Germany’s parliament the Bundestag yesterday voted 513-207 in favour of a €500bn emergency fund to tackle the country’s crumbling infrastructure, relieving builders and sending growth forecasts for Europe’s biggest economy to as high as 2.1%.
Social Democrats (SPD) and Greens lent their votes to the Christian Democrats (CDU/CSU) to get the two-thirds majority needed to bypass the “debt brake” enshrined in the constitution for big spending boosts for defence and infrastructure. Hard right and hard left parties opposed the move.
“The prospect of a fiscal bazooka is causing expectations to skyrocket,” Alexander Krueger, chief economist at bank Hauck Aufhaeuser Lampe, told Reuters.
Germany saw a 0.2% drop in GDP last year, but the DIW economic institute had said the infrastructure fund alone could raise GDP by more than two percentage points a year from 2026, when the funds filter down to projects.
Without yesterday’s deal, the institute predicted 1.1% growth from 2026.
Another institute, the IfW, raised its forecast to 1.5% growth on the back of the funding decision, Reuters reports.
Decrepit bridges
After the SPD-led coalition government collapsed in November last year, industry bodies worried that a long period of political limbo would prevent action on the country’s dilapidated infrastructure, typified by the sudden collapse of Dresden’s Carola Bridge in September.
As many as 5,000 Autobahn bridges are decrepit and need to be renovated or rebuilt, state broadcaster DW reported in June.
But after winning the election on 23 February, CDU leader Friedrich Merz secured support from the SPD and Greens for the emergency fund before even forming the next coalition government.
He scheduled yesterday’s vote to take advantage of the pre-election Bundestag seat-share. It dissolves on Tuesday.
‘Only half the battle’
The German Construction Industry Association (ZBD) expressed relief at the measure, calling it an “historic milestone”.
But it warned that hundreds of billions of euros was “only half the battle”, and that big structural reforms were needed urgently.
ZBD managing director Felix Pakleppa said that in highway construction, up to 85% of the time can be spent on planning and only 15% on construction itself.
“This is no longer acceptable,” he said.
“Such a comprehensive special fund is an extremely important step. But it’s only half the battle,” he said, calling for far-reaching reforms in administration, infrastructure planning, digitalisation, and social security systems.
“Otherwise, it will remain an expensive measure with no lasting impact,” said Pakleppa.
40% under capacity
Pakleppa said industry capacity wasn’t a problem, with 40% of construction companies reporting a lack of orders.
“Now it is up to politicians and administrators to establish the appropriate framework,” he said.
“All capacities of small, medium, and large construction companies must be utilised and deployed now.”
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