3. Germany Lacks Political Will to Finance Needed Public-Investment Boost

Abstract

After more than a decade of weak public investment, Germany has accumulated a substantial public-investment backlog. The requirements for additional public investment in the next decade are likely in the range of €600 to 800bn, which would imply a further commitment of 1.6 to 2.1% of GDP each year. The current fiscal situation is relatively favourable on the financing side but will tighten already from 2024, as debt-brake constraints are applied, reserves have been used up, interest rates have risen and, in the medium term, debt servicing from additional borrowing during the period in which national and EU fiscal rules were suspended falls due. Despite rhetorical commitments to higher public investment, which voters support, there is a lack of political will to agree on the tax increases or additional borrowing needed for a substantial medium-term investment boost. Also, RRF spending, which makes only a minor contribution in Germany, will expire in 2026.