By Maria Martinez BERLIN, March 17 (Reuters) - Germany's special fund for infrastructure has largely failed to generate additional investment one year after its approval, the German Economic Institute
Germany's infrastructure fund fails to boost investment, institutes say
Analysis of Germany's Special Infrastructure Fund and Its Impact
By Maria Martinez and Rene Wagner
BERLIN, March 17 (Reuters) - Germany's special fund for infrastructure has largely failed to generate additional investment one year after its approval, according to calculations by two German institutes published on Tuesday.
The German Economic Institute (IW) said 86% of the money used in the past year was diverted from its intended purpose, while the Ifo Institute calculated that figure at 95%.
Reuters reported last October that Germany was using some of the financial firepower created by its fiscal reforms to prop up day-to-day spending rather than directing it all towards additional infrastructure to make the country fitter for the future. The coalition government "had the chance to clear the investment backlog. So far, they have not used it," IW researcher Tobias Hentze said.
The unprecedented 500-billion-euro ($576 billion) special fund was approved last March as a way to revive the German economy but it has taken time to take effect, while economists and business groups have warned that the fund alone cannot deliver sustainable growth.
Funds Used for a Budgetary Reshuffle
FUNDS USED FOR A BUDGETARY RESHUFFLE
Investment Spending Trends
According to the IW study, the German government's actual investment spending, including the fund and excluding financial transactions, totalled about 71 billion euros ($81.5 billion) in 2025, up just 2 billion euros from 2024 in nominal terms.
A spokesperson from the finance ministry said the allegation raised in the studies is "incorrect".
Investment spending in 2025 increased by around 17% compared with 2024 and totalled 87 billion euros, the spokesperson said.
Budgetary Reshuffle and Allocation Issues
IW said a further 12 billion euros from the fund were used for core budget spending rather than new investment, a shift the institute described as a budgetary reshuffle. It cited hospital "transformation costs" as one example, noting that such expenses were booked as investments even though they effectively covered operating costs. Berlin had planned to spend 19 billion euros from the fund in 2025, but only about three-quarters of that was actually disbursed, the IW study said.
The finance ministry told Reuters that the special fund only became operational in October 2025 as the previous government collapsed without passing a budget. "For that reason, the outflow of funds has so far remained below the planned investment amounts," the spokesperson said.
Legal Investment Requirements
Under German budget law, a spending rule requires 10% of the core budget to go to long‑term investment, on top of projects financed by the fund.
The spokesperson said the legally required investment ratio had been maintained in the budget plan for 2025, as well as in the 2026 budget and financial plan through 2029, without mentioning actual spending.
While the 2025 budget plan met that 10% threshold, actual investment reached only 8.7%, IW said.
"The requirement applies only to planned, not actual, expenditures," it said. "This means there is no effective control mechanism - a structural flaw."
Borrowing to Plug Budget Holes
BORROWING TO PLUG BUDGET HOLES Ifo calculated that borrowing under the special fund rose by 24.3 billion euros, but Berlin's investments increased by only 1.3 billion euros compared with 2024.
Debt Utilization and Economic Impact
"That's a gap of 23 billion euros in additional debt that was not used for additional investments," wrote Ifo economists, calling it a "major problem" as the funds were supposed to be used for investments to support long-term economic growth.
"We found that the government used the debt-financed funds almost entirely for other purposes, in other words, to plug budget holes," Ifo President Clemens Fuest said.
Additional Information
($1 = 0.8679 euros)
(Reporting by Rene Wagner, Maria Martinez and Christian Kraemer, writing by Miranda Murray, editing by Friederike Heine and Louise Heavens)
