After the "Germany-Speed," the "Germany-Pact" follows. Chancellor Olaf Scholz (SPD) surprised with a new catchphrase during the general debate on the 2024 budget. With a "Germany-Pact," the government and opposition, as well as federal and state authorities, are intended to work together. Planning and approval processes should be expedited, competitiveness and growth enhanced, administrations digitized, and the shortage of skilled workers addressed through immigration. Germany is to become faster, more modern, and safer. In March, the Chancellor had already declared a new "Germany-Speed" to accelerate the modernization of energy and transportation infrastructure.

Scholz believes in the concept of alliances. After Russia's invasion of Ukraine and the rapid rise in prices, he initiated a concerted action with employers and trade unions. The agreement reached was limited: the gas and electricity price brakes and the tax-free inflation bonus. Internationally, a climate club initiated by Scholz aims to prevent competitive disadvantages for countries that incorporate environmental costs into prices. The club is still in its infancy. The "Germany-Pact" follows the realization that the federal government cannot achieve many of its plans on its own. A significant portion of public administration is at the state and local level. Tax laws require approval from the states in the Bundesrat. CDU and CSU, even as the opposition in the federal government, are important allies. They lead the governments in 7 of 16 federal states. Scholz needs their cooperation.

Such pacts also pose risks. They blur positions. Once involved, they compel participants to remain silent once a result is found. Alliances make sense when institutionalized mechanisms for reconciling interests are lacking – for example internationally. However, such pacts are unnecessary when functioning procedures are in place. In Germany, the federal government and states reconcile their interests in the Bundestag and Bundesrat, and, if necessary, in the mediation committee. The state leaders coordinate with the Chancellor in the Minister-President Conference. This was evident during the COVID-19 pandemic.

Germany does not need an extra pact for this reconciliation of interests. Scholz could give more impetus to his plans if the "Ampel" coalition (SPD, FDP, and Greens) worked more swiftly. The tax relief for businesses envisaged in the Growth Opportunities Act was only approved by the cabinet at the end of August and apparently was not sufficiently coordinated within the "Ampel" coalition, as the Greens in the Bundestag already fear unintended effects: the law should not lead to higher corporate profits. The Future Financing Act aims to modernize capital market law in Germany and make the country more attractive to startups. The key points have been in place since the summer of 2022, and the government draft was ready in April. The law was stuck in coalition disputes for months. The so-called generational capital stock market pension, long-awaited by the business sector, has still not made it to the cabinet. The Ampel coalition has only outlined the reduction of bureaucracy in rough terms after the cabinet retreat. This is just the preliminary form.

A "Germany-Pact" would benefit the federal budget. The project costs nothing and might even generate more tax revenues if companies make more profit due to reduced bureaucracy and accelerated processes. The "Germany-Pact" also diverts attention from the dispute within the "Ampel" coalition over the consolidation of state finances. The necessary defense capability in a multipolar world order, the restrained globalization of the German economy to reduce dependencies, and an aging society are leading to foreseeable higher costs for the federal government. The federal budget is not prepared for this and will rely heavily on net borrowing in 2024 when special assets are included. The Greens and SPD do not show any willingness to make cuts to the welfare state – on the contrary, they want to expand it. A pact within the "Ampel" coalition for solid state finances would be urgently advisable.