Germany's digital push fails due to poor coordination

Germany's digital transformation stalls despite ample funding and bold ambitions

From Healthcare to Public Administration and Fiber-Optic Networks: Germany's Digital Push Lacks Long-Term Funding

The German government aims to accelerate digitalization across sectors—from healthcare and public administration to fiber-optic infrastructure. Yet a new study by the Leibniz Centre for European Economic Research (ZEW), commissioned by the think tank Agora Digitale Transformation, reveals a critical gap: sustainable financing for this transformation is missing. "There's no sign of a major push for digitalization," Stefan Heumann, managing director of Agora Digitale Transformation, criticized on Tuesday during the presentation of the findings.

For their analysis, researchers examined the federal budget allocations for digitalization in 2025. Funding is not concentrated solely in the newly established Ministry for Digital Affairs and Administrative Modernization (BMDS) but is scattered across multiple ministries—from economic affairs and research to education. Beyond the core budget, additional funds come from the Climate and Transformation Fund (KTF) and the special asset fund for infrastructure and climate neutrality (SVIK).

Nearly one-fifth of the funds earmarked for digital transformation originate from these special-purpose vehicles—a trend the researchers view with concern. "The increase in digital spending is entirely due to these special funds, which have absorbed major infrastructure projects," explained Friedrich Heinemann of ZEW. This raises questions about the long-term security of digitalization funding, particularly since the SVIK is limited to twelve years and €500 billion.

Dependent on Big Tech

The study's authors emphasize the urgency of digital transformation: "The geopolitical context is increasing pressure on policymakers to reduce technological dependence on Big Tech," Heumann stated.

This dependence is currently being exacerbated by tensions with the United States. While the EU enforces far stricter regulations on tech giants—covering youth protection, content moderation, reporting mechanisms for illegal content (from hate speech to counterfeit goods), and restrictions on manipulative design—these rules are not being consistently enforced. Former U.S. President Trump repeatedly threatened to impose tariffs on countries that impose significant restrictions on American tech firms.

"We urgently need greater transparency over the federal government's IT expenditures," Heumann demanded.

Chancellor Friedrich Merz and Digital Minister Karsten Wildberger (both CDU) have repeatedly called for greater digital sovereignty in Germany and Europe. Achieving this, however, would require substantial changes. Currently, public administration relies heavily on U.S. providers—particularly Microsoft.

"Digital sovereignty is a major priority for the federal government and the digital minister," Heumann acknowledged. "But you don't strengthen alternatives by talking about them—you strengthen them by investing in them." Yet federal spending tells a different story. In fact, expenditures on Microsoft products have risen. Last year alone, the federal government and its subsidized entities spent €481.4 million on licenses from the U.S. software giant.

And this is only part of the picture: state and local governments also pay for Microsoft and other U.S. services, but no comprehensive overview exists. "We urgently need greater transparency over the federal government's IT expenditures," Heumann insisted. Germany has sufficient resources, he argued—they simply need to be deployed more effectively. This includes avoiding redundant investments and establishing clear guidelines for the use of open-source solutions from European providers. The BMDS declined to comment on the study's findings when approached.