Europe 2020 in Germany

The Country-specific Recommendations are documents prepared by the European Commission for each country, analysing its economic situation and providing recommendations on measures it should adopt over the coming 18 months. They are tailored to the particular issues the Member State is facing and cover a broad range of topics: the state of public finances, reforms of pension systems, measures to create jobs and to fight unemployment, education and innovation challenges, etc. The final adoption of Country-specific Recommendations prepared by the Commission is done at the highest level by national leaders in the European Council.

Country overview

Germany has made limited progress in taking measures to address the 2012 CSRs. Germany’s public finances have continued to improve and the budget produced a small surplus in 2012. Financial sector regulation and supervision has been strengthened, but there is still scope to increase the efficiency of the banking sector. Germany is making efforts to accelerate the deployment of energy networks, but initiatives to reduce the overall costs of transforming the energy system have not yet led to tangible results. In other areas, reform efforts have been limited, e.g. as regards improving incentives to work. Efforts to stimulate competition in the services and railway sectors have been limited.

Despite the current overall favourable economic situation, Germany faces important challenges, especially in the medium and long term, but its policy plans for 2013 do not go far enough in some areas to address these. In particular, Germany needs to tackle shortcomings in the labour market and in the energy system, inefficiencies in some spending policies and in the tax system, and barriers to competition, particularly in the services, railway and banking sectors. The country would also benefit from more balanced growth based on strengthened domestic demand.

2013 European Commission's recommendations for Germany in brief

The Commission has issued four country specific recommendations (CSRs) to Germany to help it improve its economic performance. These are in the areas of:

  1. Sustainable public finances
    Public finances have continued to improve thanks to good economic and labour market performance, but at about 82% of GDP in 2012, government debt is still well above the EU's 60% threshold. To reduce the debt level Germany should improve the efficiency public spending for health and long-term care. Germany should also consider raising more tax revenue by applying the regular VAT rate to more goods and reforming the real estate tax base.
  2. Labour market
    The labour market situation is currently favourable, however due to a shrinking population Germany will face shortages in the labour market in the medium-term, in particular for qualified labour. It is necessary to increase full-time employment of women and to raise educational level of people with migrant background. The tax wedge on low income workers is still too high. Germany should lower taxes and social security contributions to increase disposable income for poorer people and to strengthen domestic demand.
  3. Energy turnaround (Energiewende)
    To make the energy turnaround a success Germany should keep economic costs under control, extend the national and cross-border networks and coordinate energy policy with neighbouring countries.
  4. Competition in the services sector
    More competition in the services sector will lead to lower prices, more jobs and better service quality. Low income households would be able spend their money for other purposes which will strengthen domestic demand. To this end, Germany should, in particular, remove unjustified restrictions on professional services, in the construction sector, and improve competition in rail and financial services.

See how Germany compares with other EU Member States in key areas

European Semester Documents