Economists, business leaders warn of misuse one year after Germany adopted €500bn special fund
Clean Energy Wire
Economists and business leaders remain critical of how the government uses a 500 billion-euro special fund to finance infrastructure and climate neutrality projects, one year after Germany’s parliament adopted the largest debt package in the country’s history.
The economic research institute ifo said that 95 percent of the new debt earmarked for spending in 2025 has been misused and has not resulted in additional infrastructure investment. “We have found that policymakers are using the debt-financed money nearly entirely for other purposes, namely to plug gaps in the regular budget,” said ifo head Clemens Fuest. “This is a major problem. The additional debt should be used for additional investments that support long-term economic growth,” he added.
According to an ifo analysis, the government had about 24.3 billion euros in additional funds at its disposal in 2025 through the special fund for infrastructure and climate neutrality. However, actual investment only increased by 1.3 billion euros compared to 2024, suggesting that around 23 billion euros were not used for the intended purpose. “A misuse arises because the government has reduced the earmarked investments in the 2025 core budget compared to 2024,” the institute said. Investments that were planned within the core budget were shifted to the special fund, particularly in the transport sector, meaning they did not meet the key criterion of additionality. This could only be corrected by increasing investment levels in the core budget, ifo added.
The private industry-sponsored German Economic Institute (IW) published a report, saying that 86 percent of the special fund had been misused.
The business-affiliated CEO initiative Stiftung KlimaWirtschaft also said that the special fund’s money is being misused to plug gaps in the core budget. “To ensure that the special fund becomes a political success, close monitoring over its entire runtime is needed to guarantee that money is spent on additional investments,” said foundation head Sabine Nallinger. Funds should be consistently directed at expanding energy infrastructure, strengthening integrated transport systems and advancing electrification, Nallinger argued. “Clear criteria for public procurement of low-emissions basic resources and building materials would be a useful lever to ensure appropriate spending,” she added.
Nallinger also stressed that the government must go beyond one-off funding packages. “One year after securing billions of euros for infrastructure, we can already see that funding major investments in the future only through special funds will not be enough.” The country’s commission for reforming the national debt brake at the end of this month therefore must present proposals for long-term financial planning security, she added.
The coalition parties of chancellor Friedrich Merz’s government, the conservative CDU/CSU alliance and the Social Democrats (SPD), adopted the historic debt package with the help of the Green Party on 18 March 2025, ahead of agreeing on a coalition treaty. The package includes 300 billion euros earmarked for infrastructure investments by the federal government, 100 billion euros for the country’s Climate and Transformation Fund (CTF) and another 100 billion euros for infrastructure and climate projects financed directly by Germany’s states.
Observers had warned from the onset that the government could use the additional financial leeway to fund short-term projects by shifting spending from the core budget. They called for clear criteria that ensure additionality and enable effective monitoring of the fund’s impact.