriers to employment of
housing completions have declined since 2012 and 2022, resulting in an estimated overvaluation of about 25%. wkilled labour. The availability of social
2020 and are below targets Since the second half of 2022 house prices receded, reflecting the housing remains very limited too. The
increasing interest rate environment and the reduced purchasing power of government acknowledged that the targeted
The overvaluation in the housing market and buyers. 400 000 new housing completions will not
the ongoing price correction can have be reached at least until 2024, yet it is not
implications for the financial sector, meriting The number of housing completions increased to 293,000 in 2019 and clear how government measures would
close monitoring, even if no major disruption around 306 000 in 2020, while going down to 278 000 in 2022, which is make a tangible contribution reaching this
is expected. clearly below government estimates that around 400 000 new dwelling objective – although the support for housing
are needed a year, which was also included in the coalition agreement of renovation is expected to contribute to
2021. improvements in the housing stock and to
climate-friendly construction.
In December 2021, the European Systemic Risk Board (ESRB) issued a
recommendation on medium-term vulnerabilities in the residential real The ESRB has concluded that borrower-
estate sector in Germany. The ESRB considered house price overvaluation based measures, in particular the loan-to-
and high house price growth as well as possible loosening of lending value (LTV) ratio measure should be
standards and significant data gaps to be the main vulnerabilities in the activated.
German housing market and the policy mix is considered only partially
appropriate and partially sufficient to address the increasing
vulnerabilities.
Semester – 2023 Spring Package (COM(2023)

600 final) that Germany continues to
experience imbalances.
83
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ISSN 2443-8014 (online)

INSTITUTIONAL PAPER 229 | JUNE 2023

This paper can be downloaded from https://economy-finance.ec.europa.eu/ecfin-publications_en.

Luxembourg: Publications Office of the European Union, 2023

PDF ISBN 978-92-68-03196-4 ISSN 2443-8014 doi:10.2765/317863 KC-BC-23-036-EN-N

© European Union, 2023

2023 Country Report

EUROPEAN ECONOMY Institutional Paper 229

COMMISSION STAFF WORKING DOCUMENT

2023 Country Report - Germany

Accompanying the document

Recommendation for a COUNCIL RECOMMENDATION

{COM(2023) 605 final}

Graph 1.1: Components of GDP growth

Germany's economy is adjusting to 4

a new and shifting environment 3

GDP has now recovered beyond pre- 0

pandemic levels, but the economy is still -1

feeling the impact of Russia's war of -2

aggression against Ukraine. As services -3

reopened and households started using the -4

savings built up during the pandemic, -5

against Ukraine caused significant disruptions Fixed capital formation Inventories

to energy deliveries and to supply chains. This Net exports GDP

(1) The 2021 Ageing Report: Economic and Budgetary

(4) Eurostat (2021)

Notable measures in 2022 included one-off lump-sum payments of EUR 300 to

(6) For 2022, gross budgetary costs of measures amounted

Germany applies the EU solidarity contribution under Council Regulation (EU)

(7) I.e. applying a mandatory temporary solidarity

Graph 3.1: Total installed capacity of the main

Onshore wind roll-out of renewable energy sources and

Rollout plan Graph 3.1 shows the total (planned) installed

Germany has one of the highest employment 100

Nevertheless, the high share of women 70

working part-time and the low number of 60 57

There is potential to increase the employment 20

of low-qualified people, which was 15.4 10

percentage points (pps) lower than overall 0

64). In addition, considerable employment

It is crucial to develop skills for the green

(27) Science, technology, engineering and mathematics.

Safeguarding the pension system Early retirement puts pressure on the

Second and third-pillar pensions remain

The government plans to bring in a

(37) Taking the average pension at EUR 1 500, the

 action to tackle the learning disparities  tackling inequalities in educational

 boosting investment and swiftly

 boosting the labour supply and promoting

 reducing further its reliance on fossil fuels

A1. Sustainable Development Goals 26

A2. Progress in the implementation of country-specific recommendations 28

A3. Recovery and resilience plan - overview 31

A4. Other EU instruments for recovery and growth 33

A6. European Green Deal 37

A7. Energy security and affordability 42

A8. Fair transition to climate neutrality 47

A9. Resource productivity, efficiency and circularity 50

A10. Digital transformation 52