2025 was a year of course alignment for the German economy. Conservative Friedrich Merz became Germany’s chancellor after snap elections, and his new coalition government immediately signaled that investment, reform and pro-business policies would be its priorities. We review pivotal economic and business developments of 2025 – from government measures supporting industry and startups to international investment trends and Germany’s positioning in global markets. Find out what it all means for companies looking to invest in or expand into Germany.

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Our year in review features leaders from business and politics and Germany Trade & Invest experts from a variety of fields.

Transcript of this episode

[Sound of ship horn, ship leaving port]

Narrator:

Imagine for a moment that Germany is a very large ship. If so, then 2025 was the year it replotted its course, heading for waters that were maybe not completely uncharted, but still different than those it was headed toward in 2024. What was the bottom line of this realignment of direction?

Friedrich Merz

Wir werden alles daran setzen Deutschlands Wirtschaft wieder auf Wachstumskurs zu bringen. Wir wollen investieren und reformieren – beides gehört zusammen.

We will do everything we can to put Germany’s economy back on course for growth. We’ll invest AND reform – those two things go together.

[Sound of ship horn, ship leaving port]

Narrator:

Hello and welcome to INTO GERMANY, the business podcast brought to you by Germany Trade & Invest or GTAI for short. I’m Kelly O’Brien. Today, we’re taking a look BACK at some of the most important business stories of the past 12 months in Germany. The voice you just heard was Friedrich Merz. At the start of 2025, he was the leader of Germany’s conservative opposition. By May, after snap elections, he became the 10th Chancellor of the Federal Republic.

The outgoing parliament changed the German constitution to allow the government to take up huge amounts of new credit. The new government led by the conservatives and their junior partners, the center-left Social Democratic Party, promised to be much more explicitly business-focused than its predecessor. We’ll be hearing about the measures it has taken throughout this program. GTAI CEO Julia Braune underscored one of the main points.

Julia Braune

Well, we're talking about half a trillion euros of extra spending power the government can call upon to invest in Germany's future. That will and can be infrastructure and also 100 million euros are allocated to climate-related investments, for example, to advance Germany's transition to renewable and sustainable energy. And just to give you a feeling, what does it mean half a trillion for Germany? By comparison, Germany's GDP is around 4.3 trillion euros.

[Sound of ship horn, peeping sound]

Narrator:

2025 was a big year for Germany in terms of microchips. Nearly a billion euros in state support was approved for a 5 billion euro project by Infineon in the eastern German city of Dresden. The internationally renowned Belgian research institute Interuniversity Microelectronics Center chose the southern city of Heilbronn as the site of its Advanced Chip Design Accelerator (ACDA) hub. And Germany was named a “key global producer” in a study by think-tanks Ifo and Econ Pol Europe. GTAI chip expert Jerome Hull: 

Jerome Hull

2025 was an unmarked year for German semiconductor investment, underscored by TSMC’s multi-billion euro investment in Dresden which is a major commitment marking one of the largest foreign direct investments in both Germany and Europe. Alongside global foundries’ ongoing expansion in the regions. These strategic moves reinforce a vibrant and growing ecosystem characterized by a strong network of leading research institutes, suppliers, manufacturers and endusers which firmly establishes Germany’s rising role as a key global producer and an essential de-risk and technological advanced partner for semiconductor investments.

[Sound of ship horn, starting e-vehicle]

Narrator: 

Electromobility made an impressive leap forward in commercial vehicles, particularly trucks and busses. Germany saw a nearly 100 % increase in the number of electric bus registrations. E-trucks also gained considerable traction. It’s a European-wide trend, and since Germany is at the heart of Europe, it’s in the thick of this trend too. E-mobility creates all sorts of market, not the least for a charging grid, as Nils Heine, Vice President Go-To-Market and Alternative Drives at truck maker M-A-N, told us:

Nils Heine

We expect to achieve 50% with battery electric vehicles and that it will continue. But we expect, let's say in ten years, two third or even 80% might be electrical when you have the electrical system working. It's always the vehicle plus the charging.

[Sound of ship horn, strong wind / wind turbines]

Narrator:

2025 saw Germany celebrate the 15^th anniversary of offshore wind power. In April 2010, Alpha Ventus became the first offshore wind farm to go online. It consisted of 12 turbines with a a total capacity of 60 megawatts. Within 15 years, the number of turbines installed in Germany has increased more than thirteen-fold, and capacity was up to over 9 GIGAwatts. That's 150 times as much! The trend is set to continue: By 2030, installed capacity is expected to reach 30 gigawatts. Then 50 gigawatts by 2035 and 70 by 2045.

