According to calculations by the Ifo Institute, the German government used 95 % of the new debt issued in 2025 for purposes other than additional infrastructure investment. This conclusion comes from a recent Ifo analysis of the Special Fund for Climate Neutrality and Infrastructure (SVIK).
“Policymakers have essentially funneled the debt‑financed funds into other areas-primarily to plug budget holes” said Ifo President Clemens Fuest. “That is a serious problem. The extra borrowing was intended to finance investments that support long‑term economic growth”.
The data show that the SVIK borrowing in 2025 rose by €24.3 billion. Yet the federal government’s actual investments were only €1.3 billion higher than in 2024. Consequently, €23 billion of the new debt did not result in additional investment.
The misallocation stems from a reduction in the core budget’s investment allocation in 2025 relative to 2024. “Certain items were shifted from the core budget into the debt‑financed SVIK” explained Emilie Höslinger, a researcher at the Ifo Center for Macroeconomics and Surveys. “In particular, subsidies in transportation were included in the SVIK, leading to lower core‑budget investments than in previous years. A large portion of the funds in the special account is therefore not truly additional”.
The institute rejects the argument that delayed legislative proceedings or real‑economy bottlenecks caused a lag in the disbursement of funds, as such delays would have prevented the debt from escalating so sharply. “The federal government can reduce the rate of misallocation in the future” said Max Lay, specialist at the Ifo Center for Financial Science. “To do so, it must first increase investment spending in the core budget; otherwise it still cannot be called additional investment”.