Federal government plans investment offensive with 35 billion euros!

Federal government plans investment offensive with 35 billion euros!

The federal government is planning a comprehensive investment offensive of around 35 billion euros for the current year, which will focus on key areas such as climate protection, fast internet and the modernization of schools, railways, hospitals and energy networks. Finance Minister Lars Klingbeil (SPD) announced that a total of around 110 billion euros will be available for investments in 2025, which corresponds to an increase of around 47 percent. This high level of investment should be maintained not only in the current year, but also in the coming years.

This strategic orientation was made possible to a large extent by the joint agreements between the Union, the SPD and the Greens before the change of government. A central point of these agreements was the easing of the debt brake and the creation of a loan-financed special budget of 500 billion euros to be used to renovate the infrastructure. This capital will be made available gradually over a period of twelve years and is intended to stimulate investment activity by private companies.

Debt brake and defense spending

With 512 yes votes and 206 no votes, the Bundestag passed a far-reaching change to the Basic Law, which has had a significant impact on the financial constitution since the introduction of the debt brake in 2009. This includes a special fund worth billions for defense and infrastructure, which amounts to 500 billion euros. The Federal Council also approved this change with a two-thirds majority.

A key element of the change is the partial exemption from the debt brake for defense spending, which also includes security policy spending. Expenditures that exceed one percent of nominal gross domestic product (GDP) are exempt from the debt brake. This currently corresponds to around 43 billion euros, with the defense budget estimated at around 52 billion euros. From 2028, the NATO target of two percent is to be financed entirely from the core budget.

Criticism from the Greens

Although the plans for the investment offensive were received positively, there are concerns from the ranks of the Greens. They accuse Finance Minister Klingbeil and Chancellor Friedrich Merz (CDU) of misusing funds from the infrastructure pot for the core budget. According to the deputy Green Party leader Andreas Audretsch, up to 50 billion euros will be used for election promises.

However, the Ministry of Finance considers this criticism to be unfounded and emphasizes that all agreements made will be adhered to. Part of the newly created capital will also be used to reduce energy prices, although this is seen as problematic by the Greens as it may undermine the desired investment strategy.

Investments in the climate and transformation fund

A significant aspect of the financial realignment is the Climate and Transformation Fund (KTF), which is to receive a total of 50 billion euros from the new infrastructure budget by 2029. However, there are concerns that only half of this amount will be available for additional investment due to shortfalls in the current economic plan. Nevertheless, the Greens were able to push through some of their main criticisms, including the introduction of an additionality criterion and greater consideration of climate protection in the financial regulations.

In total, the federal states have 100 billion euros available from the special fund for investments. In order to regulate the countries' debt leeway, it was determined that this should increase to up to 0.35 percent of GDP. The Union and the SPD have also announced that a further reform of the debt brake should be completed in 2025. A commission of experts will develop proposals for modernizing the debt brake.

For more information read the reports from South Germans and The Parliament.