German Finance Chief Seeks Joint Venture Rule for Foreign Firms

Main Measures

• Mandate that foreign companies must form a joint venture with a local German/European company in order to operate

• Impose stricter scrutiny on cross‑border mergers and acquisitions

• Introduce targeted tariffs, a digital tax, and a windfall tax on energy companies

• Implement a comprehensive reform of the income tax system

Germany's Finance Minister Lars Klingbeil has proposed a significant shift in the country's approach to foreign investment, seeking to mandate that foreign companies form joint ventures with local firms to operate within Europe. The proposal, which also includes tighter scrutiny over cross‑border takeovers, was outlined in a finance ministry document for a keynote speech delivered on Wednesday.

Klingbeil, who also serves as Vice Chancellor, aims to shield German businesses in sectors where they "have fallen behind technologically". The concept of requiring foreign companies to partner with local firms echoes a method already employed in China, suggesting a move toward more protectionist measures to safeguard domestic industries.

The remarks by Klingbeil, who leads the Social Democrats (SPD), come at a critical juncture for Germany's coalition government. His proposals are set to kick off negotiations with Chancellor Friedrich Merz's conservatives as the alliance enters a decisive phase focused on reviving the struggling economy and closing a €60 billion ($70 billion) budget gap.

In addition to the joint venture initiative, Klingbeil has called for a broader economic overhaul. His proposed measures include a comprehensive reform of the income tax system, the introduction of "binding price caps" and a windfall tax on energy companies—with the revenue returned to consumers—the deployment of "targeted tariffs" to protect German industrial competitiveness, the introduction of a digital tax, and a streamlining of subsidy programmes.

"We must not be naive," Klingbeil said, emphasising the need for greater vigilance in protecting German economic interests. While the joint venture proposal would still require the backing of Merz's conservative bloc, it signals a potentially dramatic shift in Germany's traditionally open stance toward foreign direct investment.