Germany’s New Digital Ministry Will Make or Break The Government’s AI Ambitions

Germany has a new coalition government, and it wants to make the country an “AI nation.” That ambition and vision aren’t new: Germany was one of the first countries to adopt a national AI strategy in 2018, back when the technology was narrower, the geopolitics more stable, and the country’s economic outlook less strained. But while Germany was early on AI, it was not fast. A cautious investment culture, slow industry adoption, and a widespread view within established sectors that existing ways of doing business didn’t need to change have held it back from progress.

Now, with a new government in place, Germany is trying to catch up. The new chancellor has declared “Germany is back” and framed AI in the coalition agreement as both a growth engine and a tool to modernize the state. Delivering on that agenda will depend heavily on the new digital ministry the government has established: the Federal Ministry for Digital and Government Modernization (Bundesministerium für Digitales und Staatsmodernisierung, BMDS).

The BMDS consolidates key digital responsibilities that were previously scattered across six federal ministries. It now oversees digital strategy from the Chancellery; federal IT systems, digital services, and parts of cybersecurity from the Interior Ministry; broadband and network planning from the Transport Ministry; data policy and digital economy oversight from Economic Affairs; the government’s central IT provider (ITZBund) and federal cloud operations from Finance; and implementation of the EU AI Act from Justice.

The BMDS will touch many aspects of Germany’s digital landscape, but it matters most for the AI agenda in two ways.

First, by centralizing and coordinating efforts to modernize public sector operations. The coalition agreement pledged to embed AI across public services, from finance and family support to healthcare, defense, and even the judiciary. The previous government had already laid some groundwork to this end, including two AI platforms developed by the Federal Information Technology Center to help agencies with tasks like document processing and sentiment analysis. It also launched the AI Opportunity Market, a catalogue of systems hosted by the Federal Ministry of the Interior designed to promote more consistent adoption across the federal administration.

But the problem hasn’t been a lack of effort, it’s been a lack of alignment. Until now, no single institution had the mandate to comprehensively steer, synchronize, or enforce digital modernization across ministries. That problem is compounded by Germany’s federal structure, where its 16 states (Länder) control key services and operate with distinct IT systems and standards. The result is a patchwork where core functions like digital identity or health data platforms often fail to work across borders, which in turn limits the scalability of AI-powered services.

The BMDS offers a way out. It gives the federal government a single institution that can bring coherence to federal modernization, aligning AI strategy with open data strategies and infrastructure strategies instead of letting each run on separate tracks. And it simplifies how the Länder engage with the federal government. Rather than dealing with a patchwork of agencies, they now have one office to work with—an office that holds the mandate and the tools to support interoperable, scalable systems. That means less duplication, clearer accountability, and the kind of shared digital infrastructure AI can build and scale on.

Second, the BMDS will play a key role in whether Germany becomes a more enabling environment for the private sector. Despite the country’s world-class research, founding and scaling a tech company remains hard. Venture capital is scarce, and compliance eats up roughly 40 percent of European IT budgets due to frameworks like the EU AI Act and GDPR. Unsurprisingly, more than half of German companies in a recent BCG survey say legal hurdles are stalling their AI ambitions, and that burden hits not just adopters but also the developers Germany hopes to attract. Silicon Valley and, increasingly, the UK offer speed, capital, and clarity. If Germany wants to compete, it needs to do the same. Aleph Alpha’s retreat from the foundation model race, despite once being touted as Europe’s answer to OpenAI, is a wake-up call that the field is unforgiving for even well-funded startups. Germany has to create an environment where AI companies can grow.

Regulatory reform is where the BMDS could matter most, but its direction remains unclear. Appointing Karsten Wildberger—a private-sector executive with no party affiliation—as the inaugural minister suggests the government is serious about prioritizing innovation and growth. Yet the coalition agreement puts digital sovereignty at the heart of Germany’s AI agenda. These goals pull in different directions. A drive for self-sufficiency can easily harden into protectionism, slowing adoption, limiting global collaboration, and stifling the very innovation Germany needs to stay competitive. Even if the ministry strikes the right balance, it can only go so far; EU-level rules like the AI Act will continue to shape the boundaries of what’s possible.

The new government has a real shot at getting AI right this legislative period, but it’s no longer the race Germany entered in 2018. If the BMDS uses its mandate to cut compliance costs, unlock public data, and scale AI across levels of government, Germany can start to close the gap. If it defaults to symbolic sovereignty and defensive regulation, the gap will widen—and this time, it may not get another chance.