Bureaucracy costs Germany up to 146 billion euros per year, Ifo says
By Maria Martinez
BERLIN (Reuters) – Excessive bureaucracy costs Germany up to 146 billion euros ($153.53 billion) a year in lost economic output, a study by the Ifo Institute showed on Thursday, putting a hard figure on the impact of a long term bugbear for businesses.
Executives have complained about the amount of red tape – including lengthy approval procedures for new companies, and a relatively slow move into digitisation – in Europe’s largest economy, which has underperformed euro zone peers since 2018.
“The large scale of the costs caused by bureaucracy illustrates how urgently reforms are needed,” Oliver Falck, director of the Ifo centre for industrial organization and new technologies, said in the report.
“The costs of doing nothing are huge when measured against the untapped growth potential from reducing bureaucracy.”
Ifo said it identified countries that had brought in reforms to cut red tape, tracked their economic development over time, and used that to estimate what Germany has missed out on by not making similar changes.
“If Germany were to catch up with Denmark in terms of the digitalization of public administration, its economic output would be 96 billion euros a year higher,” Falck said.
Germany’s government passed a law in September meant to cut red tape, as part of a growth package with 49 measures aiming at revving up stuttering economic growth.
Business associations said at the time the initiative was in the right direction but not enough to increase competitiveness.
Bureaucracy has been named as the biggest problem for business in all Chamber of Industry and Commerce surveys in the past two years.
All verification and documentation requirements, reporting obligations and statistical reports, all the constant changes to the law, data protection requirements and lengthy administrative procedures “must be scrutinized, significantly streamlined and in some cases completely abolished in Berlin and Brussels,” Manfred Goessl, CEO of the Chamber of Industry and Commerce for Munich and Upper Bavaria, said in the report.
($1 = 0.9509 euros)
