• Long-term potential growth of more than one per cent per year is achievable – lately it has been little more than zero
• Germany is to become one of the world’s leading technological and innovation hubs again by 2035
• For a new productivity growth dynamic – as AI application leader in manufacturing and SMEs
• KfW CEO Stefan Wintels: “New growth formula – bring SMEs, start-ups and capital together more effectively”

Despite years of stagnation, Germany has realistic potential for significantly more growth in the long term. The KfW Research study entitled “A hub for the future. How Germany will find new strength and growth” (Standort Zukunft. Wie Deutschland zu neuer Stärke und Wachstum findet) has found that potential annual growth of more than one per cent is achievable in the coming decade. Since 2015, this growth has fallen from just under two per cent to little more than zero. A sustained upswing is contingent on Germany strengthening the three key forces of growth – labour, capital and productivity – in a targeted manner.

The most important lever for achieving this will be to generate new momentum in productivity growth, emphasises a twelve-point paper derived from the study. Stefan Wintels, Chief Executive Officer of KfW Group, and Dr Dirk Schumacher, KfW’s Chief Economist, presented the paper and study in Frankfurt today. Artificial intelligence (AI) and digitalisation must be adopted by businesses more quickly and more broadly, digital innovation projects must become easier to finance, and new technologies must be scaled faster in SMEs and large industrial enterprises.

Stefan Wintels: Germany does not need an economic miracle but a convincing strategy for sustained growth.” He added that the current upswing was a good opportunity to do everything possible to entrench growth in the long term. “In the short term, we do not need to become a world leader in the development of AI models, but the number one country that uses AI in industry and SMEs. Productivity emerges primarily from everyday application. And when we also bring SMEs, start-ups and capital together more effectively, a new growth formula for Germany will emerge.

The twelve-point paper condenses this analysis and indicates key levers for moving Germany out of its structural growth weakness to a positive growth dynamic. In this, growth will result from the interplay of multiple dimensions: improved conditions for private and public investment, a competitive energy supply, a secure supply of skills and labour, an innovation-friendly environment, and greater integration of the German economy into the European and global economy.

Our location has a future because Germany has strengths for which many countries envy us, said Wintels. He mentioned a robust economic foundation, efficient SMEs, a qualified workforce, strong research institutions and a remarkable ability to adapt. Reforming the German innovation system and more digitalisation on a broad scale are key levers. We need to boost the stalled productivity growth. Our ambition must ultimately be to make Germany one of the world’s leading technology and innovation hubs again by 2035.

KfW’s Chief Economist Dirk Schumacher called for smart and more effective regulations – and for less red tape: Every new regulation should be examined for whether it achieves its objective, how high its compliance costs are, and whether it needlessly stifles business initiative. A lean administration is not a secondary aspect but a hard locational factor. Targeted reform efforts will lead to a sustained revival of growth and a recovery of technological competitiveness.

That also means tapping more into the capital market. Equity, venture and growth capital must become more readily available for innovation, scaling and productive investment. One operational bridge for mobilising such capital is, which was launched at the end of 2025 and is being implemented by KfW on behalf of the Federal Government. It addresses investment obstacles, enables risk assumption and mobilises private capital. In the coming years, public funds and guarantees of around EUR 30 billion are to enable some EUR 130 billion in investment to flow into the German economy through the Germany Fund.

The twelve-point paper and the current study can be downloaded from A hub for the future. How Germany will find new strength and growth (German page)