Markus Nölke, the head of industry association W-A-B, says:

Markus Nölke

A lot has happened in the last 15 years and the numbers speak for themselves. The history of offshore wind development is of course much older than 15 years and there was also a lot of skepticism beforehand as to whether it was feasible and sensible both technically and economically. Today we can say, yes offshore wind is a success story.

[Sound of ship horn, flowing water / waves]

Narrator:

In May, GTAI released its annual report on the flow of foreign direct investment to Germany for the preceding year. The news was mixed. FDI was down somewhat in both project numbers and total volume in 2024 compared with 2023. But with more than 1700 companies investing over 23 billion euros in German expansion projects, the level of activity remained quite high considering the many challenges the world and German economy continue to face. Here’s GTAI Senior Manager for Investment Services Thomas Bozoyan:

Thomas Bozoyan

These numbers contextualize and relativize some of the recent negative headlines about German growth. Germany remains the economic heart and powerhouse of Europe. So it’s still a top location for international companies looking to expand their business.

[Sound of ship horn, falling coins]

Narrator:

It may have required changes to the German constitution, but the Merz government used new leeway allowed by relaxations on deficit spending to free up funds for a massive infrastructure spending program. As we heard, the size of the initiative was half a TRILLION euros. And that wasn’t all, defense spending was COMPLETELY exempted from limits.

2025 was the year the German defense industry really took off. Munich start-up Helsing increased its value to more than five billion dollars, while Quantum Systems also became a unicorn. GTAI Managing Director Achim Hartig explains:

Achim Hartig

Helsing is one of the most remarkable success stories in recent months in Germany. Their incredible growth illustrates the opportunities right now and particularly with AI expertise in the dual use, security and defense sector.

[Sound of ship horn, bubbling and steaming water]

Narrator:

Meanwhile, a survey showed the German government invested a record amount in research and development in 2024. It allocated nearly 90 billion euros on future technologies – eight and a half percent more than in the previous year. And another study shows that German spending on education, research and science is reaching almost 400 billion euros. Former Director General of the German Ministry for Education and Research, Armin Reinarzt says:

Armin Reinartz
Research and Innovation made in Germany has a great deal to offer. Our big four research institutes, our excellent universities, countless innovative companies and a vibrant start-up scene. We target our support across the entire innovation chain, from excellent science to application. For example in key digital technologies, in health, in biotech, climate-friendly and resilient energy. We do give tax brakes to companies for research and development. So, in total, Germany’s annual expenditure for R&D is already well above the EU-goal of 3 percent of the GDP. That is more than in most other large economies worldwide. 

[Sound of ship horn, rocket start]

Narrator:

It’s intended to be a rocket for the German economy. In the late summer, the German government introduced a tax incentive program – nicknamed the “growth booster” – aimed at stimulating investment. It will see a gradual reduction of corporate tax, starting in 2028, from 15 to 10 percent. And it changes the structure of tax deductions for investments as German Finance Minister Lars Klingbeil told the country’s parliament.

Lars Klingbeil

Wir erhöhen die Abschreibung für Investitionen auf 30% für die nächsten Jahre. Das heißt: Ein Unternehmen, das eine neue Maschine für 120.000 Euro kauft, kann schon im ersten Jahr 40.000 Euro von der Steuer absetzen. Diese Super Abschreibungen sind einfach, sie sind unkompliziert. Sie wirken schnell, sie bringen für alle Unternehmen Vorteile, die investieren. Für das Handwerk ebenso für die Familienbetriebe, die Mittelständler und die Industrie.

We’re raising the deductions for investments in the coming years to 30 percent. That means a company that buys machinery for 120,000 euros can already write off 40,000 in year one. These “super deductions” are simple and uncomplicated. They have an immediate effect and offer advantages to all businesses, whether they be tradespeople, family-run companies, SMEs or industrial corporations.

[Sound of ship horn, beeping sound]

Narrator:

And speaking of rockets, another sector that was constantly in the headlines this year was space. Hot young Munich startup Isar Aerospace became the first company to be commissioned to put European Space Agency rockets into orbit. And American new space company Planet Labs announced an eight-figure expansion in Berlin that will see it construct satellites in the German capital. The news was significant enough that TWO government ministers attended the announcement. One of them was Dorothee Bär, Head of the Ministry for Research, Technology and Space.

