Removing Barriers

Investing in Germany’s future has rarely been easier. Lawmakers recently passed forward-thinking legislation that will usher in a wave of new opportunities for investors, both domestic and foreign.

March 2020

 

The new legislation is a big deal for all investors. The changes amount to nothing less than an attempt to overhaul Europe’s biggest economy, preparing it for the challenges posed by climate change, energy transitions and demographic shifts. For anyone interested in investing in Germany right now, an in-depth knowledge of these laws is a must. The new measures have been anticipated for a long time and are the fruit of lengthy and complex negotiations between the two government parties and various ministries. They focus primarily on three areas: climate protection, skilled labor immigration and restructuring the country’s coal regions. As Germany decarbonizes its economy, the laws will help IT specialists and care workers to move in and revitalize its coal-dependent regions.

Significant public funds via tax breaks and direct investment will be made available to businesses to attract direct investment. As always, the devil is in the detail: Investors will need to familiarize themselves with the laws to know where to take advantage.

The German government is investing heavily in electromobility infrastructure, particularly charging stations. Pictured: An electric car charges up. © Markus Kirchgessner/laif

Climate Package

The so-called climate package is designed to coax the economy toward ‘greener’ sectors while protecting businesses during the transition. The law assigns flexible greenhouse gas budgets to different industries over the next decade. There will also be a carbon pricing scheme – an increasingly common phenomenon – which will entail new opportunities in the energy, auto, agriculture and construction industries. These measures will be complemented by increased state investment in carbon-storage technology.

Opportunities

The construction industry will receive support to carry out energy-efficient renovations of apartment blocks. Tax deductions will offset costs for insulation and replacing old heating systems and windows by up to 20 percent.

The automotive industry will receive incentives to transition to electric cars. For instance, state allowances for company cars with battery-driven or plug-in hybrid engines have been extended until 2030, and there will be a tax reduction for company e-cars. There will also be major state investment in electric mobility infrastructure, specifically in charging stations.

Public transport will receive more money from the state: EUR 86 billion will be invested in rail networks alone over the next decade.

A resident is attended by Yingwei Yang from China, one of five new geriatric nurses at the Curanum nursing home in Cologne. © Tim Wegner/laif

Skilled Immigration Act

German business associations have been popping champagne over the introduction of this law on March 1, 2020. With unemployment reaching new lows, several sectors have struggled with a shortage of skilled personnel in recent years – care workers, IT specialists, nurses and craftsmen are in particular demand. The Skilled Immigration Act will reduce the bureaucracy that has made it difficult for companies to get their preferred recruits into Germany. One of the key changes will be the elimination of the dreaded Vorrangprüfung, which required German authorities to prove that no EU citizen was available for a given job.

Opportunities

IT specialists are much sought-after in Germany, which is why the new law contains special clauses to allow them to settle even without training as long as they have worked in the industry. This will ease the labor situation for German IT companies.

The research and development departments of big industrial players in Germany are likely to expand, as scientists around the world take advantage of the easier bureaucratic rules.

Germany’s carer industry depends heavily on workers from Poland and other central European countries. The new law will make it easier for German care home managers to employ people from “third countries” outside the EU. Major recruitment drives are likely to result, as Germany’s population ages.

Zollverein is now a UNESCO World Heritage Site. Architect Rem Koolhaas developed the master plan in 2002 – all construction has been based on his principle of “preservation through conversion.” © Oliver Tjaden/laif

Structural Change for Coal

The purpose of the restructuring program hammered out by the so-called Coal Commission (officially, the Commission on Growth, Structural Change and Employment, or KWSB) is to support the regions of Germany traditionally dependent on the coal industries as the country implements its transition to non-nuclear, renewable energy sources. From now until 2038, federal resources promoting innovation and growth will be pumped into the eastern areas around Leipzig, western areas near Cologne, and other regions to compensate for expected job losses.

Opportunities

The KWSB recommendations aim to expand Germany’s renewable energy capacity to 65 percent of the market by 2030 without incurring extra costs either for companies or consumers. That won’t be possible without major state investment in renewables.

A further measure will see government investment encouraging power stations to be more energy-efficient by switching their combined heat and power generation to gas rather than coal. Gas suppliers are likely to comprise a larger share of the market.

The wholesale restructuring of Germany’s energy supply is likely to put more pressure on the safety of critical infrastructure. Cybersecurity firms protecting power stations from hackers will see a boost.

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