BERLIN—When Christian Lindner stormed out of negotiations to form a new German government in Berlin this month, he pointed to what he said were 237 policy issues on which the four parties at the table had failed to agree after more than a month.

But the reason the exasperated leader of the small pro-business Free Democratic Party said he broke off coalition talks wasn’t in the details; it was “a lack of agreement on how to modernize” Germany.

Mr....