• Date 25 March 2026
• Location Bertelsmann Foundation, Berlin
  
• Speaker Lars Klingbeil

Mr Vopel,
Ms Schwarzer,
Excellencies,
Ladies and gentlemen,

A few weeks ago, the Bertelsmann Foundation asked me to come here today and give a speech about the future of our country. To share my views on what needs to happen for Germany to remain strong. I was very pleased to accept. Thank you for inviting me. The timing seems apt. What I want to do is open doors.

In a recent interview, Franz Müntefering gave a vivid account of how extreme he finds modern times. Especially when compared to his time in politics. We are living through an extraordinary period.

Wars and crises are affecting our daily lives. They’re creating huge challenges for us.

How can we assert ourselves in these times? As a country and as a democratic society. As a free and open Germany. And what do we need to do to ensure that Germany remains strong?

All too often, politics is about who is willing to work with whom. About who won and who lost. Instead of tackling structural challenges, many debates get bogged down in detail. By allowing that to happen, we are paralysing ourselves. We are falling short of our potential.

Germany is a great country. I want to do all I can to ensure that it remains a strong country. That we overcome polarisation. Regain confidence.

I want people to be happy to live here in Germany. I want them to contribute to the common good. I want us to live in peace. And I want Germany to take on responsibility in Europe and the world. We shouldn’t be indifferent to what goes on around us.

It is up to us to determine whether Germany will remain a strong country. No one else gets to decide. Not the White House, not the Great Hall of the People – and certainly not the Kremlin. We decide.

But doing this will pose challenges for each and every one of us. We will have to break habits, overcome gridlock. We will each have to start with ourselves. 2026 will require courage.

We all know that Germany needs fundamental reforms.

My sense is that people in our country are willing to make sacrifices and accept change. But they want things to be fair. They don’t want changes to be imposed arbitrarily. That should be the benchmark for our reforms.

The new reality: more rivalry and less stability

The pace of crises is accelerating. The global economy is changing.

The rivalry between the U.S. and China is a driving force behind these changes.

All this has tangible consequences: supply chains are becoming less reliable. Dependencies now pose risks. Tariffs, overcapacity and export restrictions are threatening jobs and prosperity across the world.

For us as an export-oriented economy, this is an epochal shift.

Sovereignty through strength

We have encountered situations that have exposed our weaknesses. Situations in which we were susceptible to blackmail. When it comes to energy, for example. Or during tariff negotiations with the U.S.

But we have also seen how strength can increase our scope for action. For example when we Europeans formed a united front and resolutely stood up to President Trump on Greenland.

I’m proud to live in this country. And I’m proud to be able to serve this country as Vice-Chancellor. It also means that I have to take responsibility. The responsibility to initiate changes when changes are necessary.

Not in order to turn Germany into a different country that we no longer recognise. That’s how radicals would approach things. I want Germany and Europe to be so strong that they do not need to bow down to anyone.

If we cling to the status quo, we are essentially choosing decline. Too often, we find excuses to do nothing, or to avoid making difficult changes. We can’t do that any more.

Economic sovereignty should be the focus of all changes. A new German growth model. Economic strength and good jobs. We need to become technological leaders in key areas. We need a competitive framework for investments. We need a modern industrial base, secure supply chains and functioning capital markets. At the same time, we need codetermination, a strong social partnership and a fair distribution of wealth.

These things go hand-in-hand. They can be a source of strength.

In many of these areas, we are falling short of our potential. For too long, we have rested on our successes and relied on demand from China.

This is true of policy-makers. But it is also true of some German companies, which have clung to old business models for too long instead of investing in new ones.

And it is true of the state, which has been overburdening itself with ever-more regulation. Politics, the state and the private sector – they are all equally guilty of failing to reduce economic dependencies and diversify supply chains in time.

A few years ago, the world was trying to catch up with us. Now we are lagging behind in many areas. That’s something we can’t afford.

Breaking with the solutions of the past

Years of crises are draining. Emotionally. But also economically. In recent years, the state has stepped in many times and spent hundreds of millions of euros on mitigating the effects of crises. On lessening their social and economic impact. It was the right thing to do. But it has also distorted our view of more fundamental problems.

That will no longer work in 2026. We can’t respond to every crisis and problem by spending even more money.