Dorothee Bär

Dass wir – obwohl wir natürlich schon immer für Raumfahrt zuständig sind – das Ganze auch nochmal so prominent im Namen eines Ministeriums dargelegt haben, zeigt auch nochmal die Wichtigkeit, die auch unserem Bundeskanzler sehr wichtig ist.

The government has always been responsible for aerospace, but the fact that Space is now part of the name of a ministry shows how important it is – also for the German chancellor. 

Katherina Reiche

The sky is not the limit für Innovation und Startups wie es Planet Labs ist…New Space ist ein Treiber für wirtschaftliche Innovation im All. New Space ist aber auch eine ganze wesentliche Säule für Wirtschaftswachstum, für Resilienz, für Unabhängigkeit in einer sich dramatische verändernden Welt.

The sky is not the limit for innovation and start-ups like Planet Labs. New Space is a driver of innovation in space. But New Space is also an essential pillar of economic growth, resilience and independence in a dramatically changing world.

[Sound of ship horn, spheric sound]

Narrator:

2025 will also be remembered as the year the German start-up scene staged a major bounce back. Q2 venture capital funding was up a whopping 45 percent, and 4 BILLION euros were invested in the first half of the year. The size of the deals, sometimes reaching nine figures, increased as well. No wonder that 1500 new startups were established during this period. Germany, as GTAI Trend and Innovation Scout Kiana Frank explains, offers fledgling businesses a number of advantages.

Kiana Frank

Germany really has all ingredients in one plate. We’ve got outstanding talent, world-class research and a very strong, unique industry base. And also Germany really offers a plethora of different federally backed start-up support programs, such as the de:hub initiative, which ranges across 25 different hubs in Germany and helps start-ups to connect with the right decision makers in order for their ideas to scale not only nationally but internationally.

[Sound of ship horn, factory belt]

Narrator:

Speaking of investments, the government recruited 105 companies, including some of Germany’s best-known multinationals and smaller family-run business for a massive investment program called Made for Germany. The companies involved have pledged to spend some 735 billion euros to stimulate growth, with twelves figures coming as new investments. The initiative is spearheaded by Siemens and Deutsche Bank. At the unveiling of the program, Deutsche Bank Chairman Christian Sewing, set the tone:

Christian Sewing

Deutschland hat enormes Potential, und jetzt müssen wir gemeinsam dafür sorgen, dass wir dieses Potential gemeinsam ausschöpfen. Und der heutige Tag stimmt mich persönlich sehr optimistisch, dass uns das gelingen kann. Heute hat deutlich gezeigt, dass wir es selbst in der Hand haben und die Kraft dazu haben.

Germany has enormous potential. What we need right now is to ensure we exploit this potential together. Today makes me very optimistic that we’ll succeed. Today showed we have everything in our own hands and possess the necessary strength.

[Sound of ship horn, quickly flipping through stacks of paper]

Narrator:

And finally, as 2025 drew to a close, chancellor Friedrich Merz’ governing cabinet put forward an extensive set of proposed laws to eradicate regulatory bureaucracy and digitalize state administration. Initial savings were projected at some EUR 100 million. But the cabinet also listed a series of “next steps” to be taken at the latest by the end of 2026. German Digital Affairs and State Modernization Minister Karsten Wildberger said the goal was to save the state and the private sector as much as five BILLION euros.

Karsten Wildberger

Damit haben wir einen wichtigen weiteren Schritt gelegt für einen weiteren langfristig angelegten und zielgerichteten Bürokratierückbau – oder, wie ich es lieber nenne: das Leben wieder einfacher machen für die Bürgerinnen und Bürger und die Unternehmen.

We’ve laid a further cornerstone for another long-term, targeted reduction in bureaucracy. Or as I prefer to put it, we’re making life easier again for our citizens and companies.

[Sound of ship horn]

Narrator:

So there you have it. We’ve completed our voyage through some of the biggest German business stories of 2025. Thanks for being on board. There’s a new captain and crew on the bridge, and it will be interesting to see where they – and the private sector – steer the German economy in the year to come. Wherever it heads, though, it’s worth keeping an eye on for your company. After all, Germany remains the biggest market in Europe and the heart of business on the continent. Germany Trade and Invest can help you navigate the possibilities – at no cost because we’re a German government agency. Let’s talk at gtai.com.

We’re also keen on your opinions, suggestions and questions. Please leave a comment in your favorite podcast app or drop us a line. You’ll find all the details in the INTO GERMANY show notes.

So until next year anchors away, Frohes Neues, Auf Wiederhören and remember… Germany means business!