Germany Between Reform Pressure, Competitiveness, and Geopolitical Change

High energy prices, burdensome bureaucracy, and an aging welfare state are putting pressure on Germany’s economy — while, at the same time, global competition between the United States, China, and Europe is intensifying. In an interview with The Transatlantic Ledger, Sepp Müller, Deputy Chairman of the CDU/CSU Bundestag parliamentary group, explains what reforms are needed now, how energy can once again become affordable, and why the future of eastern Germany will help determine social cohesion across the whole of Germany.

Germany finds itself in a phase of fundamental economic and political reorientation. After several years of weak economic growth, rising energy prices, persistent bureaucratic burdens, and profound geopolitical change, the new federal government faces the task of guiding the country back onto a sustainable growth path. At the same time, international conditions are changing rapidly: global competition between the United States, China, and Europe is intensifying, technological innovations such as artificial intelligence are transforming entire industries, and the demands on security, energy supply, and economic resilience continue to rise.

Many companies report a growing burden from high energy prices, lengthy approval procedures, complex documentation requirements, and a persistent shortage of skilled workers. Medium-sized businesses in particular — the backbone of the German economy — are increasingly seeing their international competitiveness come under pressure. Investment decisions are more frequently being made abroad, while other industrial nations simultaneously court businesses and future technologies with extensive funding programs, lower energy costs, and faster administrative procedures.

Welfare State Under Pressure

On top of this come enormous challenges for the welfare state. The aging population is increasing the pressure on pension, health, and long-term care insurance. At the same time, citizens’ expectations are growing that the state will both invest in infrastructure, education, digitalization, and defense, and reduce the financial burden on businesses and employees. Reconciling these differing demands is one of the greatest political tasks of the coming years.

Energy policy also remains at the center of public debate. Following the turbulence of recent years, security of supply, competitiveness, and climate neutrality are all coming into focus equally. While the expansion of renewable energy continues to progress, there is at the same time intense debate about what role storage technologies, hydrogen, biomass, modern gas-fired power plants, or, in the longer term, new technologies such as nuclear fusion could play. Businesses are calling above all for planning certainty and permanently competitive electricity prices in order to make investment in Germany more attractive again.

At the same time, the international economic order is changing. The United States is investing billions in funding programs for future-oriented sectors such as semiconductors, artificial intelligence, energy, and advanced technology. China has for years pursued a long-term industrial policy strategy and is consistently expanding its technological independence. Europe therefore faces the question of how to reconcile competitiveness, innovation, and open markets without entering into a permanent international subsidy race. At the same time, transatlantic cooperation is once again gaining importance — not only in security and defense policy, but equally in research, digitalization, raw materials, supply chains, and technological standards.

Another central issue remains the development of eastern Germany. More than three decades after German reunification, numerous economic disparities have indeed been reduced, yet structural challenges continue to persist. Questions concerning investment, infrastructure, business relocation, wealth accumulation, and social cohesion shape political discussion there in many places. At the same time, election results in recent years show that many citizens do not feel adequately represented by politics. Strengthening democratic institutions and regaining trust are therefore among the most important tasks facing all democratic parties.

Against this backdrop, The Transatlantic Ledger spoke with Sepp Müller, Deputy Chairman of the CDU/CSU Bundestag parliamentary group and Chairman of the CDU state group of Saxony-Anhalt in the German Bundestag. Within the Union, Müller is regarded as one of the leading voices on economic, energy, and structural policy. As a representative of an eastern German state, he combines questions of economic policy reform with the particular challenges facing the eastern German regions, while also bringing a clear perspective on Germany’s international competitiveness.

CDU Politician Sepp Müller in Interview

Mr. Müller, the German economy continues to face considerable competitive pressure. Which three reforms, in your view, must now take top priority?

Sepp Müller: Three levers now have top priority: first, we must stabilize social insurance contributions so that labor remains affordable for both employees and businesses. Second, energy costs must come down on a lasting basis. Third, we need a resolute reduction of bureaucracy — not in small steps, but with the ambition to abolish reporting obligations and significantly reduce the compliance burden. This is precisely what the economic policy fresh start must be measured against.

High energy prices, bureaucracy, a shortage of skilled workers, and a comparatively high tax burden are taking a toll on many businesses. Where must the federal government start first?

We need to tackle these burdens simultaneously, because they reinforce one another. Lower energy costs and less bureaucracy have a particularly fast impact. At the same time, businesses need reliable tax conditions, faster approvals, and stronger incentives for employment. What matters is that relief measures are not merely announced, but actually reach businesses in their everyday operations.

Bureaucracy Reduction and Competitiveness: Sepp Müller’s Economic Policy Priorities

The CDU has promised a fresh economic policy start. By the end of this legislative period, how should businesses and employees be able to recognize that this fresh start has succeeded?

By the end of the legislative period, businesses and employees should feel that investments are more attractive again, that approvals are granted more quickly, and that work pays off more. Our goal is to lead Germany out of its growth weakness and put it back on a stable growth path.

