A shift in budgetary priorities has emerged under the current German government, moving infrastructure investments from the core federal budget into a debt-financed special fund. This reallocation is highlighted in a recent analysis released by the Ifo Institute.
Initially, it was projected that spending from this special fund would supplement investments outlined in the regular federal budget. However, that is not occurring. Instead, the government is transferring infrastructure and digitalization projects into the debt-financed fund, while simultaneously increasing social spending within the core budget.
Planned investments within the federal budget have been significantly reduced. While the previous coalition anticipated spending €53.4 billion on investments, the current draft allocates only €37.5 billion. A loan earmarked for the capital stock of the pension insurance system (-€12.36 billion) has been entirely eliminated. Investments in nationwide broadband expansion (-€2.93 billion) and infrastructure contributions for railway lines (-€2.36 billion) have also been removed from the core budget.
The largest increase in investment spending is a new €2.3 billion loan to the healthcare fund. The budget for the Federal Ministry of Labor and Social Affairs has risen by €11.05 billion compared to the previous coalition’s plan.
“Investments in infrastructure and digitalization projects have been moved in favor of increased social spending within the central budget” stated Ifo researcher Emilie Höslinger. “New loans to social insurance institutions provide short-term liquidity, but shift repayment burdens onto future generations and obscure the need for reform.
The overall budget for 2025 under the current administration totals €502.5 billion. The previous coalition had projected spending of €488.6 billion – approximately €13.9 billion less. While the former coalition projected borrowing of €51.3 billion within the federal budget, the current draft outlines a debt level of €81.8 billion to finance expenditures from the core budget.