Germany plans to buy direct stakes in defence technology start‑ups through the state development bank KfW, introduce tax incentives and streamline digitalised processes for company formation. Katherina Reiche, economy minister, said the measures aim to make it easier to set up a business, accelerate growth and keep innovation in Germany. The government will also simplify the regulatory framework for dual‑use technologies.\n\nThe move signals a more dirigiste industrial policy, responding to long‑standing complaints that bureaucracy and a shortage of venture capital stifle innovation. While Germany is a top EU recipient of VC funding alongside France, it lags behind the UK and the US. Friedrich Merz’s coalition has struggled to revive the export‑oriented manufacturing base, with firms such as Volkswagen cutting jobs and closing plants amid cheaper Chinese competition.\n\nBerlin will spend more than €700bn on defence by 2030 and create a new vehicle for direct investments in start‑ups and scale‑ups that provide military‑grade products, including those under tight export controls.

The package also eases public procurement for start‑ups, speeds export‑licence reviews and accelerates digitisation of tax, social‑security and licensing data. Officials say the initiative seeks to maximise spillover effects for the whole economy and prevent sensitive technology outflows.