German economy in crisis: How digital is Germany?

German economy in crisis: How digital is Germany?


Hardly any other device symbolizes the status of digitization in Germany as much as the fax machine. It still adorns offices, medical practices and signatures. According to a survey by the digital association Bitkom, more than 80 percent of all companies in Germany with more than 20 employees will still be using the device – in 2023.

The nebulous term digitization includes the 5G expansion as well as the electronic health prescription and is difficult to capture. The answer to the question of the status quo is correspondingly complex.

How far advanced is the Digitalization?

If you believe surveys and rankings, things are not looking particularly good for digitization in Germany. The UN E-Government Development Index measures the degree of digitization in administration among UN member states. Last year, the Federal Republic only achieved 22nd place. In the EU, this is measured via the DESI index, which stands for the Digital Economy and Society Index. And here, too, Germany only made it into midfield with 13th place last year. The self-proclaimed goal of the federal government’s digital strategy is to make it into the top 10 by 2025.

But whether she can do that is critically questioned. In the perception of Germans, trust in a coherent digital strategy is falling. In a survey by the management consultancy BCG, which takes place in 41 countries, dissatisfaction with digital government services was greater than in Germany in only two countries: Austria and Japan.

At the moment it looks as if “southern European countries are also making faster progress in the implementation of e-government solutions than the country of poets, thinkers and administrative bureaucrats,” wrote Klaus-Heiner Röhl from the German Economic Institute (IW) on the status of the Administrative Digitization.

How digital is public administration?

“I had the bizarre situation that I applied for a building permit in 2020, so I had to hand in a CD,” joked Green politician Michael Kellner recently. Many administrative offices still lack lean digital processes. The insufficient digitization in the administration is experienced at the latest by those who have an appointment at the Citizens’ Registration Office. Then applications and documents still have to be filled out on paper and some of them handed in on site.

According to the so-called Online Access Act (OZG), which was passed in 2017, the administration of the federal and local governments should actually have been fully digitized by 2022. However, of the 575 services listed in the law, only 105 were implemented on time. An OZG 2.0. was launched in May.

But even with the introduction of digital services, not everything always runs smoothly. The submission of the property tax return caused frustration among many citizens. This was also related to the ELSTER control program, with which the property owners were supposed to transmit their data. Not only the incomprehensibility with which the data was queried was criticized, but also the system itself. The portal was overloaded for days and only accessible to a limited extent.

How do the federal, state and local governments work together?

While some federal states are leading the way when it comes to digitization, others are lagging far behind. Hamburg is in the best position in Germany, with Sachsen-Anhalt at the lower end. The lack of exchange between municipalities and federal states is therefore also seen as a problem when introducing faster and more efficient administrative solutions.

The “one-for-all” principle was actually developed for this, in which the digital pioneers in the federal and local governments should provide services for the laggards. “But a lack of digital capacities in technical or personnel terms, wrong priorities or simple lack of interest in the municipalities continue to act as a stumbling block,” wrote Röhl from the IW.

In addition, developed solutions are often adapted to the specific conditions as well as the hardware and software of the respective municipality and cannot be adopted one-to-one by other municipalities, especially not in other federal states. The new concept of uniform solutions and standards “for everyone” was “missed in the thicket of federal and municipal self-determination”.

What role does lack of communication play?

However, there is not only a lack of the introduction of digital processes, but also of the knowledge that such processes exist at all. The “Bund-ID” has existed since 2019 – a digital user account with which, for example, applications can be made online. So far, however, hardly anyone in Germany has known or used it. The number of users has recently only skyrocketed because students needed a federal ID for the energy flat rate. At the beginning of the year, the number of users was just under 250,000 and then jumped to over two million.

Similar to the Bund-ID, there are already electronic prescriptions, but they are hardly ever used. Now the e-prescription is to be introduced as mandatory across the board at the beginning of 2024, and by the beginning of 2025 there should also be e-patient files for everyone.

