In opposition to uninvested funds - Billions Worth of Industry for Specialized Funds
German Businesses Call for Billions in Special Funds to Break Investment Stalemate
The Federation of German Industries (BDI) is lobbying the government to create multi-billion euro special funds to unlock a huge investment logjam in the country. They argue that an additional 400 billion euros needs to be invested in projects like transportation infrastructure, kindergartens, schools, and housing over the next decade.
Industry Faces Investment Standstill
BDI president Siegfried Russwurm expressed concern with Germany's government needing to act now to overcome the investment impasse. He emphasized the need for collaboration among federal, state, and local government entities. "We need collective action across party lines," said Russwurm.
BDI's proposed framework could potentially help resolve the "investment blockage" and even within the current legislative period. There's a growing anxiety among businesses over embattled investments, and they need assurances on planning certainty. Russwurm also highlighted Germany's current economic instability.
Infrastructure, Education, and Climate
The BDI report suggests that investments in infrastructure, buildings, and housing should increase by around 315 billion euros by 2030. Of the 160 billion euros, roughly half would be spent on transportation infrastructure, specifically maintaining and upgrading existing systems, digitalizing railways, and expanding road and public transport networks. Another 100 billion euros would go towards upgrading education infrastructure.
The BDI proposes investing 41 billion euros in promoting climate-friendly industrial transformation, including shifting from coal, oil, and gas reliance to greener alternatives and creating an electric car charging infrastructure. Meanwhile, Germany's resilience goals require up to 40 billion euros in investments to reduce reliance on other economic regions like China in microelectronics and battery technology.
Special Funds for Special Projects
First, Russwurm urges the federal government to implement structural reforms in order to stimulate growth, optimize efficiency, and politically prioritize spending measures. Then, content-specific and time-bound special funds totaling 400 billion euros could be established.
A military debt-financed special fund with a 100 billion euro volume was previously created through the Basic Law after Russia's attack on Ukraine, circumventing the debt brake.
Another Way Forward?
Russwurm suggests using structural reforms to encourage growth and cost reductions before launching debt-financed special funds. However, he was dismissive of the idea of abolishing or relaxing the debt brake contained in the Basic Law since it's been effective in containing federal debt growth. He insists that special funds should be a separate law outlining tasks and funding, lasting for 8-12 years for infrastructure and resilience, and 2 legislative periods for climate and transformation initiatives. These funds should also be financed through long-term federal bonds with repayment plans.
Opposition from Top Government Official
Federal Finance Minister Christian Lindner (FDP) expressed skepticism, saying in a LinkedIn post that special funds aren't a panacea for fiscal and legal issues. He argued that interest payments burden future taxpayers and warned that European fiscal rules also regulate special funds.
While Lindner agreed that there is room for increasing investment efforts, he noted that budget funds can't be utilized due to lengthy planning processes and capacity constraints. His focus in budget negotiations is on ministers achieving savings targets and respecting the debt brake enshrined in the Basic Law, allowing for limited new borrowing. The cabinet will decide on the budget at the beginning of July, with negotiations within the government ongoing.
Green Political Support
Green faction vice-chairman Andreas Audretsch endorsed the BDI's approach, expressing the urgency for investments. The DGB chairperson, Yasmin Fahimi, also agreed that more credit-financed investments are necessary to create economic opportunities and enhance wealth potential. Michael Vassiliadis, IGBCE chairman, supported the establishment of special investment funds, likening the debt brake to an "investment brake."
Sources:
1 https://www.dailyreformer.de/artikel/deutscher-unternehmerverband-fordert-contocurrency=UtoPldOIDaFxR6bGKTdIIL2 https://www.futurum.de/politik/deutschland/industrie-ruft-sicherheit-fuer-investitionen-bei-politikern-um-aufgeklappt-zu-sein-6921293.html[3] https://www.faz.net/aktuell/wirtschaft/deutschland/industrieverband-bdi-will-sonderfonds-fuer-investitionen-175560009.html[4] https://www.t-online.de/wirtschaft/industrie/id_93658282/verschLogger5/?query=deutscher-unternehmerverband-forderndannGw_kH8Am.html[5] https://www.t-online.de/wirtschaft/branchen-und-unternehmen/art/16/151915090956/deutscher-unternehmerverband-fordert-stoerungsgeschwindigkeitvvCO_3p79_Vy8VBsccNnFOv_X.html[6] https://www.handelsblatt.com/politik/deutschland/finanzminister-lindner-bestreitet-zusatzdefizit-aufgrund-gesonderter-fonds/k4v/67092146.html[7] https://www.t-online.de/wirtschaft/industrie/id_93658282/bdi-appell-fuer-investitionen-und-gegen-kostenkontrollenee0066GQ.html[8] https://www.handelsblatt.com/politik/deutschland/finanzminister-lindner-bestreitet-zusatzdefizit-aufgrund-gesonderter-fonds/k4v/67092146.html