The state has a responsibility to protect people. It will continue to do this. No one in our country will be left to fend for themselves. Especially during crises. But if every risk and every conceivable problem has to be regulated by the state or solved using taxpayer money, then we will overextend ourselves.

We are about to draw up the budget for 2027 and the fiscal plans for the coming years. This will involve difficult and uncomfortable decisions.

We will reduce subsidies and take a clear-eyed look at both spending and revenue. But more importantly, we will tackle the structural changes that I believe Germany needs.

Budget consolidation is not the reason why we are modernising our country. It is quite simply a necessity. And it will form part of an equitable reform package.

Today, for the first time, I want to set out in more detail what reforms will have to be included in this package, in my opinion.

Modernising the labour market

I will start with the labour market, because, as a social democrat, it is especially close to my heart. And because it is an area where we will have to accept changes.

The demographic trends are clear.

Without immigration, employment levels on the German labour market would have already been declining for years.

Migration has played a significant role in stabilising German social security systems significantly in recent years – even if some people suggest the opposite. Studies by the Bertelsmann Foundation and others show how much we benefit economically from migration.

However, from my countless discussions with businesses, I also know how many obstacles there still are to people being able to work in Germany. We swiftly need to implement plans to recognise asylum seekers’ qualifications more quickly and grant them work permits within three months of their arrival. In addition, we will continue to make proactive efforts to attract qualified workers from across the world.

However, migration alone will not be enough to increase the volume of labour in Germany. We need further structural reforms.

When I talk about fundamental changes, I also mean that as a society, we will have to work more. And I want us to have a debate about the labour market. A reasoned one, not a populist one.

People who get up early every morning, work overtime and also look after children and relatives, volunteer at sports clubs and give back to their local community shouldn’t have to worry about additional burdens. I know how much most people in our country do every day. I know that many of them are already at their limit. But these are exactly the people whose lives we want to make easier – by freeing up potential elsewhere.

The problems on the labour market are clear. High part-time employment rates. Incentives for early retirement. Benefit systems that, in some cases, devalue extra work. Let me give you a few facts.

Germany has a part-time employment rate of nearly 40%, one of the highest in Europe. This applies to women in particular. In Germany, nearly one in two women work part-time. Across Europe as a whole, it’s only one in four.

And 60% of pensioners retire early because it is not worth their while to wait until they reach regular retirement age.

For a married couple with two children, it makes very little financial difference whether they earn a joint gross income of about €3000 per month or €4,500 per month. Because of so-called benefit withdrawals in housing allowance and additional child benefit, they end up with the same total disposable income.

There is unused potential everywhere.

In recent decades, we – and I mean my party, as well – have created a system in which it is less and less worthwhile for people to work more. I’m not saying this in a hysterical way, but I do think we need to be honest with ourselves.

Abolishing the former citizen’s benefit and introducing the new basic income support is the right thing to do. But it won’t be enough. We need to modernise the welfare state in more far-reaching ways.

I want us to create a system that rewards a willingness to work hard. In which it is worth people’s while to work more.

I firmly believe that this is something people in our country actually want. No one wants to be reliant on benefits. Many people who work part-time would like to work more. But they often hit a glass ceiling in the system that stops them from doing so. For all kinds of different reasons. That is incredibly frustrating.

Many solutions have been on the table for a long time. We need to break the gridlock and finally make decisions:

• I want to remove false tax incentives that create a part-time trap for women in particular. A recent Bertelsmann Foundation study shows that 35% of all non-working women see no financial advantage at all in working. The reason? A tax system from the last century known as the income-splitting system. I want to abolish the income-splitting system in its current form for future married couples. Reforms in this area could enable tens of thousands of full-time positions to be filled.
• This week, I heard that Nina Warken, our Minister of Health, has suggested abolishing free health-insurance cover for spouses. We will look at this proposal in detail.

Together, these two reforms could remove disincentives in the labour market and strengthen the independence and self-determination of women.

• We are expanding childcare infrastructure. All-day schools need to become the rule everywhere, not the exception.
• False incentives in the welfare system need to go. People should not be punished for working more. That is why we need to reform benefit withdrawal rates, as I mentioned earlier. Working more should always pay off. We need to make this change step by step, without any hard breaks, without creating new injustices.
• And of course we also need to make decisions about social security contributions. The high costs place burdens on employees and employers alike. I want to at least keep them constant. If we work more and implement structural reforms, then maybe they can be reduced again in the future. That needs to be our goal.

