Analysis from the Ifo Institute indicates a shift in infrastructure investment strategy by the current governing coalition. According to the institute’s recent report, planned infrastructure and digitalization projects are being transferred from the core federal budget into a debt-financed special fund.
This strategy represents a departure from the initial plan, which envisioned supplementary investments channeled through the special fund alongside regular federal budget allocations. Instead, there is a reallocation of resources, with increased social spending prioritized within the core budget.
The current draft budget reflects a decrease in planned investment figures. Originally, the former coalition government had allocated €53.4 billion for investment within the federal budget. The coalition’s current proposal reduces this figure to €37.5 billion. Notably, a loan earmarked for the capital stock of the pension insurance system (-€12.36 billion) has been entirely removed, alongside investments in nationwide broadband expansion (-€2.93 billion) and infrastructure contributions for railway lines (-€2.36 billion).
Conversely, newly allocated funding includes a €2.3 billion loan to the Health Fund, representing the most significant increase. Expenditures for the Federal Ministry of Labor and Social Affairs have also risen by €11.05 billion compared to the previous coalition’s projections.
According to Emilie Höslinger, Ifo Institute researcher, “Investments in infrastructure and digitalization projects have been shifted to the core budget in favor of social spending”. She added that while new loans provided to social insurance bodies offer short-term liquidity, they ultimately defer repayment burdens onto future generations and obscure the need for structural reforms.
The proposed budget for 2025 outlines total expenditures of €502.5 billion. This is a higher figure than the €488.6 billion previously estimated by the former coalition. While the previous government anticipated borrowing of €51.3 billion, the current proposal foresees debt of €81.8 billion to finance core federal budget outlays.
