Over half of Germany’s special fund expenditures not used for extra investments, say economists

More than half of the money Germany borrowed through its special fund for climate neutrality and infrastructure has not gone into additional investments, economic research institute ifo said in a monitoring report. The government borrowed 21.6 billion euros through the fund in the first half of 2026, yet federal investment rose by only 10.1 billion euros compared with levels before the fund was introduced, the economists found. 

In 2025, Germany's government agreed on a debt-financed special fund worth 500 billion euros for a wide range of infrastructure and climate neutrality projects over the next 12 years, with 100 billion euros earmarked for climate action. The special fund allows the coalition government of chancellor Friedrich Merz to bypass the country's debt brake – a constitutional limit on new borrowing – and make additional investments that are meant to improve Germany's competitiveness and put the country on track towards achieving climate neutrality by 2045.

A clause to ensure that all investments made under the fund are additional to existing planning was agreed as a guiding principle when the fund was set up by the coalition government parties in early 2025. For the first half of 2026, however, the special fund’s “misallocation rate” stood at 53 percent, ifo wrote, adding that the fund has replaced investments previously paid from the regular budget. Since the fund’s introduction, 75 percent of the money had gone to cover previously existing expenditure, according to the institute. 

The ifo noted that the numbers are economic indicators and do not assess legal compliance. “If the funds are, in fact, channelled into current expenditure rather than additional investment, future generations will inherit the debt without receiving the corresponding value in return,” researcher Emilie Höslinger said.

Since the special fund’s introduction, economists have broadly agreed that it has the potential to boost economic growth, but that it would only do so if the money flowed into new projects. A year after the launch, Germany had spent about one tenth of the 500 billion euros earmarked, according to figures released by the finance ministry.