Many medium-sized businesses complain about ever-new documentation and reporting obligations. Which specific regulations should be abolished or fundamentally simplified?

We need to systematically review reporting obligations and eliminate them wherever they create no discernible added value. This applies in particular to data collected twice or multiple times, small-scale documentation and retention requirements, and national add-on requirements that go beyond European standards. Our goal is to largely abolish national reporting obligations and noticeably reduce the bureaucratic compliance burden.

Germany wants to preserve its industrial base while at the same time becoming climate-neutral. How can this transformation be shaped without shifting production and jobs abroad?

Climate neutrality and industrial value creation must not be played off against one another. This requires a reliable European emissions trading system, competitive energy prices, and effective protection against carbon leakage. At the same time, we should give greater consideration to European value creation in strategic and climate-friendly products. What matters is the triad of affordability, security of supply, and climate neutrality — only then does the transformation remain economically viable.

Energy Prices, Nuclear Power, and Technology Openness: Germany’s Path to Affordable Energy

What energy policy measures are necessary to ensure that electricity and heating remain permanently affordable for private households as well as businesses?

We need to expand the energy supply, build out grids and storage more quickly, and make use of all available climate-friendly potential. At the same time, price components influenced by the state must come down. This includes lower grid fees, the abolition of unnecessary levies, and an electricity tax aligned with the European minimum level. Permanently affordable energy, however, results above all from more competition, more generation, and reliable framework conditions.

You advocate for greater technology openness in the building sector. What role should heat pumps, district heating, biomass, hydrogen, and modern oil and gas heating systems play in the future?

With the Building Modernization Act, we are creating the basis for owners to decide for themselves which solution fits their building and their budget. Heat pumps will play a central role because of their high efficiency. Alongside this, however, district heating, biomass, climate-friendly gases, hybrid solutions, and modern oil or gas heating systems must also remain possible, provided they are gradually operated with renewable or climate-neutral energy sources. Technology openness does not mean anything goes — it means competition for the best and most affordable solution.

Critics fear that easing the requirements for new heating systems could jeopardize Germany’s climate targets. How do you respond to this accusation?

I do not share this accusation. Climate protection does not become more effective by having the state mandate a single heating technology, but by making climate-friendly solutions affordable and practical for people. The Building Modernization Act therefore combines freedom of choice with clear climate protection instruments: the share of renewable and climate-neutral fuels rises step by step, while the green gas quota creates additional incentives. The rise in heat pump sales by more than 50 percent last year alone also shows that acceptance and technology openness can accelerate the transition. Our aim is not merely to meet the climate targets, but to reliably achieve them through a broader technology path.

Given high energy prices, rising electricity demand, and the expansion of artificial intelligence, should Germany fundamentally reconsider its stance on nuclear energy?

We should assess the energy policy decisions of the past soberly. In my view, shutting down the last three nuclear power plants in the midst of an energy crisis was a mistake. However, a short-term restart of the decommissioned plants is not, today, a technically and economically realistic answer to high electricity prices. That is why we are looking ahead: as part of the High-Tech Agenda, we are investing massively in nuclear fusion and want to create the conditions for the world’s first fusion power plant to be built in Germany. At the same time, we need more secured capacity, faster grids and storage, and a resolute expansion of renewable energy in the short term.

What conditions does Germany need in order to once again become an attractive location for energy-intensive industries, data centers, and future technologies?

Energy in Germany needs to become cheaper and more reliable overall. This requires more generation, faster approvals, high-performance grids, and competitive electricity prices. Renewable energy makes a decisive contribution to this, but must be supplemented by storage, flexible power plants, and secured capacity. In addition, we should make greater use of domestic potential such as biomethane. Data centers and future-oriented industries also require plannable grid connections, fast procedures, and a high-performance digital infrastructure.

Pension Reform and the Debt Brake: How the Welfare State Is Meant to Remain Financially Viable

You are calling for a comprehensive reform agenda for Germany. What changes are needed to pensions, Bürgergeld, long-term care, and health insurance in order to keep the welfare state financially viable in the long term?

Demographic change is presenting our social security systems with enormous challenges. What matters is that rising contributions do not keep making labor more expensive. In pensions, alongside reliable protection, we therefore need more funded old-age provision, stronger occupational pensions, and incentives for voluntary continued work — for example, through the Aktivrente [active pension]. With Bürgergeld, it must once again clearly apply that anyone able to work should, through counseling, qualification, and binding participation, return to employment as quickly as possible; this requires a new, more precisely targeted basic income support. In health and long-term care insurance, structural reforms are needed that strengthen prevention, organize benefits more precisely, and bring revenues and expenditures back into a sustainable balance. Solidarity and personal responsibility belong together here.

Where do you see concrete opportunities for savings in the federal budget without jeopardizing investment in infrastructure, education, digitalization, and defense?

