German Infrastructure Fund Failed to Spur Extra Investment, Iw Says

German infrastructure fund failed to spur extra investment, institutes say

By Maria Martinez

Analysis of Germany's Special Infrastructure Fund

BERLIN, March 17 (Reuters) - Germany's special fund for infrastructure has largely failed to generate additional investment one year after its approval, according to calculations by two German institutes published on Tuesday.

Institute Findings on Fund Utilization

The German Economic institute (IW) said 86% of the money used in the past year was diverted from its intended purpose, while the Ifo Institute calculated that figure at 95%.    The coalition government "had the chance to clear the investment backlog. So far, they have not used it," IW researcher Tobias Hentze said.

Background and Purpose of the Special Fund

The unprecedented 500-billion-euro special fund was approved last March as a way to revive the German economy but it has taken time to take effect, while economists and business groups have warned that the fund alone is not enough to deliver sustainable growth.     According to the IW study, the German government's actual investment spending, including the fund and excluding financial transactions, totalled about 71 billion euros ($81.5 billion) in 2025, up just 2 billion euros from 2024 in nominal terms.    IW said another 12 billion euros from the fund were used for core budget spending, describing the shift as a budgetary reshuffle, citing hospital "transformation costs" booked as investment even though they covered operating expenses.    Berlin had planned to spend 19 billion euros from the fund in 2025, but only about three-quarters of that was actually disbursed, the IW study said.    According to Ifo, borrowing as part of the special fund grew by 24.3 billion euros, but Berlin's actual investments were only 1.3 billion higher than the 2024 level.

Implications of Misallocated Funds

"That's a gap of 23 billion euros in additional debt that was not used for additional investments," wrote Ifo economists, calling it a "major problem" as the funds were supposed to be used for investments to support long-term economic growth.

Additional Information

($1 = 0.8709 euros)

(Reporting by Rene Wagner and Maria Martinez, writing by Miranda Murray, editing by Friederike Heine and Louise Heavens)