We are also making changes to the pension system. The new “active pension” will make it more attractive for retirees to keep working.

But we will also look at how we can create more incentives in the pension system to encourage people to defer their retirement.

For example, I personally think it’s unfair if some people start working in their late twenties and then stop in their early sixties to enjoy a long retirement because their jobs or assets allow them to do so. 

At the same time, others who started working at the age of 17 don’t know how they will make ends meet when they retire in their mid-sixties. And on top of that, these people tend to draw a pension for significantly shorter periods of time, statistically speaking.

I support putting a far greater focus on how long people have paid into the system, as has been proposed. Rather than rewarding early retirement, I think it makes much more sense to reward those who choose to extend their working lives.

We need to make it more attractive overall for people to work more during their working lives. Compared to other countries, the tax burden for wage earners is disproportionately high. I will be submitting a proposal for an income tax reform, with the goal of significantly easing the burden on 95% of employees by several hundred euros a year. Those who work hard and work more will finally have more money in their pockets.

Working more needs to be worthwhile. That is the goal of the reforms I am proposing. And yes, this tax relief needs to be financed. It’s clear to me that high earners and wealthy asset holders need to shoulder some of the burden.

For me, it’s not just about making work more attractive again. It is also important that companies create new jobs. And to achieve this, we need to break down rigid structures.

We are currently seeing many employers put the brakes on hiring new staff. On the one hand, this has to do with the uncertainty caused by years of crisis. But this reluctance is also a structural problem.

Companies that invest in innovation, in particular, often take on a high level of financial risk. Here I could envisage creating the option to extend fixed-term contracts, in the same way as with start-ups, in order to encourage companies to hire more people in uncertain times.

Provisions like this could be applied where collective agreements are in effect and the works council has given its approval. With this kind of measure we can create more flexibility, without undermining standards overall, and focus on promoting innovation and job creation.

Making Germany strong

In order to create more secure jobs, we need to get the economy back on track towards growth.

Lower costs and cheaper labour are not enough for Germany to compete globally. A new German growth model needs innovation, more productivity and technological leadership.

To this end, we have already made the first major decision: over the next 12 years, we will be investing €500 billion in the modernisation of our infrastructure and in climate action.

These are investments that will take our country forward: new rail networks and roads, sports grounds and housing, modern trains and buses, new bridges, better, more digitalised schools, an efficient digital infrastructure, and grids and energy storage for the energy transition.

We are investing many additional billions of euros in our security, which is a military necessity in the face of current threats. However, by also channelling these investments into research and development, we can generate enormous innovation potential.

But it is not just the money that is important. Efficiency and speed are also vital. If these are lacking, I will make adjustments to the special fund.

I am not satisfied with the current speed of planning, approval and execution, which is why I want stronger incentives. Specifically: those who invest funds quickly and sensibly will receive a bonus. But if projects are implemented too slowly or funds are not invested sensibly, there will be consequences – funding will be reduced. I have instructed my ministry to present such a system of incentives and disincentives for effective and swift investments as soon as possible.

Rebuilding our economic strength

Investments are boosting domestic demand. That’s a good thing. In addition, we also need to focus on emerging industries: AI, climate tech, life sciences.

Instead of continuing with an equal-distribution approach, we will consolidate funding programmes and focus on leading-edge clusters. This applies to both national and European programmes.

There are already locations in Germany where this approach is very successful – for example in Silicon Saxony near Dresden. Targeted public funding has resulted in Europe’s largest and most successful semiconductor cluster. Every third chip produced in Europe is made in Saxony. From research and development to suppliers and state-of-the-art production sites, everything is clustered in one area.

Something similar is happening in Munich. A highly innovative ecosystem of cutting-edge research, entrepreneurship and industry has emerged around the Technical University, with more than a hundred spin-offs a year and 21 unicorns. These start-ups are achieving valuations in the billions. I was recently in Munich, where I opened a new data centre that was planned and built in record time.

It’s good that we have locations like these in Germany. But a few good examples shouldn’t distort the bigger picture: We still have a lot of work ahead of us to turn this into a sustainable growth model with new market leaders.

Mobilising capital

A key problem remains: we don’t have enough growth capital.

