The digital transformation of Germany

What has to be done and what is the meaning for the economy?

The digitization is changing every part of our society. The German government has to react to these new economic and political structures. Otherwise Germany could lose the international connection in terms of the digital transformation, which could have serious consequences for its economy.

Studies show, that Germany has only used 10 percent of its digital potential. This affects the German IT-sector in particular, which is already lagging behind the leading markets of China and the USA. If the digital transformation fails, the industrial sector could lose 220 billion Euro in total value added until 2025. The automotive- and logistic industry could even experience a loss of 140 billion euros in gross value added.

A fast digital upgrade of the European economy could bring a 1.25 trillion euro of industrial gross value added. At the same time, a failure of the digital transformation could mean a loss of 605 billion euros for the European Union. Between 2001 and 2011, the difference of a digital-induced economic growth between the EU and the USA was already 25 percent.

Germany in particular feels the pressure to protect and change its structures of competitiveness. According to experts, the digital transformation and its associated automatization could lead to a significant reduction of the overall working hours. The low- and medium-skilled workers would be affected most, while the highly-qualified workforce would be less concerned. This means, that the current economic structures will change dramatically and that Germany is not ready for it. Also, the German economy does not have any leading entrepreneurs in the field of consumer electronics and of online transaction platforms to play a more important role in the global digital economy.

As a response to the need of a digital transformation of its economy, the new coalition agreement sets out the following goals: The expansion of the digital infrastructure, enhanced digital education, digital training of employees and employers, a regulation to create competition and competitiveness, cyberspace-security, digital administration and a legal framework guaranteeing citizenship and innovation.

In the previous cabinet, 482 civil servants in 244 teams in 76 departments were responsible for the German digital modernization. The question, if the new German government will change this structure, remains unclear. However, in order to achieve these goals, several ministries have been instructed to lead the German digitization. These are the Federal Ministry of Transport and Digital Infrastructure with Andreas Scheuer as Minister in charge of the expansion of the digital network, the Federal Ministry of Education and Research with Anja Karliczek as its Minister for digital education and the Federal Ministry for Economic Affairs and Energy with Peter Altmaier as Minister in charge of the digital economy. Furthermore, the Head of Chancellery Helge Braun is responsible for the coordination of the digital transformation and Dorothee Bär is subordinated as Junior Minister for digital affairs. However to which extent these goals of digital transformation will be achieved, remains to be seen.