Only new investments through Germany’s €500 bln fund will boost growth – economists

Germany’s new 500 billion euro special fund for infrastructure and climate neutrality should be used for additional investments, economists and industry experts said. They agreed the billions have the potential to boost economic growth, but that this would only be achieved if the funds flow into new projects, such as building modernisations or railway upgrades, Tagesspiegel Background reported. Parliament is currently debating the fund's introduction. 

Taking part in a hearing in the German parliament on Monday (25 August), experts echoed concerns made recently by Germany's national Court of Auditors, which had warned that payments from the fund must be limited to “real investments” and not include running costs such as wages. 

According to Johannes Franke, a lawyer from the Günther law firm, it is necessary to exclude investments from the special fund that had already been previously approved. These would, for example, include the equipping of German infrastructure and rolling stock with the EU’s European Rail Traffic Management System (ERTMS) — an item that was shifted from the transport ministry budget to the special fund. Another would be the financing of German liquefied natural gas terminals, previously included in the country’s core budget.

The lack of “additionality criterion” in the country’s separate Climate and Transformation Fund (KTF), which will receive 100 billion euros out of the special fund, was likewise a point of contention. "The fact that the states and the KTF are not subject to the additionality criterion is a massive problem in this draft law," said Christian Ochsner, a scientific staff member of the German Council of Economic Experts.

Germany’s new coalition government under chancellor Friedrich Merz set up the debt-financed special fund worth 500 billion euros “for additional investments in infrastructure and for additional investments to achieve climate neutrality by 2045.” Whether parts of the 400 billion euros which are not transferred into the KTF are also used for climate-related spending is up to the government and parliament to decide.