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Digital state, GovTech & Greentech - what the possible next German Government is planning

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Germany has voted, and the three "election winners" SPD, Bündnis 90/Die Grünen, and FDP want to form a government together. Coalition negotiations between the parties are still ongoing. Thus, the formation of a government by the three parties is far from decided. But the three parties' exploratory paper of 15 October 2021 provides a glimpse into the future. In today's article, we present essential key points and give an outlook on what this means legally for the state, authorities, and citizens. In doing so, we focus on the topics of the state, digitalization, climate protection, and innovation competition.

 

I. Fundamental

The exploratory paper is the basis for the coalition talks. It begins by identifying five significant challenges for Germany's future:
 
  • Climate change
  • Digitalization
  • Securing prosperity in Germany
  • Social cohesion
  • Demographic change

The parties understand their task in a progressive coalition to shape an essential decade of renewal.
This commitment to the fundamental challenges should not be underestimated in its importance. Future negotiations between the parties and legislative proposals will always come back to acknowledging these fundamental challenges. Of course, it is not surprising that climate change and digitalization are important aspects here, securing Germany's prosperity. But also important is the concern about the social context in Germany, i.e., the question of the "division of society," which is particularly familiar from the discussion in the USA. Concern about this could, in turn, trigger stronger regulation of (social) media in the future (although the FDP tends to take a liberal position here). Demographic change is also a significant challenge, especially for the public sector. Public authorities and ministries in Germany are facing an unprecedented wave of retirements in the coming decade. The public sector will hardly be able to compensate for this outflow of professionally competent personnel by recruiting new staff in the current battle for the best talents with the economy. No wonder, then, that the digitalization of the public sector also occupies an ample space in the exploratory paper.

 

II. The digital state - opportunities for GovTech start-ups

The focus is on modernizing the state and the administration. This concern is seen as central and forms the first significant point of the exploratory paper.
The state should become faster and more effective. Economic and social innovation processes are to be promoted. To this end, administrative and approval procedures, in particular, are to be accelerated through digitalization. The goal: approval procedures are to be shortened by half the time.
This takes up a central criticism of the German state system. In an international comparison, the administration in Germany is considered mediocre at best in the digital sector. Many procedures take a long time or are hardly understandable on the internet, smartphones, and blockchain age. Too often, citizens are still required to appear in person at the administration. Yet, the so-called "Online Access Act" (OZG) has stipulated for years that many administrative services must be digitalized by the end of 2022. A goal that is being missed. Time to step on the accelerator on the subject of digitalization.
Of course, many a federal government has already taken up the goal of digitization. But the paper shows that the topic is now being taken seriously because of the challenges mentioned, including climate change and demographic change. Moreover, pressure can be built up by a new federal government in various ways, e.g., by:
 
  • New legal requirements for the municipalities and authorities of the federal states and the federal government create much more urgent conditions than the "toothless" OZG.
  • Structural changes at the federal level, especially in ministries and authorities, where the management seriously pushes the implementation of digitization.
  • If necessary, establish a digital ministry that pushes the potentials for digitization in all areas. However, since there will probably already be a new "climate protection ministry," it is rather unlikely that a second new ministry will be created.

Digitization is not only timely. It will also be necessary to master the significant challenges described at the beginning.
The "old digitization strategies" of the former federal government are to be revised. The AI strategy, data strategy, and blockchain strategy are to be relaunched. This will also be necessary for the view of the further development of these technologies. In addition, there are new legislative projects at the European level, e.g., for the regulation of artificial intelligence, to which the strategies must be aligned. Contrary to popular opinion, such strategies are essential because they are the basis for creating jobs in the administration and granting budgetary funds.
Fast internet and mobility in rural areas should be strengthened; gigabit expansion is also an important goal.
We from the public sector at Fieldfisher expect especially great opportunities for start-ups and companies that offer digital solutions for public administration. This so-called GovTech is likely to experience a new flowering in Germany and is supported by funding programs. This is because state institutions will not be able to drive digitalization as quickly on their own as the government would like. In addition, external expertise is often helpful in keeping pace with technical developments and creating sustainable solutions.

 

III. Climate protection and green tech

Not only because of the likely political composition of the new federal government will the issue of climate protection be at the center of attention. It will shape the state, the economy, and society and trigger far-reaching changes.
In this context, the European background should be illuminated. With the Green Deal, the EU Commission wants to achieve the following:
 
  • No more net greenhouse gases are to be emitted by 2050;
  • Economic growth is to be decoupled from resource use;
  • No one, neither people nor regions, is to be left behind.

