The Impact of German Elections on an Already Sluggish Tech Ecosystem
Germans geared up for the federal government elections in February. Still, tech innovators watch closely as the election results could impact the technology ecosystem that already falls behind leading countries, while Germany has the potential to become a hub.
Discover how the German government elections may impact technology innovations, what current state and opportunities exist, the common German tech challenges, and what the potential of a lean toward right-wing leadership would have meant for the country's tech industry.
The Current State of Germany's Tech Landscape: Innovations and Challenges
Discover the current opportunities and challenges within the innovative landscape before determining how the federal government election results may impact the German tech industry. The German government could implement new programs to supplement the opportunities or increase the challenges, so understanding them will help businesses to invest safely.
Germany's Incredible Renewable Energies Technology Ecosystem
Clean Energy Wire suggests Germany is leading in climate tech, appraising the German energy transition with 64 solar and wind technology manufacturing facilities. Spain comes in second with 38 and Italy third with 27. Germany has significantly reduced its greenhouse gas emissions to ensure renewable energy sources for future generations.
The German energy transition is an example of technological improvements that supplement the country with renewable energies, which opens opportunities for further technological advancements. The European Council and Parliament struck a deal to boost the European Union's green transition while instituting the Net-Zero Industry Act (NZIA).
The NZIA regulations boost the industrial deployment of climate-friendly technologies related to renewable sources, nuclear plants, and greenhouse gas neutrality, revealing innovation opportunities for Germans. Investments in technology for energy transitions also help businesses meet climate laws like the Federal Climate Change Act (KSG).
Germany Has the Potential to Become a World-Leading Tech Hub
The Federal Ministry of Education and Research aims to restructure the research landscape in Germany, increasing the research and development (R&D) spending GDP by 3.5% in 2025. The federal government established special funding programs for sustainability in educational and scientific research, preparing future generations for innovation.
New visas for skilled professionals could also attract technological innovators and advanced expertise in the tech industry. Often referred to as the "Opportunity Card," the new visas allow skilled technology experts up to 12 months to seek employment while working 20 hours weekly, opening the doors to greater skills and transformative tech.
Challenges to the German Tech Landscape: Losing the Innovation Race
The German economy and tech landscape are far behind world leaders like the US and China in terms of artificial intelligence, climate technology spending, and global talent sourcing. For example, the US plans to inject €355 billion into climate-related technology development and deployment over 10 years with the US Inflation Reduction Act.
A recent Stanford report also indicates that the US led the deployment of AI models in 2023, launching 61 machine learning AI models. China deployed 15, France launched 8, Germany deployed 5, and the UK only launched 4 to match Canada and Israel. Meanwhile, China held 61.1% of AI patents while the US held 20.9% in the same year.
The EU and UK didn't account for 3% of the AI patent origins. China and the US are leading the technology race because artificial intelligence, machine learning, and data science are the transformative drivers for innovation. Global investments in AI technology have surged, and German innovators must close the gap to catch the leaders.
Germany's Strict Regulatory Guidelines Challenge Investments
Germany has vast regulations guiding technological innovations from the European Union, Federal Network Agency, and Federal Constitutional Court, and things are about to worsen. Europe may wrap the tech industry in even more tape, favoring the precautionary approach to innovation and being the world leader in technology regulations.
Unfortunately, the EU strengthens the regulatory reigns while tightening the innovative noose with a list of compliance and regulatory standards:
General Data Protection Regulation (GDPR)
The EU Digital Services Act (DSA)
The EU Digital Markets Act (DMA)
The EU Artificial Intelligence Act (EU AI Act)
The EU General Product Safety Regulation (GPSR)
The Digital Operational Resilience Act (DORA)
The NIS2 Directive for Cybersecurity
The German Accessibility Strengthening Act (BSFG)
The EU Data Act (DA)
The regulations are strict and plentiful, often driving innovators elsewhere. The Draghi’s competitiveness report showed that Europe needs a renewed and proactive approach to AI integration, development, and deployment. The European Commission is also considering another regulation called the Digital Fairness Act. However, these regulations may come in handy with the German election results.
How the German Elections Impact the Tech Ecosystem
Federal government election results are in, but investors and innovators often look beyond politics to discover potential opportunities or setbacks. However, looking at what has come after the federal government elections could reveal potential opportunities or risks.
