Following the resolution of the 20th German Bundestag, the Bundesrat also approved the so-called debt package and amended the German Basic Constitutional Law (GG) with the necessary two-thirds majority to the effect that
- the debt brake applicable to the Federal Republic of Germany’s new borrowing pursuant to Article 109 (3) 115 of the GG is restricted to the extent that expenditure for defence, civil defence and civil protection, intelligence services, the protection of information technology systems and aid for states attacked in violation of international law above one percent of gross domestic product will no longer be counted towards the debt brake in future, and that
- With the introduction of the new Article 143h of the GG, a special fund for infrastructure and achieving climate neutrality by 2045 totalling EUR 500 billion with a term of 12 years will be set up. Of this EUR 500 billion, EUR 100 billion will be allocated to the Climate and Transformation Fund and EUR 100 billion will be available to the federal states.
These amendments to the Basic Constitutional Law laid the foundation for extensive investment and the relaxation of the debt brake. An enabling act of the Bundestag is required for implementation (Article 143h (1) sentence 1 GG). The enactment, specific form and implementation are the responsibility of the future federal government and the parliamentary groups supporting it as part of the budget preparation process.
Additionality criterion
The amendments to the Basic Constitutional Law stipulate that investments in infrastructure and measures to achieve climate neutrality must be “additional”. This is only the case if an appropriate investment quota is achieved in the federal budget in the respective financial year. According to the explanatory memorandum, this means that the planned investment share in the federal budget for a given year must exceed 10% of total expenditure excluding special funds and financial transactions. This is intended to ensure that the additional funds provided are channelled into new infrastructure projects and climate neutrality measures.
Utilisation of funds
It has not yet been decided in detail what the additional funds will be used for. As is well known, the coalition negotiations between the CDU/CSU and SPD are still ongoing. The results of the “exploratory talks” - the papers of all the working groups have been “leaked” to the public - already reveal some tendencies:
In the outcome paper of the exploratory talks, the term infrastructure is outlined as follows: “Infrastructure includes in particular civil defence and civil protection, transport infrastructure, hospital investments, energy infrastructure, education, care and science infrastructure, research and development as well as digitalisation.”
The results paper of Working Group 4 “Transport and Infrastructure, Construction and Housing” already contains some indications of the intended use of the special fund:
- “The renovation of the high-performance corridors will be financed from the special infrastructure fund and linked to its duration.”
- “We will organise adequate additional funding with planning security for the necessary investments to upgrade the infrastructure of waterways, locks, seaports and inland ports. A financing and realisation plan will be developed for this and financed from the special fund.”
- “The financial volume of urban development funding will be gradually doubled.”
- “Funds will be made available from the special fund for the road to clear the renovation backlog, especially for bridges and tunnels.”
- “Investment in the German rail network will be increased.”
- “We will gradually increase the GVFG funding significantly and raise the funding rate. We will also finance this from the special infrastructure fund and link it to its term.”
In the area of energy infrastructure, it remains to be seen which projects from the previous Climate and Transformation Fund will be prioritised by the future federal government. The Climate and Transformation Fund - the Federal Constitutional Court famously declared the reallocation of coronavirus funds to be unconstitutional - was intended to promote the energy-efficient refurbishment of buildings and the switch to climate-friendly heating systems, the decarbonisation of industry, the expansion of renewable energies, electromobility and charging infrastructure as well as the development of a hydrogen economy.
The amendment to the Basic Constitutional Law also allows the federal states to relax the debt brake so that they can also invest more in infrastructure and climate protection. EUR 100 billion is available for this purpose from the special fund, which is earmarked specifically for investments by the federal states in their infrastructure. According to the explanatory memorandum, these funds are to be used to co-finance heating and energy networks.
Specific requirements
Deutsche Bahn, among others, has announced a specific need for funds from the special fund for rail infrastructure. Extensive investments are also required in various other areas or the utilisation of funds from the special fund could provide relief elsewhere:
- Deutsche Bahn: Requirement of EUR 148 billion announced from the special fund; total investment requirement of EUR 290 billion by 2034.
- Transport infrastructure: High funding requirements for motorways and federal roads, bridges and tunnels
- Healthcare: Possibility of partially financing the hospital reform from the special fund instead of via statutory health insurance funds (SHI). If information from the coalition negotiations is confirmed, the federal government could in future take over half of the transformation fund for the hospital reform from the special fund. This could mean that financing from SHI funds would no longer be necessary.
- Education: investment in the digitalisation of schools as well as the renovation and new construction of school buildings. Refurbishment and additional construction of daycare centres.
How can companies participate in the special infrastructure fund?
Now that the possibility of taking out additional loans in the aforementioned amount has been created under the Basic Constitutional Law, the specific form depends on the future federal government and the parliamentary groups supporting it. They can decide to take out one or more loans with an establishment law. The Federal Finance Agency will then be commissioned to raise the money on the capital markets.
How this additional liquidity will be channelled is not specified in detail. Some of the funds will flow directly into government investments. Private companies can participate through public contracts and participation in funding programmes. Many funding programmes stipulate that private sector recipients of funds are bound by public procurement law.
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