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06/12/2016

German government bolsters municipal investment power

Innovation & Industry

German government bolsters municipal investment power

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[Robert Agthe/Flickr]

Germany’s governing coalition hopes to boost investment power among municipalities in the Federal Republic, planning to offer them an additional €5 billion over the next few years. EurActiv Germany reports.

Germany’s federal government intends to increase its planned investment programme to €15 billion, with an eye on cities and municipalities. A meeting of high-ranking coalition members agreed to top up the €10 billion plan, which was scheduled to be implemented by 2018, with a €5 billion investment programme for municipalities.

First and foremost, it is meant to benefit financially weak cities and municipalities. These are to be assisted in dismantling the investment jam for roads, schools and municipal buildings.

Despite the additional spending, German Finance Minister Wolfgang Schäuble expects to reach the target of a balanced budget, a Ministry spokesman said.

So far, Schäuble and German Chancellor Angela Merkel had been against the increase, saying stocking up the programme could first be decided when the appropriate finances are available.

Asked how the boost is possible, Economic Affairs Minister Sigmar Gabriel said, “because the leeway is there”.

European Commission President Jean-Claude Juncker told Reuters on Tuesday (3 March) evening that Germany has an investment gap like all other EU countries but additional spending, even on a municipal plan, puts the country on a good path.

“Germany is moving in the right direction,” Juncker said.

The goal of the government’s initiative is to dismantle the considerable backlog in Germany with regard to infrastructure investment, such as for road construction, broadband networks and energy capacity. In addition, spending on future industries is intended to ensure Germany’s economic might.

The government’s initiative consists of three components. Firstly, Schäuble intends to make €7 billion available between 2016 and 2018 for additional investments. According to Gabriel, almost €4.5 billion will go to the transportation industry and the digital infrastructure.

“We will double that which we have planned in the coalition agreement,” the Economic Affairs Minister indicated.

An additional €1.2 billion are expected to be invested in energy efficiency. Around €700 million are allocated for urban development, kindergartens and other public buildings.

A second portion, worth €3 billion, which the individual departments were originally supposed to save, is allocated to finance the care allowance for families. Now, Schäuble will take this out of tax revenues. The resources freed up by this shift are intended to be invested by the ministries.

The third portion is the municipal investment programme. “More than half of public investments come from the municipalities,” Gabriel said.

Because of financial weakness in many cities and municipalities, their investment power has suffered significantly, he said. €1.5 billion is to be additionally allocated to the municipalities starting in 2017. A planned special investment fund of €3.5 billion is only intended for financially weak municipalities. The special investment fund is scheduled to expire in 2018.

Gabriel estimated the volume of relief payments for the municipalities, which are to be or have been implemented within this parliamentary term, to be far above €20 billion. “That is the largest municipal relief programme that has existed for decades,” the Economic Affairs Minister said. In the long term, the municipalities should be freed of all the burdens related to accommodating refugees.

Schäuble, Gabriel, Transportation Minister Alexander Dobrindt, the head of the Federal Chancellery, Peter Altmaier, as well as the chairs of the governing factions, agreed on the key points of the government’s investment initiative. The supplementary budget needed for the implementation of the initiative, as well as additional necessary legislative changes will be put forward for a resolution in the federal cabinet on 18 March 2015, together with the budget’s benchmark figures for the years 2016 to 2019.

Background

European Commission President Jean-Claude Juncker has announced a plan to mobilise €300 billion in an effort to jumpstart the European economy.

Boosting the Luxembourg-based European Investment Bank's (EIB) capital is the central part of the plan.

The details of the plan will be given in November, and presented to EU heads of states at a European Council meeting in December.

Jyrki Katainen, the Commissioner for Jobs, Growth, Investment and Competitiveness, has said that the growth package should include public and private partnerships, increased lending capacity for the EIB and other EU lending bodies, more “future investment” by EU nations in areas such as infrastructure and the completion of the single market.