“FRANKFURT. It is a familiar ritual: on the opening day of the Hannover Messe, the Federation of German Industries (BDI), the Mechanical Engineering Industry Association (VDMA), and the Electro and Digital Industry Association (ZVEI) outline the state of their sectors before the industrial showcase—led by Germany’s own—gets underway in the halls of the massive exhibition complex. There is rarely a shortage of warnings or complaints. This year, however, the admonitions were particularly urgent. While the week ahead will focus on companies, technology, future-oriented topics, and international networking, the leaders of German industry first took the opportunity to deliver a stern lecture to policymakers in Berlin and Brussels.
Speaking early Monday morning, Peter Leibinger—representing the BDI—delivered the closing remarks on the state of the nation’s industry, using the platform to issue an appeal to the Chancellor and the Vice Chancellor. Despite their differences, Friedrich Merz and Lars Klingbeil needed to tie their shared political fate to the modernization of the state and the strengthening of Germany as a business location. The reforms—demanded for years across countless venues and occasions—would necessitate a "poison pill list" of unpopular measures and trigger a "counter-movement." Yet, both men would have to see it through—and so would the country. If that failed, "then we will fail in a different way."
The country may well already be on that path. At any rate, Leibinger—a co-owner and long-time board member of the laser specialist and mechanical engineering heavyweight Trumpf—was unwilling to deny that deindustrialization is already underway in Germany, of all times at the kickoff of this premier industrial trade fair featuring some 3,000 exhibitors from around the globe.
After all, what else is one to call it when Germany has lost more than 15 percent of its industrial production over the past few years? Or when capacity utilization within companies has also remained below 80 percent for years—a situation that may sound harmless, but according to Leibinger, is actually "dramatic."
Of course, there are companies that are still doing excellently. However, many of them are now directing their investments toward international locations rather than their plants in Germany. This is a trend also observed by Bertram Kawlath, President of the VDMA and the country’s leading representative of the mechanical engineering sector. His association is hearing from an increasing number of member companies "that while they want to remain committed to Germany as a business location, they are making new investments in other countries with better conditions."
Like Leibinger after him—and ZVEI President Gunther Kegel before him—Kawlath could not avoid the tiresome topic of bureaucracy. He repeats so often just how much the flood of regulations and obligations—whether from Brussels or Berlin—is holding back his industry that it has begun to feel like a broken record even to him. He finds the situation frustrating and disheartening. In Hanover, he singled out the CO2 adjustment mechanism known by the acronym CBAM as a prime example; it presents many small and medium-sized industrial enterprises with insurmountable problems and undermines competitiveness.
According to a survey of VDMA member companies, 40 percent are considering relocating operations to countries outside the EU. More than a third anticipate job cuts as a result of CBAM. "The limits of endurance have been reached in the mechanical engineering sector, too," said Kawlath. "If policymakers in Brussels and Berlin don't change course now, the long-term damage to our industry will be irreversible."
Just as the unwieldy acronym CBAM was the focus for Kawlath in Hanover, for Kegel—who insists that "we need a bold move now, not patchwork solutions"—the issue was the so-called AI Act, the regulation of artificial intelligence originating in Brussels. He would like to see his industry exempted from these rules when it comes to industrial AI. Unlike in the consumer sector, he argues, there is no need to protect consumers when AI is used in machines and components or during their development. The two matters are not comparable—yet the situation serves as another example of the senseless harassment of entrepreneurial activity. Fortunately, the Chancellor is reportedly open to this argument—a point Friedrich Merz confirmed during his initial appearances in Hanover.
"I will advocate for easing European AI regulation and, if possible, exempting industrial AI from the European Union's current, overly restrictive regulatory straitjacket," Merz said on Sunday evening at the trade fair's opening. However, the chances of Merz being able to keep this promise are slim. While the European Parliament, EU member states, and the European Commission is currently discussing how the AI Act can be simplified—a proposal it put forward last autumn as part of its agenda to cut red tape.
A compromise is expected by the end of April. However, negotiators tell the *F.A.Z.* that the idea of categorically excluding industrial AI is no longer even on the table. While the aim is to ease the burden on the industry, the scope of the actual red-tape reduction being discussed is ultimately quite limited.
Driven by Christian Democrats and Liberals, the Parliament is pushing for more significant relief, but sources in Brussels say resistance from the Council of Ministers and the Commission is too strong. Specifically, the Parliament wants to ensure that AI is not automatically classified as "high-risk" simply because it is part of a machine or product that could pose a safety risk—regardless of whether the AI itself presents a danger. An example would be an AI system designed to recognize food—harmless in itself—that is connected to an oven.
Digital Affairs Minister Karsten Wildberger (CDU) reportedly initially supported the European Parliament's approach in principle, as did other CDU ministers. However, the German government subsequently dropped the idea out of consideration for the SPD in Berlin. FDP MEP Svenja Hahn says that making high-profile demands is not enough: "Merz now needs to build majorities in both Berlin and Brussels." Only then might it still be possible to achieve something for the industry.
Gunther Kegel heads the electrical and digital industry, a sector that—despite all odds—expects to see two percent growth this year; a positive signal following a nine percent decline in 2024. It is also encouraging that short-time work in his sector is declining again, the number of employees (872,000) is only slightly below the previous year's figure, and strong business in the European single market is more than offsetting losses in China and the USA. Added to this are hopes for increased revenue in the defense and artificial intelligence sectors.
Kegel shared this assessment with Kawlath, the president of the mechanical engineering association, whose sector expects growth of just one percent for the current year, 2026. Like Kegel and Leibinger, Kawlath—speaking from Hanover, Lower Saxony—advocated a policy of reaching out to policymakers, yet he issued a warning: "Germany as a business location is too expensive and too inflexible—this can no longer be compensated for by hard work and inventiveness." [1]
1. "Die Grenzen der Leidensfähigkeit sind erreicht": Die Industrieverbände schlagen zur Hannover Messe Alarm / Kippt Merz die KI-Regulierung für Maschinen? Frankfurter Allgemeine Zeitung; Frankfurt. 21 Apr 2026: 15.
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