Information Technology Summit

Chancellor Merkel said the IT industry, which contributes 6.2 percent of Germany's Gross Domestic Product, needed to link up with the country's traditional industrial heavyweights such as the automotive and chemical sectors.

"Germany's traditional economic pillars need the IT industry in order to maintain their strength," Merkel said to the more than 200 top politicians, managers and researchers gathered in Potsdam near Berlin on Monday. "Without the IT sector, the classical strenghts of the federal republic won't last but will fade."

The summit, the first of its kind, was attended by the leaders of some of Germany's top high-tech companies including Deutsche Telekom, Europe's largest telecoms group by sales, and software giant SAP. Germany's strong tradition of technological innovation has been flagging in recent years due to high labor costs that have deterred investment and declining university standards that have caused a brain drain of top scientists.

Summit participants agreed to a 12-point "Potsdam Initiative" to foster the IT industry, which included provisions for the information and telecommunications sector to receive 1.2 billion euros ($1.6 billion) in government grants over the next three years. The funds come from the government's High-Tech Strategy announced earlier this year.

SAP CEO Henning Kagermann minced no words in his speech. "The German information technology is not a global leader and, even worse, is falling behind," he said.

The government initiative also calls for "appropriate" immigration rules that would help attract foreign researchers and give grants to keep high-potential students in the country.

In addition, small to mid-sized firms, which make up the backbone of Germany's economy, are to have better access to software that meet their needs.

Money needs to be spent carefully

Merkel also said that in the future, industry grants had to be carefully targeted, and not just "poured out of a watering can." The chancellor's action plan foresees Germany investing in key technological areas to promote cooperation between universities and technology companies.

The IT sector in Germany has a annual turnover of around 146 million euros, and employs nearly 800,000 people in Germany.

Economics minister Michael Glos emphasized the importance of the branch and said innovation was key to winning more investment.

"We have to invest more than ever before in our best minds," Glos said. "In order to become world-class, we have to win top talent for Germany."

Germany need more IT workers

Industry representatives used the opportunity to draw attention to the lack of skilled IT workers. They called for changes to immigration laws to fill the labor shortage.

They also said university studies needs to be made more industry specific and that students needed more encouragement to study IT.

SAP co-founder Hasso Plattner said too few young people were interested in working in IT. "I hope, the summit sends a signal that we won't retreat from the IT field without a fight."

At the Potsdam summit, Interior Minister Wolfgang Schäuble said that the federal, state and council authorities need to construct a single internet presence, and demonstrate the security of personal data. He also called for an electronic signature and the electronic identification.

In a recent EU study of government internet services offered by European countries, Germany was ranked 13th of 15. Only Greece and Luxembourg offered less services.