If Germany is to get back on track economically, achieve stronger growth, become more attractive to foreign investment, increase skilled worker immigration, and enable domestic companies to regain technological leadership, politics must move beyond typical coalition thinking. It needs to abandon political trade-offs – such as pension credits for mothers in exchange for a minimum wage, or agricultural diesel subsidies in return for rent controls – and instead focus on decisions that yield long-term impact. That means investment in education, digitalization, and infrastructure, as well as a tax system reform that creates better conditions for investment and labor.

However, this comes at a political cost. Economist Ulrike Malmendier made this clear at the Frankfurt Business Journalists Club (ICFW) last week. Policymakers must advocate for measures that may not bring them immediate benefits – or may even harm them politically in the short term. In other words, prioritising the common good over party interests, and long-term vision over short-term election cycles. Regarding the exploratory paper from CDU/CSU and SPD, she remains sceptical that the promised „genuine policy shift“ has truly taken root in Berlin. „If we don’t start investing in things that don’t benefit politicians or even the public today but will pay off in the long run, Germany will continue its decline“, she warns.

To safeguard Germany’s economic position, negotiators must be prepared to go even further and consciously accept political resistance. This means not only upsetting traditional interest groups, such as farmers and retirees, but also offering highly skilled immigrants the most attractive conditions possible. Some groups will protest, but „daring to create more inequality“ could ultimately lead to greater success for society as a whole. Incentives for increased work effort must also be strengthened, even as the trend toward work-life balance continues. These are not comfortable prospects for politicians, but isn’t that their responsibility?

In March 2003, then-Chancellor Gerhard Schröder introduced the „Agenda 2010“ reform package, one of the most extensive in post-war German history. Though it was passed, mass protests by labour unions and social organisations soon led to calls within the SPD to reverse parts of it. Schröder lost power, yet years later, the long-term positive effects became evident: renewed economic confidence and a vastly improved international reputation for Germany.

A similar „Schröder moment“ now seems necessary to trigger real change – one that will again involve hardship for certain workers and industries. According to Malmendier, it is therefore crucial to engage with these groups actively and support them through the transition. „No one should be left behind!“, she stresses. Otherwise, Germany risks the kind of polarisation seen in the US, which ultimately fueled Trump's rise to power. In this sense, well-placed social policies are not just compassionate – they are an investment in stability.