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Germany Turns to AI and Deregulation to Revive Its Struggling Economy

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Germany’s Chancellor Friedrich Merz unveiled an ambitious plan on Wednesday to streamline bureaucracy, embrace artificial intelligence, and accelerate digitalization in an effort to restore the country’s economic strength after two years of contraction.

Speaking at the Borsig Palace in Berlin, Merz said the new measures mark a decisive shift toward modernization.
“We are, of course, aware of the problems facing the German economy at the moment,” he said, “but we aspire to return to the top.”

FROM FISCAL RESTRAINT TO INVESTMENT

Merz’s government has already broken with Germany’s long-standing tradition of fiscal restraint, approving a €500 billion infrastructure and defense package to stimulate growth in the only G7 economy that has shrunk over the past two years.

The new “Modernisation Agenda,” approved by the cabinet on Wednesday, outlines 23 priority projects aimed at cutting red tape, fostering innovation, and improving public services.

23 PROJECTS TO BOOST EFFICIENCY

Among the key reforms are:

  • A centralized digital vehicle registration system for faster processing.

  • A 24-hour business registration platform to simplify company formation.

  • AI tools for legal and visa verification procedures to speed up administration.

  • A faster process for recognizing foreign medical qualifications, to help fill gaps in healthcare staffing.

  • A new digital immigration agency to attract and integrate skilled foreign workers into the labor market.

Merz said the package will now be presented to the Bundestag, Germany’s lower house of parliament. “We are going to the German Bundestag with very concrete legislative proposals,” he added.

SAVINGS AND GROWTH TARGETS

Germany’s Ifo Institute estimated last year that excessive bureaucracy costs the country €150 billion annually in lost productivity. The government’s goal is to cut bureaucratic requirements by 25%, generating €16 billion in annual savings.

The government aims to fast-track the legislation through the upper house (Bundesrat) before its final session in December.

ENERGY AND TECHNOLOGY INITIATIVES

The cabinet also approved funding of €1.7 billion for the construction of a nuclear fusion reactor, marking Germany’s renewed push into cutting-edge clean energy research.
Additionally, a draft law to accelerate hydrogen infrastructure development by removing regulatory bottlenecks was given the green light.

Together, the measures reflect a major pivot toward technology, energy innovation, and pro-business reforms, signaling Merz’s determination to pull Europe’s largest economy out of stagnation through AI, science, and structural modernization.