Can Berlin’s New Government Save the German Film Industry?

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With Germany’s politicians grappling to form a fresh administration, issues concerning their nation’s film industry are not currently occupying their immediate thoughts.

In the aftermath of their victory in last month’s federal elections, the Christian Democratic Union (CDU), led by Chancellor-designate Friedrich Merz, prioritize resolving Berlin’s fiscal issues and negotiating a coalition agreement with their centrist opposition, the Social Democrats (SPD). At present, they seem less concerned about Germany’s manufacturing sector. In fact, during Thursday’s parliamentary debate, no mention was made of local industry. During this crucial time before forming a new government, Merz is attempting to amend Germany’s constitution, aiming to provide him with greater financial flexibility once he assumes office.

2024 was a challenging year for German entertainment producers, experiencing a significant decline. The number of theater admissions dropped by 5.8% to approximately 90.1 million, with a steeper decrease compared to many Western European nations. Domestic productions captured only 20.6% of the market, representing a 3.7% decrease. Additionally, television revenue is dwindling due to decreasing commercial advertising. A survey of the 375 members within the German Production Alliance, an organization for film and TV producers, indicated that about 80% of them are facing financial difficulties.

Filmmakers were given a reprieve towards the end of last year as the outgoing administration agreed on an updated film financing legislation, preserving government subsidies for domestic productions, without which German movie production might come to a standstill. However, in response to Merz’s Conservative party’s demands, the approved law omitted a provision that would have mandated all German films to adhere to certain diversity, gender equality, inclusivity, and anti-discrimination standards.

A more urgent concern for the industry involves a proposed tax break that could make Germany more attractive compared to its European counterparts, potentially luring foreign productions. Due to escalating production costs in the U.S., studios and independent producers have been venturing towards Europe and Australasia, drawn by lower-cost locations offering generous tax breaks. However, when considering incentive programs currently available in countries like Spain, Italy, Austria, and the Czech Republic, Germany is no longer as competitive.

The leader of a major German film studio stated that production companies are interested in working here, but they require tax incentives to make it happen. If current circumstances continue, they may choose to work elsewhere instead, causing permanent harm to our location.

A legislative plan, previously unvoted upon during the previous administration, aims to oblige streaming services active within Germany to fund domestic productions. With the escalating influence of Netflix and Amazon in Germany, this law could significantly benefit local producers. However, its progress is currently paused until a new German government takes office.

The specific date for the event remains undecided. However, it’s noteworthy that the newly elected members of Germany’s parliament, known as the Bundestag, are due to gather for their initial meeting on March 25th.

Due to no single party securing a majority in the election, Merz’s Conservatives are currently negotiating with the Social Democrats to potentially form a coalition government. They are seeking areas of agreement on disputed topics, such as immigration and economic policies. For instance, the Conservatives advocate for stricter control over illegal immigration and border security, while the Social Democrats emphasize better integration for immigrants already in Germany. Similarly, the Conservatives aim to reduce corporate tax and unemployment benefits, whereas the Social Democrats support strengthening pensions and extending rent controls. Germany’s far-right party, the AfD, which received notable endorsement from Elon Musk during the campaign, experienced a spike in popularity, capturing 21% of the vote (Merz’s CDU garnered 29%). However, mainstream parties in Germany, including Merz and others, have refused to collaborate with AfD, meaning they will not be involved in the upcoming German government.

The CDU and SPD are in agreement on the need for increased funds, leading to ongoing discussions in parliament about modifying Germany’s “debt brake,” a constitutional provision limiting Berlin’s borrowing capacity for government programs. Merz needs a two-thirds majority in parliament to amend this law, which will not be achieved when the new parliament convenes in two weeks. Consequently, before then, the CDU is working with the outgoing government (SPD and their Green Party partners) to make it simpler to loosen the debt brake’s constraints in the German constitution. The proposed change aims to facilitate substantial investments in military expansion, as a response to Trump’s withdrawal from Ukraine, and infrastructure development. However, the Greens express reservations, fearing that the additional funds will primarily benefit corporations and the wealthy through tax breaks.

For German movie and television creators, Berlin’s willingness to invest funds is a promising indication. “They are discussing tax exemptions here, tax exemptions there, so perhaps tax breaks for films as well,” observed one experienced director. However, for the struggling local sector, time is crucial. Each week without a fresh tax incentive could mean another German production going overseas or a film being produced in Prague rather than Berlin.

According to Björn Böhning, CEO of the German Production Alliance in Berlin, spoken on February 13, Germany’s ability to compete internationally as a filming location hinges upon an appealing tax incentive structure. He emphasized that the new federal government should carry on with the reforms they’ve initiated, or there could be a risk of regression rather than advancement in this area.

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2025-03-13 23:55