Copyright

Katja Rietzler, Andrew Watt, and Ekaterina Juergens

Published On

2023-12-12

Page Range

pp. 51–68

Language

  • English

Print Length

18 pages

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

  • Katja Rietzler (author)
  • Andrew Watt (author)
  • Ekaterina Juergens (author)
Chapter of: Financing Investment in Times of High Public Debt: 2023 European Public Investment Outlook(pp. 51–68)
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.

Contributors

Katja Rietzler

(author)
Head of the Unit of Fiscal Policy at the Macroeconomic Policy Institute (IMK) at Hans-Böckler Foundation

Katja Rietzler is Head of the Unit of Fiscal Policy at the Macroeconomic Policy Institute (IMK), part of the Hans-Böckler Foundation. She holds a PhD from the Freie Universität, Berlin. Her research focuses, among other topics, on fiscal issues of the municipalities, the German tax system, public-investment needs, and fiscal rules. In addition, she is responsible for the IMK’s macroeconometric model. She regularly participates in parliamentary hearings as an expert on issues such as tax legislation, annual budgets, and the debt brake.

Andrew Watt

(author)
Head of the Unit of European Economic Policy at the Macroeconomic Policy Institute (IMK) at Hans-Böckler Foundation

Andrew Watt is Head of the Unit of European Economic Policy at the Macroeconomic Policy Institute (IMK), part of the Hans-Böckler Foundation. He holds a PhD from the University of Hamburg. His main research fields are European economic and employment policy and comparative political economy, with a particular interest in the interaction between wage-setting and macroeconomic policy. Recent work has focused on reform of the economic governance of the euro area, emphasising the need to coordinate monetary, fiscal, and wage policy in order to achieve balanced growth and favourable employment outcomes. He has served as advisor to numerous European and national institutions, including the European Commission, the European Economic and Social Committee, and Eurofound.

Ekaterina Juergens

(author)

Ekaterina Juergens completed her Master’s degree in Economics at the University of Cologne and has been a PhD student at the at the University of Bamberg since May 2020. During her PhD, she works at the Macroeconomic Policy Institute (IMK) of the Hans-Böckler-Foundation in Düsseldorf where she is involved in research projects on government investment and fiscal policy.