A new study from the Institute for Economic Research (IW), a research body closely aligned with employers, is raising concerns about the German federal government’s management of a newly established infrastructure fund. The study, reported by Handelsblatt, suggests the government risks effectively using the fund as a mechanism for shifting investments rather than significantly increasing infrastructure spending.
The IW’s research highlights a potential imbalance, warning that regional and local authorities could see their own investment budgets depleted as they redirect funds into the dedicated infrastructure fund.
A core issue identified by the study is the ten percent investment quota currently mandated for the federal government’s core budget. The IW argues this target is insufficiently ambitious. The calculation excludes credit-financed defense spending, which would otherwise bring the rate below ten percent. Furthermore, recent years have consistently seen investment quotas exceeding this level. The report states that a minimum quota of eleven percent would necessitate an additional five billion euros in annual federal investment.
According to the IW’s findings, to allow access to the infrastructure fund, the federal government would need to invest approximately 60 billion euros more in its core budget between 2025 and 2029, particularly under stricter guidelines for credit-financed defense expenditures and a higher investment quota.
The government plans to reduce core budget investment by 34 billion euros over the same period, citing specific financial transactions, such as increased capital allocation to the national railway system, as contributing factors. However, the IW argues these special circumstances do not fully justify the reduction. Moreover, contributions from a separate Climate and Transformation Fund, also a dedicated financial instrument, are not solely directed toward investment, thereby diminishing the potential growth capacity of the infrastructure fund. IW researcher Tobias Hentze emphasized that this practice limits the fund’s overall impact.