2026 Economic Reforms Reshape German Business Landscape with Bureaucracy Cuts and Funding Program Changes

Starting January 1, 2026, German businesses face sweeping economic reforms introduced by the government aimed at stimulating growth while implementing cost adjustments across various sectors. A major highlight is the dramatic reduction in bureaucracy, projected to relieve the economy by 25%, equivalent to 16 billion euros, a move designed to modernize operations and ease administrative burdens for companies.

The reforms also encompass labor changes, including an increased minimum hourly wage raised to 13.90 euros in 2026, with a further planned increase to 14.60 euros in 2027. Retirees working beyond retirement age can benefit from a new tax exemption allowing them to earn up to 2,000 euros monthly tax-free, further incentivizing extended workforce participation.

However, these economic efforts come with increased costs in some areas, notably a rise in the CO2 tax on heating fuels that could add approximately 84 euros annually for typical gas heating users.

Parallel to these economic policy changes, funding programs for businesses, particularly in North Rhine-Westphalia, are also evolving. The NRW.BANK.Invest Zukunft program will tighten eligibility criteria starting February 2026. According to the Volksbank Sauerland, stricter rules will limit funding access for investments such as solar power, now only available when combined with other measures, and exclude support for electric cars without specific usages and combustion-engine machinery. Digitalization support will face new restrictions, especially regarding hardware acquisition.

Energy efficiency mandates for new or refurbished machinery will increase to a minimum of 25%, pushing companies towards greener technologies. Small and medium enterprises (SMEs) will continue to receive repayment grants, although interest rate subsidies will reduce from 2% to 1.5%. Given these changes, businesses are urged to advance their applications to secure funding under the current more favorable conditions.

Together, these reforms and funding adjustments mark a significant transition period aiming to foster economic sustainability, enhance productivity, and adapt to environmental standards. The government and financial institutions are preparing businesses for the new economic terrain, offering consultations to help navigate these changes.