What about the digital infrastructure?

In order to gain access to the Internet, a comprehensive digital infrastructure is required, which consists of the cable-based fixed network and the mobile network. While there are good networks in cities and metropolitan areas, there is still a lack of good network coverage or fast internet in rural areas. Markus Kreher from the auditing company KPMG said that from a purely economic point of view, investments in rural areas are often not worthwhile. “But the state also has obligations in the context of public services, and digital supply must also be included.” To this end, planning projects should become leaner and approval procedures should lead to the goal more easily and quickly.

The expansion of the fifth-generation mobile communications standard – 5G – is progressing. Telefónica (O2) announced at the end of July that its own 5G network reaches around 90 percent of all German households. Telekom had recently reached 95 percent for 5G coverage and Vodafone 81 percent.

In order to advance digitization, however, it also involves a lot of money. Opposite of daily News the managing director of the digital association Bitkom, Bernhard Rohleder, emphasizes how important investments are for digitization. “Companies in Germany have to pick up the pace. In the USA, two trillion euros will be invested in digitization in two years’ time. In Germany we’re at 200 billion euros a year.”

What are other countries doing better?

In other countries, Germany is way ahead of the curve when it comes to digitization. Digital model countries include Estonia and Denmark. The digital identity card has been mandatory in Estonia for more than 20 years. Since 2005 it has even been possible to vote electronically in the country. This year, for the first time, more than half of all votes were cast using e-voting – a new high.

The Danes lead various rankings on the subject of digitization. Electronic patient records and digital IDs have been around for a long time. The state relies on the obligation: Many applications can only be created online. If you want to be exempted from this, you can apply for this.

Is there a shortage of skilled workers?

In order to advance digitization in Germany, well-trained specialists are essential. According to an IW study published in December last year, it is not just computer scientists and highly qualified people who are important for the digital conversion. Well-trained specialists are also essential in areas such as electronics in order to digitize Germany. However, according to the researchers at the IW, the shortage of skilled workers will grow enormously in the coming years up to 2026, especially in training occupations such as “Electronics technician for industrial engineering”. An estimated 8,000 skilled workers could be missing in this area by 2026.

And that, although in the years from 2018 to 2021 there was an “employment increase” in digitization occupations in particular, which was “significantly higher than the average for all occupations”, it is said. A trend that is likely to continue: by 2026, the number of employees in digitization professions could “increase by a further 11.2 percent to almost three million”. According to the researchers at the IW, however, this will not be enough overall to remedy the shortage of skilled workers in the digitization professions. “In 2026, there could be a shortage of almost 106,000 qualified workers in digitization jobs,” was their final verdict.

What political measures are taken?

In May, the second online access law, the OZG 2.0., was launched for digital administration. “By 2024 at the latest, it will be possible to apply for a vehicle or driver’s license, re-registration, marriage, a building permit and parental allowance digitally throughout Germany,” announced Interior Minister Nancy Faeser (SPD) in May. The law also met with criticism. Bitkom President Achim Berg complained: “The present draft law is not an OZG 2.0, but at most an OZG 1.1.”

The coalition agreement actually provides for a “comprehensive digital awakening”. However, the implementation lacks a certain coherence for the digital: By and large, the Federal Ministry for Digitization and Transport under Volker Wissing (FDP) is responsible for the digital strategy. But since, according to the federal government, this is a cross-cutting issue, the many tasks involved in digitization are distributed among various departments. For the topic of digital identities alone, five ministries are involved under the leadership of the Ministry of the Interior.

The budget for the digitization of the authorities, which caused a controversy at the beginning of the month, also speaks for a lack of coherence. Instead of the previous 377 million euros, the draft budget for 2024 only provided 3.3 million euros, as the “FAZ” reported. After protests from business, the Ministry of the Interior finally increased the funding by around 300 million euros.

With information from Lilli-Marie Hiltscher, ARD finance department


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