Germany’s Infrastructure Crisis: The Urgent Need for Investment

Germany needs to invest more. However, Minister Lindner is preventing economic and social modernization. A guest article by DGB board member Stefan Körzell.

Dilapidated roads and trains, a holey cell phone network and an economy that is left disoriented in the midst of climate transformation: Germany is increasingly making itself look ridiculous around the world. The “Economist” once again declared the Federal Republic the “sick man of Europe”. “Obsessive budget discipline” leads to low public investment, and German infrastructure suffers because the debt brake is made into a fetish.

In the growth forecasts of international organizations such as the OECD or the IMF, Germany is almost at the bottom. Among the western industrialized countries, the Federal Republic will probably be the only country with shrinking economic performance in 2023. It is high time to take countermeasures.

Lindner’s course runs counter to that of Chancellor Scholz

The Chancellor wants to create a spirit of optimism. With a “Germany Pact” he wants to reduce bureaucracy, promote digitalization and encourage more courage to take risks. But that won’t be enough as long as Finance Minister Lindner prefers to count beans instead of focusing on the country’s future viability. The spending cuts planned in the 2024 federal budget – for example in funds for administrative digitalization – clearly run contrary to the Chancellor’s wishes. Lindner, who described himself as the “Enabling Minister” when he took office, is increasingly becoming an obstacle to economic and social modernization.

The Federal Minister of Finance uses all sorts of argumentative tricks to make a reduction in government spending appear to be no alternative. In his budget speech in the Bundestag, he repeated the claim that the federal government’s interest expenditure had increased tenfold compared to 2021. In fact, this number is only achieved using an outdated and distorting calculation method. Even if one takes the misleadingly high number as a basis, the volume of interest payments is put into perspective when compared to total government spending: the interest spending ratio is far lower than in the 1990s and the first decade of the 21st century.

Germany can afford further loans

It is nonsense that Germany cannot afford additional borrowing. In fact, the amount of German national debt relative to economic output is well below the European average. The USA’s debt ratio is twice as high and Japan’s is four times as high. It still makes sense to continue suspending the debt brake. Given the war in Ukraine and the ongoing energy crisis, there are good reasons to use the emergency clause in the Basic Law to take out additional loans. We are not in normal times, as Mr. Lindner would have us believe with his call for financial normality.

That is why the Bundestag cannot be satisfied with the fact that the federal government’s total spending in 2024, at around 446 billion euros, is supposedly 25 percent above the pre-crisis level of 2019, as the Finance Ministry is trying to reassure. Firstly, due to high inflation, the money is worth much less than before Corona. Measured in terms of gross domestic product, the federal government’s planned spending next year will probably only reach the level of 2019. Secondly, the state is facing even greater challenges today.

Government spending was already too low in 2019. At that time, the German Federation of Trade Unions, together with the Federation of German Industries, called for a government investment package of 450 billion euros to modernize the infrastructure, promote education, housing construction and decarbonization.

Tackle future tasks

Since then, these needs have tended to grow. The railway is breaking all records when it comes to tardiness and the municipalities are facing an investment backlog of 166 billion euros. There are also additional challenges: As a result of the war in Ukraine, the number of refugees has increased. In order to end child poverty, there must be effective basic child protection. Until there is enough cheap renewable energy available, a reduced industrial electricity price is needed to maintain production and jobs. If future tasks like these are not tackled immediately, the medium-term costs will be much higher for today’s society and future generations.

Other countries have already turned things around: in China and the USA, hundreds of billions are being invested in future investments. Germany must make improvements to its federal budget if it does not want to lose touch internationally.

Stefan Körzell is a member of the executive board of the German Federation of Trade Unions (DGB)