AfD and CDU Share Some Common Ground to Challenge Investors
An AfD right-wing lean in the German government elections could have posed a risk to Germany's AI and tech race. A recent BBC article claims that Germany's parliament was rocked by AfD's proposal to tighten legislation to curb family reunion rights and immigration laws, which could have directly impacted the new visas allowing skilled innovators 12 months to find work.
The AfD party could have prevented Germany from sourcing highly skilled individuals to promote progression in the technological advancement and AI race against China and the US. The non-binding motion for border rules could’ve challenged Germany's technological evolution. Fortunately, EU laws would’ve prevented such proposals, and the election results reassure investors that the challenge won’t be the case for this term.
However, a recent Politico article suggested that the center-right Christian Democratic Union (CDU) leader Friedrick Merz, who took the election, appears to support the anti-immigration motions after violent attacks left six Germans dead in the Magdeburg Christmas Market attacks in December. A weakened German economy doesn’t need the anti-immigration laws that prevent startups from flourishing and investors from making confident decisions.
Still, Germany votes far-right in the state elections in September headlined the news, showing how the AfD gained much ground in Saxony and Thuringia, possibly indicating a larger support base for the national elections this month. Merz’s party won, but time will tell whether the AfD and CDU truly share the anti-immigration ideations. Meanwhile, Elon Musk dug his claws into the AfD’s social media reach and is currently being investigated.
Should Germans Worry About The Elon Musk Effect on the AfD?
Euro News questioned whether Elon Musk could've actually impacted the German elections. Musk certainly knows how to get himself involved in federal government elections worldwide, famously increasing his reach on X during the US elections in 2024.
Musk inspires some technology innovators but concerns others due to his brazen personality. However, Elon Musk hosted an interview with AfD leader Alice Weidel, showing the potential for attempting to influence the elections through his X platform.
Fortunately, the European Commission outlines the strategy and policy for how tech companies and social media platforms must handle the sharing of disinformation and online coercion through algorithm manipulations in the EU Digital Services Act.
The European Commission has already added Musk's German AfD interview to the ongoing platform probe while citing the EU Digital Services Act. Additionally, recent research reveals that Germans stand out for their comparatively light use of social media.
Only 51% of Germans use social media platforms like Facebook, X, Instagram, TikTok, and Snapchat, making it unlikely that Musk would’ve influenced the 2025 German elections. More research shows that social media is mostly good for democracy, dividing political opinions, and the election results reveal that Musk had no power or persuasion through X.
The AfD Drove Climate Change Innovations Out of German States
The AfD announced that the country should concentrate on immigration laws and move away from focusing on climate change in a recent news article "Klimaat Als Splijtzwam in Duitsland Alles Wordt in Het Extreme Getrokken." The far-right doesn't believe that renewable energies or a green transition of the German economy matters.
Consider how this extremist view could’ve impacted the technological innovation opportunities for German economy investors seeking to monetise tech related to renewable energy sources, or nuclear power plants, or to reduce greenhouse gas emissions. Focusing on renewable energy sources could secure greater opportunities for future generations.
Currently, the focus is on securing the Baltic Sea Nord Stream 1 and Nord Stream 2 natural gas pipelines to solve Germany's energy crisis, albeit a bit controversial, and create sustainable renewable energies. The AfD didn't support the ongoing pursuit of streamlining a German energy transition. These issues clearly raised red flags among voters.
Frankfurter Rundschau business publishers also shared how Thuringia companies warned against AfD support despite supposed political support for hydrogen expansion on the agenda, particularly Maximator Hydrogen, a leading provider of hydrogen filling stations. The CEO suggested he may leave the state if the AfD won the German government elections.
How Does the CDU Win Impact the German Tech Startup Landscape
Fortunately, the CDU took the elections, and the AfD remains a distant threat to the German tech startup landscape for this term. Still, the Politico article suggested that Friedrick Merz showed some support for the anti-immigration proposals. Time will tell whether he will implement stricter immigration laws, but it didn’t seem to be top of his priority list.
Another Politico article reveals that Merz’s win may positively impact the tech and startup landscape, with Merz suggesting that digital transformation is imperative to Germany’s industrial revival. Merz plans to increase the R&D GDP by 3.5% by 2030, allowing German tech startups the ability to breathe and welcome innovation.
