Gov’t advisors call for special fund to finance Germany’s transport infrastructure

The fund could be filled with proceeds from toll charges, which currently only exist for lorries, and should prioritise the maintenance of existing infrastructure to avoid unnecessary new construction projects.

A reform of the German debt brake, the limit on new government borrowing, could help kickstart the fund to make up for many years of underfunding in many policy areas.  “For years, future-oriented public expenditures were not given adequate priority,” the advisor council, known as the “Wirtschaftsweise”, said in its annual expert opinion on the economy.

Transport emissions in the country have not gone down noticeably since the 1990s, and the sector has often been branded as Germany's "problem child" in the energy transition.

Policymakers favour short-term investments

To ensure that investments in public infrastructure are brought to scale, new institutional safeguards should be created, and minimum budget quotas be set for other areas, including education and defence.

Expenditures to future generations, which only pay off in the long run, were often discounted by policymakers, who prefer to spend money on projects that benefit current voters, the advisors noted. Institutional mechanisms that “effectively oblige” policymakers to tackle long-term investments could therefore help to overcome the bias for short-term spending and earmark sufficient funds to finance long-term goals, they concluded.

German economy facing "structural challenges"

With a general view on the German economy’s prospects for 2025, the advisors said that the country’s GDP will likely contract 0.1 percent in 2024 and attain a low growth rate of 0.4 percent next year. At the same time, they expect inflation to drop further in the coming months.

“A weak industry and long phase of stagnation suggest that the German economy is facing not only short-term but also structural challenges,” said council head Monika Schnitzer, arguing that the country had gone through “decades” of underfunding in certain areas that now needed to be addressed.

Economy minister Robert Habeck said the advisors’ findings showed that the country had to speed up its modernisation efforts. He reiterated his call on other parties in parliament to cooperate with the outgoing government of chancellor Olaf Scholz and get key policy proposals to revive industrial development as well as energy and climate regulation across the line.