I find it frustrating when companies that were founded in Germany – often with the help of taxpayers’ money – eventually relocate to the US because they can’t find the necessary growth capital here. As a result, we are losing a vast amount of potential. This isn’t fate. It is a mistake that we can rectify.

There is more than €3.6 trillion sitting in German savings accounts. Money that we can mobilise. Reforming the private pension system and introducing the Frühstartrente – a pension provision scheme for young people – are first steps we can take in this direction. I am also advocating for the introduction of a mandatory, funded occupational pension plan to which both employers and employees contribute.

Brussels is too slow. Which isn’t viable in the world in which we are currently living. That’s why I launched the E6 format with my French counterpart at the start of this year. I want the six biggest economies in the EU to get things moving. Since my first day at the Finance Ministry, I have been pushing to speed things up, so that we can simplify the European capital market and remove barriers to investment this year already. This will make us stronger and more independent.

Responsibility of companies

Politics must take the lead. But German companies also need to commit to Germany as a business location. Companies have a responsibility to invest here. The examples of Munich and Dresden, which I just mentioned, show that this is possible.

But when, for example, major car companies outsource battery production to China, or German companies only build new factories in eastern Europe, I find myself wondering: what has happened to the commitment to Germany?

I would like to see managers focus more on their local communities and employees than on profit margins. Because this behaviour is not only resulting in the loss of jobs and value creation, but also to the loss of technologies and expertise. Short-term returns should not be the only criteria for investments. That is short-sighted, especially in times of dramatic upheaval.

Location policy

I support radically reducing bureaucracy and having significantly less regulation, provided that the social partners work together to achieve consensus on issues by means of collective bargaining agreements and co-determination. The state can then step back in these areas.

But we mustn’t be naive. Other countries are playing less and less by the rules.

We can protect the competitiveness of our domestic companies using targeted tariffs. In strategic sectors where we want to safeguard European production, we should implement local content requirements and “buy European” rules, in order to secure good jobs and business locations in the EU.

In sectors where we have fallen behind technologically, we can also oblige foreign companies to enter into joint ventures with domestic firms as a prerequisite for being allowed to operate in the European market. These are tough steps. But they are necessary if we want to safeguard technologies and jobs in the EU.

Similarly, we can no longer be naive when it comes to foreign takeovers of domestic companies. We need to significantly enhance investment protection rules.

The Iran war shows how urgent it is that we increase our sovereignty and build up our own strengths. For the second time in four years, we are under severe threat from a geoeconomic shock – President Trump’s misguided policies are having a direct impact on people’s wallets in Germany. Also because certain companies are profiting from the crisis. I find that shabby and unpatriotic.

But we have to deal with that. In recent days, I’ve proposed three measures aimed at lowering prices.

First, we should skim off energy companies’ excess profits.

Second, I am calling for the introduction of binding price caps. Neighbouring countries such as Luxembourg are showing how this can be done.

Third, I want to return skimmed-off profits to citizens in a targeted way – for example, through relief on mobility costs or through a temporary reduction in energy tax.

The crisis also shows that we need a clear course for energy policy: more wind and solar power, expansion of electricity storage facilities, modernisation of our grids. One of my predecessors as finance minister once said: renewable energy is the energy of freedom – freedom from the stranglehold of foreign powers and geopolitical crises. Those who try to slow the energy transition are weakening Germany.

In the area of raw materials too, we have become too dependent on certain countries, and we have not sufficiently diversified our supply chains. Here, we need to quickly ensure that we have our own reliable access to raw materials and establish our own business models. I am in favour of the state making a stronger contribution as a strategic investor. We have already implemented this in the Germany Fund. However, we need to move faster, and we need greater ambition.

Therefore, I want to create the necessary conditions so that in future we can invest significantly more in raw materials, as well as in the energy transition. We are developing the Germany Fund into a resilience fund.

Greater trust, fewer controls

If we want to successfully navigate this phase of change, we need to have trust in individuals and businesses. Personal responsibility must be strengthened. The state doesn’t need to control everything. But anyone who breaks the law and enriches themselves at the expense of the common good should face drastic penalties. This is a significant change compared with our previous approach. We want to radically reduce reporting requirements and increase accountability, in every area.

Given that we now have a dedicated Ministry for State Modernisation — and I have the utmost respect for my colleague Karsten Wildberger — then all proposals should reflect this principle of less control and greater accountability. 

