German government looks to AI and cutting red tape to revive economy

German Chancellor Friedrich Merz vowed to make Europe's biggest economy competitive again after the cabinet approved measures aimed at reducing bureaucracy and making it quicker and easier to do business through AI and digitisation.

"We are of course aware of the problems facing the German economy at the moment, but we aspire to return to the top," Merz said at a press conference at the Borsig Palace on Berlin's outskirts. 

Under Merz, Germany has shifted away from decades of fiscal discipline to pass a half-trillion-euro infrastructure and defence package aimed at jump-starting growth in the only G7 economy that has contracted for the last two years.

A study by the Ifo economic institute in November showed that excessive bureaucracy costs Germany nearly 150 billion euros (A$266 billion) a year in lost economic output.

The "modernisation agenda" defined 23 key projects that could improve citizens' everyday lives, including a centralised online vehicle registration service, a platform enabling companies to be formed within 24 hours and AI-based tools to help with court and visa verification processes.

In addition, the procedure for recognising foreign qualifications in medical professions should be sped up, and a digital agency will be created to make it easier for skilled workers to immigrate and integrate into the labour market.

"We are now going to the German Bundestag with some very concrete legislative proposals," said Merz. 

Cutting bureaucratic requirements by 25 percent in the coming years could bring savings of 16 billion euros, according to the agenda. 

Merz added that the cabinet intends to initiate several more legislative proposals this month to get them through the upper house of parliament before its last session in December.

The cabinet also approved a plan to build a nuclear fusion reactor in Germany, allocating 1.7 billion euros in funding for the project.  

In addition, a draft law to accelerate the development of hydrogen infrastructure by reducing bureaucracy was given the green light.