| A sensible fiscal policy is a central element of economic policy and – through taxes and public spending – influences a country’s competitiveness. The settings of fiscal policy have changed very much due to global challenges like digitalisation, climate change and the USA’s shift away from multilateralism.
We have dedicated this edition of our ZEW Monthly to the topic of “Fiscal Policy” and some of its key issues. These include the debate on the German debt brake after the federal election and what this means for fiscal policy. Another topic is the planned global minimum tax agreement, which has recently been rejected by the USA, and the increasing tax burden for SMEs in Germany. Finally, this edition also focuses on the so-called future quota, which aims to strengthen investment in education and innovation.
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↗ FRIEDRICH HEINEMANN ON TRUMP’S REJECTION OF TAX AGREEMENT
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| Donald Trump has declared that the USA will pull out of the global minimum tax scheme. What are the implications of the USA’s rejection of international tax cooperation for the minimum tax in Europe and Germany? Friedrich Heinemann, head of the ZEW Research Unit “Corporate Taxation and Public Finance” and professor at Heidelberg University, has commented on this matter: “A minimum tax without the US means a disadvantage for EU locations.“
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↗ FUTURE BUDGET REPLACES DEBT BRAKE
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| The reform of the Debt Brake that is now needed should not only mobilise more funds for defence in the short term. It must also permanently steer the federal budget towards future-oriented tasks and create a strong incentive for greater care in the allocation of funds. In line with this approach, a team of ZEW researchers, supported by the Strube Stiftung, has put forward a detailed package for a reform of the Debt Brake.
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↗ SMALL AND MEDIUM-SIZED COMPANIES AT A TAX DISADVANTAGE
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| Small and medium-sized enterprises (SMEs) are considered the backbone of the German economy. However, they face tax challenges that affect their competitiveness. A new study conducted by ZEW on behalf of the IMPULS Foundation shows that Germany has one of the highest corporate tax burdens in an international comparison. At the same time, the tax relief for SMEs is low in international comparison.
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| | ↗ FEDERAL BUDGET 2024: SPECIAL FUNDS DRIVE FUTURE QUOTA
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| In 2024, the future quota attained the highest value since 2018: With 21.3 per cent of federal spending, around one in five euros of the total federal budget was dedicated to future-oriented tasks. However, this focus is driven by the special funds earmarked for digital infrastructure, climate action and transformation as well as German defence spending. When considering solely the core budget, the future quota noticeably declined: It was down at 18.0 per cent, after 19.8 per cent in the previous year. These are the findings of a study conducted by ZEW and funded by the foundation Strube Stiftung.
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↗ KATRIN MÜLLER TO BECOME HEAD OF COMMUNICATIONS AT ZEW
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| Katrin Müller took over responsibility for ZEW’s Communications unit on 15 March 2025. By appointing her, the institute gains a communicator who has been working in the academic arena for over ten years. Before taking on her new position at ZEW, Katrin Müller was head of the university communication units at Zurich University of the Arts (ZHdK), Switzerland and at Technical University of Kaiserslautern, Germany.
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↗ START-UPS: POTENTIAL OF PUBLIC TENDERS REMAINS UNUSED
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| A recent ZEW study analyses to what extent start-ups participate in public tenders and win them. The study revealed that eleven per cent of German start-ups have been involved in public tenders since they were founded and seven per cent were awarded at least one contract. However, the number of established companies winning a tender is more than twice as high. The study is based on a representative survey of around 5,000 start-ups in Germany which was conducted in 2022.
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↗ INNOVATION ECONOMICS EXPERTISE FOR THE BMWK
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| The Federal Minister for Economic Affairs and Climate Action, Dr. Robert Habeck, has appointed Professor Hanna Hottenrott as a new member of the Scientific Advisory Board of the Federal Ministry for Economic Affairs and Climate Action (BMWK). Hanna Hottenrott is head of the ZEW Research Unit “Economics of Innovation and Industrial Dynamics” and Professor for Economics of Innovation at the Technical University of Munich.
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Germany is confronted by a need to act on multiple fronts. The new federal government must improve conditions for productivity-enhancing investment; shape the green and digital transformations in a manner that fosters growth; and strengthen the resilience of the economy and society at large. No less importantly, these issues must be addressed in key respects at the European level. With these challenges in mind, ZEW researchers have developed specific recommendations for European economic policy that seek to mould broader developments in Europe. These recommendations are partially informed by the structure of the Draghi report on European competitiveness.
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State intervention is increasingly shaping Europe’s industrial policy. ZEW President Professor Achim Wambach, PhD takes a look at market-conforming measures and the challenges they present.
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| Read the full opinion piece
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| | | | → CONTACT FOR QUESTIONS OR SUGGESTIONS ON THE CONTENT | |
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