Two major proposals could attract investors and entrepreneurs. Merz aims to provide temporary red tape relief for startups and set up a standalone digital ministry. Furthermore, Merz warns that Germany’s business model is gone and aims to support the reduction of bureaucracy in Berlin and Brussels, which scares investors and entrepreneurs away.
Post-Election Analysis: The Impact of the Elections on Entrepreneurship and Technology in Germany
After a short yet tense waiting time, the elections concluded on February 23rd.
In the February 2025 German general elections, the conservative CDU/CSU alliance, led by Friedrich Merz, secured the largest share of votes at 28.5%, translating to 208 seats in the Bundestag. The far-right Alternative for Germany (AfD) experienced a significant surge, obtaining 20.8% of the vote and 152 seats, marking its best performance to date. The Social Democratic Party (SPD), under Chancellor Olaf Scholz, faced a historic low with 16.4% and 120 seats. The Greens and The Left garnered 11.6% and 8.8% of the votes, respectively. Voter turnout was notably high at 82.5%, the highest since 1990.
Since none of the parties can form a government alone, a new coalition will be formed, which will be critical in setting the tone for economic and entrepreneurial developments in the next months to come.
The election results will likely have a significant impact on Germany's entrepreneurial landscape, with both opportunities and challenges ahead. A potential CDU/CSU-led government under Friedrich Merz may push for pro-business reforms, such as reducing bureaucracy and fostering innovation, which could benefit startups and established enterprises alike. However, the coalition-building process remains uncertain, and if compromises with other parties—such as the Greens or the FDP—are required, different priorities, such as sustainability regulations or digital infrastructure investments, could shape the economic agenda.
At the same time, the AfD’s strong electoral performance introduces uncertainties regarding Germany’s stance on EU policies and international trade. A more nationalist economic approach could affect investor confidence and impact Germany’s attractiveness to foreign entrepreneurs. Many start-ups have been lost to the U.S. and more progressive European jurisdiction in the last year due to Germany's excessive bureaucracy, lack of growth funds, and regulatory flexibility. Giving more voice to AfD’s questionable policies can only hurt the foreign talent and investors’ market plans.
Additionally, the SPD's weaker position may limit the continuation of social policies supporting small businesses and workers, depending on the final coalition structure. As Germany navigates this political shift, entrepreneurs may face both new incentives and potential risks, making adaptability key in the evolving business landscape.
Despite Merz’s initial stance against AfD in the coalition, changing this position might bring a different light to Germany’s already struggling business landscape.
All in all, regardless of the political direction revealed in the following months, a period of ambiguity awaits businesses and entrepreneurs in Germany. Localization will be one of the key elements of brand-building in Germany, considering the rise of nationalist ideals among B2C and B2B customers. In addition, entrepreneurs are advised to tone down unnecessary expenses and build resilience and value-driven services and products if they’d like to benefit from the window of opportunity this crisis offers.
Would you like to learn more? Contact us to discuss how we can shortcut your German market entry.
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Innovation That Transcends German Government Elections
At Contextual Solutions, we aim to help innovators achieve the German energy transition and catch up with the US and China in the technology and artificial intelligence race. The good news is that what we perceive as a challenge in the highly regulated technology industry may prevent any governing party from disrupting tech-related green transitions.
We're situated in Berlin, an emerging technology hub in Germany, aiming to help other innovators, dreamers, and investors with successful market entry in Germany, particularly in the financial, banking, insurance, legal, and FinTech industries. Our experts will guide business leaders through all the regulations and help them source skilled professionals.
Our entrepreneurial coaching services ensure any business aims for the green EU goals, regardless of potential complications caused by political ascension. Instead, our teams will leverage the opportunities presented by the CDU. Our business consultancy services are ideal for guiding the digital transformation and adoption of AI automation tools, machine learning models, and technological innovation that follows EU regulations.
Our 100-day FinTech MVP launch services enable businesses to enter the market faster and experiment with different products and services before developing final products, and our go-to-market strategy consulting empowers FinTech, banking, and insurance clients with the right tools to help Germany become the next leading tech hub.
Contact us to discuss the right support method for you.
