In its 26th Main Report, submitted to Federal Minister for Economic Affairs Katherina Reiche, the Monopolies Commission has outlined fundamental recommendations for strengthening Germany as a business location. Tomaso Duso, Chairman of the Monopolies Commission and Head of the Companies and Markets department at DIW Berlin, emphasised that the challenges facing German industry cannot be overcome by a sequence of singular measures. Instead, a strategic focus on strong competition and the creation of innovation-promoting framework conditions is required.
The Commission identifies competition as the primary guiding principle for economic policy. This applies to energy policy, the promotion of Artificial Intelligence, and other location factors. A central warning signal is the diminished domestic development of large German industrial companies, which are increasingly generating their value creation abroad, while productivity in Germany stagnates or declines. The manufacturing sector, in particular, is affected by this development. Increasing Germany's attractiveness as a business location requires the targeted promotion of innovations and new technologies instead of favouring established industries.
State interventions and energy costs
The Monopolies Commission highlights that many state interventions in the economy are not only costly but often fail to achieve their intended effect. Subsidising individual sectors or companies frequently leads to distortions of competition. Such measures should only be used if necessary investments would otherwise not be made or if the transformation of the economy would be jeopardised. In these exceptional cases, a competition-open, transparent, and temporary design, as well as regular evaluations, are essential.
A 'labyrinth' of sector-specific electricity subsidies has been created, including electricity price compensation, industrial electricity price subsidies, electricity tax reductions, and grants for grid fees. These measures primarily benefit large consumers, while smaller companies often receive no support. The Commission instead advocates for comprehensive relief, for example, by reducing state-influenced components of the electricity price and increasing the efficiency of the entire electricity system. Aid for specific sectors should remain limited to narrowly defined exceptional cases.
Challenges in Artificial Intelligence
The application of Artificial Intelligence (AI) is not progressing with the necessary momentum in Germany. The reasons for this are varied, ranging from a lack of agility in companies to legal uncertainties and a regulatory framework that burdens smaller companies and start-ups in particular. The existing dependence on a few US-American players in the AI sector is considered problematic. The Monopolies Commission therefore recommends consistent application of competition law and the European Digital Markets Act. Furthermore, a simplification of AI regulation and the avoidance of double regulation are imperative.
