Germany's location debate highlights productivity gap

German economic commentators argue that the current discourse on the country's competitiveness focuses heavily on external cost factors such as energy prices, taxes, bureaucracy and skill shortages, while neglecting the internal productivity challenge. The ifo Institute projects only 0.8 % growth for 2026 and KPMG notes a strong underlying foundation, yet firms’ output per work hour has been stagnant for years.

To address this, the authors propose three internal levers for medium‑size enterprises: consolidating fragmented IT architectures to reduce maintenance costs; automating routine processes to free scarce IT talent; and applying artificial‑intelligence solutions pragmatically to specific, measurable tasks. These measures, they argue, lie within corporate control and do not depend on legislative reforms, offering a tangible path to boost productivity without waiting for policy changes.

The piece stresses that while lower energy costs and reduced bureaucracy are necessary, real competitiveness hinges on modernising the productive core of Germany’s Mittelstand through decisive digital leadership.