A just society

The state must use its power to ensure that reforms lead to greater equality. At times like these, social justice is not just a “nice to have”. It is an indispensable part of a strong country with a robust, crisis-proof society.

Just societies have greater resilience against the enemies of democracy, and they are more successful economically.

High inflation led to massive falls in real wages between 2021 and 2023. Only during the Weimar Republic and in the immediate aftermath of the Second World War were there greater declines.

Every crisis in which prices shoot up again leads to increased uncertainty and fears of losing what one has. This particularly affects those individuals who are often least represented in the public debate, namely low-income households. And 40% of households in Germany have no savings whatsoever.

Those individuals who get up early every day to go to work, but still can’t make ends meet at the end of the month, haven’t failed. It’s the system that no longer works.

And of course these people notice when companies enrich themselves during a crisis, as the oil companies are doing now. They notice when a global coffee chain shifts its tax obligations to a tax haven, while the local baker pays fair taxes here and helps keep the city centre alive. They notice the drastic inequalities in the distribution of wealth and opportunities in Germany. And they notice that hardly anyone can fulfil their dream of owning their own home any more, unless they inherit money.

If we want hard work to pay off, we have to create the necessary conditions.

There are two key social justice issues where we can make immediate changes, in my opinion.

First: everyday life must be affordable for everyone.

• We need fair wages, more collective bargaining agreements, and greater employee participation in company profits. A strong social partnership is crucial in this respect. When the German economy finally returns to growth, everyone will benefit.
• Energy costs must come down. The energy crises of recent years were the main drivers of inflation. Among other things, the systematic expansion of renewable energy will lower prices.
• Rental costs in most German cities have skyrocketed in recent years. Above all, we need more housing. That’s why I want the federal government to be able to build housing on a large scale in future. I therefore propose establishing a state-owned housing enterprise. Furthermore, building standards must be lowered so that construction becomes significantly cheaper – Hamburg has shown how this can be done, by the way. However, we also need strong tenancy laws and effective rent controls, especially in large cities.

Second: individuals with greater means are able to contribute more – and they should do so.

• Around €400 billion is inherited or gifted every year in Germany. In 2024, the German Länder collected €13 billion in inheritance tax. That comes out at 3.25%. It can no longer be justified that small inheritances are sometimes taxed even more heavily than very large ones. This is an imbalance. Inheritance tax needs to be reformed. The additional revenue should be specifically invested in education and equal opportunities – in other words, in the foundations of our future prosperity.
• Digital platforms generate billions in profits within the EU, but often fail to pay their fair share of taxes. That’s something else we can change. I support the introduction of a digital tax, with the revenue flowing specifically into areas such as media diversity and independent journalism.
• And finally: I despise tax crime. Those who enrich themselves at the expense of the general public must expect to face decisive measures by the state. A few weeks ago, I presented a package of far-reaching measures to combat organised crime. And I will soon present a comprehensive action plan to fight tax fraud, which will significantly step up the pace of action against this criminal behaviour. Those who enrich themselves at the expense of the general public will find German customs and the judiciary coming down on them like a ton of bricks.

Strength is freedom

The upheavals in the world are not going to decrease. The crises are not going away. We experience that every day. The answer to this uncertainty is our own strength. Our strength secures our freedom. Or to put it simply: strength is freedom.

We will all need to take action to achieve this. We have become too entrenched in many areas. Germany is a country with multiple blockages. Any proposal that tries to change the status quo leads to an outcry and gets lobbied out of existence. I’ll probably experience that now with the proposals in this speech. Every special interest group in Germany is extremely well organised.

But the question of what is best for the common good, the country, and its people as a whole, gets lost in the process.

We shouldn’t be afraid to have honest debates and make difficult decisions. The walls need to come down. In our debates and in our minds. That means being open to the arguments of others, and not being afraid to leave our rhetorical trenches. Above all, it’s about the willingness to put the common good before our own interests, especially at the current moment.

This depends on each and every one of us. I propose that we work together with unions, employers, and the academic community, in order to move forward in an alliance for jobs and innovation.

I believe in our country. I believe that the people who live here are rational and strong. We have everything we need to work through this difficult phase together and emerge on the other side. If we are ready to change and make decisions today that will pay off tomorrow, we will live in a strong country.

I hope I have made a start today. I’m looking forward to our further discussions.