All 27 EU member states have committed to making the EU the first climate-neutral continent by 2050. To this end, they agreed to reduce emissions by at least 55% by 2030 compared to 1990 levels.
The EU Parliament and Council adopted the European Climate Act at the end of June 2021. The European Climate Act sets greenhouse gas neutrality by 2050 as a legally binding target. Therefore, the EU institutions and the Member States have a duty to take the necessary measures at the EU and national levels to achieve the target while promoting fairness and solidarity.
German policy is thus also shaped by and committed to this Green Deal. Therefore, in 2022, there will be an emergency climate protection program in which all sectors are to contribute: Transport, construction, housing, power generation, industry, and agriculture. It is to be expected that the federal government will quickly initiate changes for the economy through laws and regulations.
The focus will be on the expansion of renewable energies. Here, too, planning and approval procedures are to be drastically shortened quickly. Two percent of Germany's land area is to be used for wind power, and the expansion to the sea is also being considered. Therefore, companies active in this sector or want to enter it can look forward to an exciting business environment.
The coal phase-out is to be achieved by 2030 ("ideally"). Renewable energies provide the gas-fired power plants needed until the security of supply must be built to be converted to climate-neutral gases (H2-ready). This will also trigger substantial investments from both the state and the private sector. Significant funding can be expected here, both at the EU and German levels.
Building will become more expensive in the future; the construction and real estate sectors must adjust. All suitable roof surfaces should be used for solar energy in the future. This will even become mandatory; for new private buildings, only the rule. How this will be handled for existing properties is still unclear.
The financing of the EEG levy via the electricity price is to be ended in the legislative period (how this is to be financed is not explained). Emissions trading is also to be revised.
Significant effects are to be expected for the automotive industry:
 
  • From 2035, only CO2-neutral vehicles are to be registered.
  • Germany is to become the "lead market" for electromobility. The charging infrastructure is to be considerably expanded.
  • There is to be no general speed limit.
  • Solutions for individual intelligent transport and local public transport are to be promoted.

Especially the last point shows: The new federal government sees a considerable opportunity in so-called GreenTech to reduce CO2 emissions and ensure sustainability. Digitalization and climate protection are associated with it. GreenTech is thus recognized as an essential technology in Germany. Not only can a favorable political environment for new projects be expected under the future government. Start-ups with innovative ideas on climate protection and sustainability are also likely to find many new funding opportunities in Germany.

 

IV. Innovation and competition

The new federal government also wants to score points in the areas of innovation and competition. This includes the following goals:
 
  • Start-up & founder promotion is to become an essential instrument of the German economy and further promote the entrepreneurial culture in Germany.
  • Bureaucratisation for start-ups is to be reduced, and small and medium-sized enterprises and skilled trades are promoted.
  • The competitiveness ("level playing field") between (local) companies and large digital models should be secured. Regional transformation clusters are to be promoted. In this way, the future federal government is also telling the big tech companies from Silicon Valley to compete more intensely. The German SME sector, which forms the backbone of the German economy, is to remain strong in this way.
  • General government spending on research and development is to be increased to 3.5% of GDP. Spin-offs from universities and research institutions are to be promoted. Germany is thus facing up to the international competition in research and development. The start-up culture in universities and research institutions, which is much more pronounced in the USA than in Germany, will be strongly promoted.
  • Open data (access to government data) is to be strengthened, especially for start-ups.

The new federal government also focuses on competition and innovation in the economic sector, emphasizing digitalization and sustainability. This is also shown by the goal of becoming the leading nation for electromobility in the world. Companies and founders who are thus committed to the goals of digitalization and sustainability could therefore find a robust environment in Germany in the new legislative period.
Of course, the exploratory paper contains many more important points that we would be happy to discuss with you. But, of course, the most crucial issue for many companies is that taxes are not to be increased. However, it should not be misunderstood that the big question behind the program is how it is to be financed if, at the same time, tax burdens are not to increase. Details will then become apparent in the coalition negotiations.

 

Outlook

Digitization, sustainability, GovTech, and GreenTech - for companies active in these areas, the program of a possible future federal government consisting of SPD, Bündnis 90/Die Grünen, and FDP could indeed present a hopeful picture of the future government. For everyone else, it means adapting quickly to new circumstances. Because no matter what the coalition agreement looks like in the end: There will be no "business as usual." Sustainability and digitalization will shape German government thinking.
 

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