The federal government's self-imposed blockade on social reforms is putting the entire business location at risk. It is also rendering special funds and the latest investment offensive ineffective. Even though Chancellor Friedrich Merz praised the country's economic position at the investment summit and spoke of a „new beginning,“ if the welfare state continues to grow unchecked, absorbing more and more tax revenue, and employers and employees give up hope for the future in the face of rapidly rising contribution burdens, there will be no modernisation or restart of the German economy.

It is doubtful that the coalition will actually dare to undertake major reforms. This is because parts of the CSU and SPD seem to be happy only when there is something to distribute. The mothers' pension and the introduction of a pension cap are examples of this. Meanwhile, no progress is being made in consolidating the welfare state. Merz's recent announcement that he intends to address the issue in the autumn was rejected by the SPD, and any associated benefit cuts were ruled out from the outset.

As the SPD's applause for the DIW's proposal for a „boomer solidarity surcharge“ shows, there is more behind the blockade: It is an expression of ideological preconceptions. It is not the system that should be reformed or respond to change, but rather the burdens should simply be redistributed. In this case, wealthy pensioners should pay; in other areas, „the rich“, „the economy“ or – simply – „capital“ are often called upon. This means that Merz can forget about any reform options. That is probably why he is so keen on investing billions – special funds are intended to conceal incompetence.

The SPD seems to have long since resigned itself to its role as a minor party. What is more, its new policy throws the party far behind its Godesberg programme, and the workers who once made the party great are ultimately becoming its cash cow. All the „proposals“ for the redistribution and refinancing of social security funds boil down to the middle class having to cough up more and more money for the social security coffers. The number of rich people actually targeted is simply too small to solve the systemic problems – and on top of that, the burden increases the risk of them leaving Germany.

The SPD continues this unrealistic attitude in its housing policy. The urgency of creating more housing is regularly expressed, but when it comes to implementation, rent controls and expropriation are considered the appropriate instruments for this. They do not seem to care that this tends to deter landlords and builders, because they apparently only have the housing construction companies in mind to whom they once sold state-owned flats.

The decline of the SPD and its struggle for new majorities to the left of centre is also a structural turning point for the government, because as the (smaller) coalition partner, it can water down, slow down or stop any reform. Without fundamental social reforms, the Organisation for Economic Co-operation and Development (OECD) has calculated that government debt is rapidly heading towards 100% of GDP. The state already spends around 42% of all tax revenue on social welfare. Expenditure on citizen's income is skyrocketing. And the growing burden of contributions on employers and employees is creating mistrust, paralysing investment and growth – and causing tax revenues to plummet. This is the money that the SPD so desperately needs for its welfare policies.

It is doubtful that the Social Democrats will come to their senses. A „worker quota“ in their ranks could provide the necessary sense of reality. But politics is determined by officials who pursue their own laws and ideas. The problem in Germany is therefore not primarily poor infrastructure, as is often emphasised, but its structural inability to reform, which, due to a lack of majorities, ideological blindness and a lack of public support in an environment of activist aggression by small groups, is paralysing democracy and alienating more and more sections of the electorate from the established parties. Social reforms are currently the most urgent, but in the longer term, state reform is even more urgent.

Where should such state reform begin? A longer legislative period, for example. It would increase the courage to reform, because there would be no immediate threat of being voted out of office and the first effects of reform might already be noticeable when it is time to face the voters again. Or the introduction of a majority voting system. This would ensure greater voting weight in parliament and governments would not be condemned to the lowest common denominator in multi-coalitions. On top of that, responsibilities would be clear. The parties involved would not be able to invoke coalition constraints. And finally, federalism needs a firmware update because, in its current form, it does not strengthen competition but rather muddies political structures, delays decisions and leads to inefficient action.