Bureaucracy costs Germany €146b annually in lost output – Ifo

Excessive bureaucracy is costing Germany up to €146 billion ($153.53 billion) per year in lost economic output, according to a study conducted and released by Ifo Institute on Thursday.

The report highlights the impact of red tape, including slow approval processes and delays in digitalisation, which have hindered the country’s economic performance since 2018.

“The large scale of the costs caused by bureaucracy illustrates how urgently reforms are needed. The costs of doing nothing are huge when measured against the untapped growth potential from reducing bureaucracy,” said Oliver Falck, Director of the ifo Centre for Industrial Organisation and New Technologies.

Ifo said the calculations were based on a “Bureaucracy Index,” which provides a multidimensional reflection of the administrative burden in areas relevant to the economy and companies for a large number of countries. Based on this dataset, Ifo researchers identified countries that had implemented broad-based bureaucracy reforms and track their economic development over time. Upon the results, they simulate the impact of bureaucracy reforms that would have brought Germany to the low level of bureaucracy of Sweden, the leader in the Bureaucracy Index.

In response, Germany passed a law in September aimed at cutting red tape as part of a growth package.

However, business associations argue that the reforms are insufficient to improve competitiveness, with bureaucracy continuing to be a major concern for businesses. Manfred Goessl, CEO of the Chamber of Industry and Commerce for Munich, called for a comprehensive overhaul of administrative procedures.

Attribution: Reuters & Ifo Institute

Subediting: Y.Yasser