We must start by addressing the structures of the state. This includes fewer personnel and lower operating costs in ministries and subordinate authorities, a rigorous review of government tasks, and a review of funding programs and subsidies. Not every expenditure that was once decided remains sensible in the long run. At the same time, investments in infrastructure, education, digitalization, and security must be protected. Saving therefore means, above all: setting priorities and fulfilling state tasks more efficiently.

How can the debt brake be maintained when, at the same time, substantial investments in the Bundeswehr, the energy grid, rail networks, and digital infrastructure are necessary?

The debt brake and necessary future investments are not a contradiction if the state sets clear priorities and mobilizes private investment. We must limit consumptive spending, dismantle inefficient programs, and speed up planning and approval procedures so that available funds take effect more quickly. At the same time, economic growth is indispensable: only a stronger economic base creates permanently higher revenues and, with them, room for maneuver for security, infrastructure, and social cohesion — without shifting the burden one-sidedly onto future generations.

What tax relief is realistic for businesses and the working middle class, and how is it meant to be financed?

For businesses, better depreciation conditions and a gradual reduction of the corporate tax rate starting in 2028 are envisaged in particular. For the working middle class, we need an income tax reform that raises the basic and child tax allowances, flattens bracket creep, and pushes back the threshold at which the top tax rate applies. Such relief must be financed through growth, a rigorous review of spending, and the reduction of inefficient subsidies. Tax relief is right when it is sustainably financeable — not when it creates new structural deficits.

Structural Change in Eastern Germany: Between AfD Successes and New Investment

As Chairman of the Saxony-Anhalt state group, you represent the interests of eastern Germany in particular. More than three decades after reunification, where do structural disadvantages still persist?

Structural differences continue to exist above all in wages, wealth, and corporate headquarters. Because of the division of Germany, many families in eastern Germany were able to build up and pass on significantly less wealth. Added to this are deficits in transport connections, digital infrastructure, and cross-border links — not only within eastern Germany, but also toward Poland and the Czech Republic. These differences are shrinking, but they have not yet been overcome.

What needs to happen for more international companies and innovative industries to settle permanently in Saxony-Anhalt and other eastern German states?

Eastern Germany is already an attractive location today, thanks to available land, the strong expansion of renewable energy, and well-trained skilled workers. For this to result in more permanent business settlements, we need faster approvals, better transport and digital networks, reliable energy prices, and a stronger research landscape. It is also important that new business settlements create regional value chains and are linked to the local Mittelstand, universities, and vocational schools.

In many eastern German regions, the AfD achieves high approval ratings. What political mistakes have contributed to this development, and how does the CDU intend to win back lost trust?

The East is a politically and culturally shaped realm of experience that continues to influence the everyday lives of many people to this day. However, the AfD is not an exclusively eastern German phenomenon; some developments have simply become visible here earlier and more clearly. This party manages to channel fears and frustrations stemming from the refugee crisis, the Covid-19 pandemic, and economic uncertainty. The CDU does not win back trust by copying populist language, but by clearly naming problems, explaining decisions, and achieving concrete improvements. As a people’s party, we must be approachable on the ground and demonstrate that democratic politics is capable of acting.

The United States, China, and the Transatlantic Economic Agenda: Europe’s Role in Global Competition

The United States is one of Germany’s most important economic and security partners. How can transatlantic relations be stabilized despite conflicts over tariffs, subsidies, defense spending, and industrial policy?

The United States remains Germany’s most important transatlantic partner in terms of values, the economy, and security. Precisely where interests differ, we must stay in dialogue and resolve conflicts on a rules-based footing. At the same time, Europe must act with greater self-confidence, take on more responsibility for its own security, and represent its economic interests as a unified whole. A resilient partnership can withstand differences, as long as both sides keep reliability, fair competition, and shared strategic interests in view.

The United States and China are supporting strategic industries with substantial state funding. Must Europe act with similar resolve in its industrial policy, or does this risk triggering an international subsidy race?

An international subsidy race cannot ultimately be won by anyone. Subsidies distort markets, tie up budget resources, and often create new dependencies. Europe’s response should therefore lie above all in better conditions as a business location: lower energy prices, faster procedures, a deepened single market, and less regulation. In the case of strategic technologies and critical infrastructure, time-limited, targeted support may be necessary. However, it must be tied to clear objectives and mobilize private investment, rather than permanently propping up uneconomic structures.

What shared transatlantic economic agenda do Germany, Europe, and the United States need in order to remain internationally competitive in energy, artificial intelligence, semiconductors, raw materials, and resilient supply chains?

We need a shared agenda for rules-based markets, open and fair trade, and the protection of intellectual property. In artificial intelligence, semiconductors, energy, and critical raw materials, Europe and the United States should coordinate more closely on research, standards, and investment. At the same time, supply chains must be diversified and one-sided dependencies reduced. The transatlantic space can only remain internationally competitive if it enables innovation, reduces bureaucratic hurdles, and combines shared security interests with economic openness.

The interview was based on a set of questions that Sepp Müller answered.