As Germanys politicians struggle to cobble together a new government, the problems of the countrys film industry arent at the top of their minds.

The conservative Christian Democrats (CDU), winners of last months federal elections, under Chancellor designate Friedrich Merz are more focused on sorting out Berlins public finances, and sealing a coalition deal with their left-of-center rivals the Social Democrats (SPD), to worry about Germanys production business. The local industry didnt get a single shout out in Thursdays parliamentary debate, which saw Merz, trying, ahead of forming a new government, to push through a change in Germanys constitution that will give him some financial wiggle room when he does take over. Its a worrying sign for German producers, who have had a rough year. Theater admissions fell 5.8 percent to 90.1 million in 2024, a much sharper drop than in most Western European countries, and domestic titles took just 20.6 percent of the market, a 3.7 percent drop. Television revenue is also sliding as commercial advertising dries up. A recent survey of the 375 companies in the German Production Alliance, an association of film and TV producers, found 80 percent of their members were struggling financially.

Producers got a lifeline late last year when the outgoing government approved a new version of the countrys film funding law, keeping in place state subsidies for local productions, without which German film production would grind to a halt. But in concessions to Merzs Conservatives, the version of the law that passed excised a clause that would have required all German film productions to meet specific diversity, gender equality, inclusion and anti-discrimination standards.

More pressing for the industry is a proposed new tax incentive that would make Germany more competitive with its European neighbors and draw in visiting productions from abroad. Rising production costs in the U.S. have sent studios and indie producers to Europe and Australasia in search of lower-cost locations with appealing tax breaks. Compared with incentive models in place in Spain, Italy, Austria and the Czech Republic, Germany is no longer competitive.

Weve spoken to the studios, they want to bring productions here but they need the tax incentive to do so, noted the head of one of Germanys biggest backlots. If things dont change soon, they will go elsewhere. The damage will be irreversible.

Another piece of legislation proposed but never brought to a vote in parliament under the last government is a law that would require streaming platforms operating in Germany to invest in local productions. Given the growing strength of Netflix and Amazon in Germany, the law could be a boon to German producers. However, the proposal is on hold until Germany forms a new government.

When exactly that will be is still an open question. The newly elected Bundestag, Germanys parliament members are scheduled to convene for their first session on March 25.

Since no one won a majority of seats in the election, Merzs Conservatives are in talks with the Social Democrats trying to hammer out an agreement to form a coalition government. They are trying to find common ground on contentious issues, including immigration policy (the conservatives want to crack down on illegal migration, tightening Germanys borders, the SPD are focused on better integration of migrants already in the country) and economic policy (the CDU wants to slash corporate tax and jobless benefits, the Social Democrats favor shoring up pensions and extending rent controls). Germanys far-right party, the AfD, which got some very public backing from Elon Musk during the campaign, saw a surge of support, winning 21 percent of the vote (Merzs CDU took 29 percent). But Merz and the rest of Germanys mainstream parties refuse to work with AfD, so they will not be part of the new German government.

What both the CDU and SPD agree on is the country needs more money, which is why parliament is debating a change to Germanys so-called debt brake, a constitutional amendment, first enacted in 2009, that restricts the amount Berlin can borrow to finance government programs, including tax breaks. To change the law, Merz requires a two-thirds majority in parliament, something he wont have when the new parliament takes over in two weeks. So before then, the CDU, with the help of the outgoing government the SPD and their coalition partners, the progressive Green Party is trying to change the German constitution to make it easier to take the foot off the debt brake. The CDU and SPD have proposed borrowing heavily to facilitate major new investments in the military to counter Trumps pull-back from Ukraine and in infrastructure. The Greens arent so sure, worried that the new cash will be used mainly to pay for tax breaks for corporations and the wealthy.

For German film and TV producers, the fact that Berlin wants to spend money is a good sign. They are talking tax breaks for this, tax breaks for that, so tax breaks for films look possible too, noted one veteran filmmaker. But for the beleaguered local industry, time is of the essence. Every week without a new tax incentive means another German project going abroad or a studio film shooting in Prague instead of Berlin.

The international competitiveness of Germany as a film location depends on a competitive tax incentive model, said Bjrn Bhning, CEO of the German Production Alliance in Berlin, on Feb. 13. The new federal government must continue the reforms it has begun. Otherwise, there is a risk of a rollback instead of progress.