From the industry’s perspective, there is a major investment backlog in Germany. To resolve this, a move is being made – in the midst of difficult negotiations.
German industry is proposing special funds worth billions to sustainably strengthen Germany as a business location. The Federation of German Industries (BDI) believes that additional state financing of up to 400 billion euros over ten years is necessary.
This includes, for example, investments in transport routes, daycare centers and schools, housing construction and climate protection. It is about resolving the public investment backlog, BDI President Siegfried Russwurm told the German Press Agency. “We want to get the debate moving. We need a major effort from the federal government, states and municipalities across party lines.”
The BDI hopes that the proposals could provide an impetus for the “investment blockade” to be resolved by means of precise, earmarked and clearly defined special funds, possibly during this legislative period. There is great concern among companies that necessary investments will be delayed. “Politicians are not coming up with any solutions. But companies need planning security.”
Germany in weak growth
Only minimal growth is expected this year. Germany is expected to remain one of the slowest growing economies among the industrialized countries in 2024, according to a BDI paper. Business associations such as the BDI have long been calling for structural reforms.
This includes less bureaucracy, faster planning and approval procedures and better tax conditions for more investment. The aim: to improve Germany’s competitiveness as a business location in international comparison.
Billions needed
“The state is currently faced with the task of having to catch up on or encourage large-scale investments,” says a BDI paper. The greatest need for public investment to be caught up on is in infrastructure – in education, housing, municipal infrastructure and transport infrastructure.
Investments in infrastructure, buildings and housing should be increased by around 315 billion euros over the next decade, the paper says. Around half of the requirement of around 160 billion euros will be spent on transport infrastructure, especially for the renovation, digitization and expansion of rail, for the maintenance and expansion of roads and the expansion of public transport. The educational infrastructure requires investments of 100 billion euros.
The climate-friendly restructuring of the economy is to be driven forward with a further 41 billion euros in investment incentives by 2030. For example, the decarbonization of industry and a charging infrastructure for electric cars are mentioned. In addition, appropriate financing for the restructuring of the German electricity grid and other infrastructure for hydrogen and CO2 must be clarified, it is said. However, the federal government is still lacking directional decisions on this.
It goes on to say that up to 40 billion euros are needed to meet Germany’s and the EU’s resilience goals. This involves incentives to reduce dependence on other economic regions such as China, for example in microelectronics and battery technologies.
Special fund industry
Following the Federal Constitutional Court’s budget ruling, the BDI has looked intensively at what this means for financial planning, said Russwurm. The ruling from last November stated that money to deal with the Corona crisis should not have flowed into a climate fund; it was about reserve credit authorizations.
Russwurm said that there are a number of individual studies on the tasks for the location, but no overall view as yet. First of all, the federal government must enable growth through structural reforms, increase efficiency potential and show the courage to prioritize measures in order to consolidate the budget. “Only under this condition do we consider it justifiable to set up special funds with precisely defined content and timing.” These could have a total volume of 400 billion euros.
After the Russian war of aggression against Ukraine, a special debt-financed fund of 100 billion euros was created in the Basic Law for the Bundeswehr; a two-thirds majority in the Bundestag was required for this. These debts are exempt from the debt brake.
BDI does not want to touch debt brake
The BDI rejects the abolition or weakening of the debt brake anchored in the Basic Law as not being effective. The debt brake has significantly slowed the increase in the federal government’s debt level. “The debt brake forces those responsible for politics to set spending priorities and manage public finances efficiently.”
Concrete form of special funds
The BDI proposes that different special funds should be set up for different tasks. Each special fund should be created by a separate law, with precise regulations on the tasks and financing modalities. They should also be linked to repayment modalities.
Specifically, the BDI paper states that infrastructure and resilience needs could be set up through a special fund with a term of eight to twelve years – climate and transformation needs could be structured in two successive special funds, each with a term of two legislative periods until 2041. The needs in the medium term are difficult to estimate from today’s perspective.
The BDI believes that the best way to finance this would be to issue ten-year or longer federal bonds. The special funds would have to be provided with a repayment plan.
Government discusses budget
The move comes in the middle of the difficult negotiations between the federal government and the federal budget for 2025, given the need to cut costs. The FDP insists that the debt brake is adhered to and is also critical of new special funds. The cabinet is expected to approve the budget at the beginning of July.
Source: Stern
I have been working in the news industry for over 6 years, first as a reporter and now as an editor. I have covered politics extensively, and my work has appeared in major newspapers and online news outlets around the world. In addition to my writing, I also contribute regularly to 24 Hours World.
