Further Developing the “One In, One Out” Rule

With the introduction of the so-called “bureaucracy brake” in 2015, the federal government took important steps to limit regulatory burdens. It operates according to the “one in, one out” principle: For every new bureaucratic requirement, an equivalent one must be eliminated within the same ministry—usually within one year. However, this tool can, at best, maintain the status quo—a noticeable reduction in bureaucracy can only be achieved with a plan that focuses on net reduction targets.

Furthermore, there are currently key exceptions that significantly limit the potential for savings: For example, the 1:1 implementation of EU law is not covered by the bureaucracy brake, even though European regulations constitute a substantial part of the legal framework that companies must apply. The one-time compliance costs—such as those for setting up new IT systems—are also not taken into account. Anyone serious about reducing bureaucracy must eliminate loopholes that allow for “window dressing” and take a much more ambitious approach than in the past.

Above all, adherence to binding net reduction targets is essential. In its coalition agreement, the current federal government committed to a 25 percent reduction. A reduction of this magnitude cannot be achieved through "cosmetic tinkering"; it requires major structural reforms. These reforms must not only make processes more efficient, digital, and less bureaucratic but also lower substantive regulatory requirements. The guiding principles must be trust-based regulation and a culture of enablement—one that treats rule-compliant behavior as the norm rather than constantly regarding companies with suspicion. Without such a paradigm shift, substantial bureaucratic reduction will not succeed.

Consistently Reduce Bureaucracy—Enact Better Laws

However, the key lies not only in dismantling existing bureaucracy but also in creating better, less bureaucratic regulations. This requires smart legislation that considers practical implementation from the very outset. Mandatory, cross-departmental "practicality checks"—ideally complemented by "digital checks"—have proven effective as a tool and should be employed at all levels of government. Factoring in implementation from the start is an effective way to prevent bureaucracy.

Public administration is also a key focus: a high-performing, digitally enabled public administration with minimal red tape is a crucial lever for relieving the burden on the business sector. Unified digital points of contact, end-to-end electronic communication, and standardized data transmission offer enormous potential—an area where Germany lags behind its European peers.

Bureaucratic costs for companies in Germany are rising; according to the Bundesbank, they account for an average of around 7 percent of annual revenue. Smaller companies, in particular, face a disproportionate burden, as the effort required for compliance often does not scale with company size. Unnecessary paperwork results in an annual loss of up to 146 billion euros in economic output (ifo Institute).

In addition to major structural recommendations—such as the "EinfachStaat" (Simple State) agenda—there are over 250 concrete proposals for reducing this burden in Germany and Europe. Implementing these proposals would lead to tangible progress in cutting red tape, structurally strengthen Germany as a business location, and free up personnel and financial resources within companies for their core business activities.