Newly incurred special debt totaling 24.3 billion euros in 2025 has largely been used to cover budgetary shortfalls rather than fund intended investments, according to analyses by the Ifo Institute and the Institute of the German Economy.
Overall Investments Have Barely Increased
Ifo President Fuest stated that policymakers have used the debt-financed funds almost entirely to plug holes in the budget. The government reportedly reduced the investment sum in the core budget and shifted individual items to the special fund.
The Institute of the German Economy found that actual investment spending by the federal government last year – including funds from the special asset – was only two billion euros higher than in 2024, just enough to offset inflation. The institute is urging the government to align spending more consistently with infrastructure and climate neutrality and to increase investment spending in the core budget.
Criticism From Politics and Business
Dröge, co-chair of the Green Party parliamentary group, accused Chancellor Merz of “gambling away” a historic opportunity. Baumann, parliamentary managing director of the AfD, accused the government of a “gigantic lie” at the expense of future generations.
Pakleppa, managing director of the German Construction Federation, accused the government of “window dressing” and stated that little has arrived on construction sites. He warned that the special fund must be used efficiently, or the largest investment program in post-war history will become a missed opportunity.
Müller, managing director of the German Construction Industry Federation, described the situation as a “shifting of funds,” arguing that the money is not being used additionally and therefore is not providing the desired, long-term growth impetus or sufficient modernization of infrastructure. The BDI industry association lamented that without structural reforms, even additional money would be ineffective.
The transport budget, for example, has reportedly shrunk because funds from the special asset were used instead. Critics claim that funds from the core budget were then used to finance election promises made by the current coalition, including expanded parental leave, commuter allowances, and a reduction in VAT on restaurant meals.
Justification From the Union
Representatives of the Union parties rejected the accusations. CSU parliamentary group leader Hoffmann stated in Berlin that the coalition is not using the additional credit for consumption but for investment. He added that a budget is not a closed system.
Bilger, parliamentary managing director of the CDU/CSU parliamentary group, said he considered the figure of 95 percent “too high.” He stated that the Union is ensuring that the additional funds are used in such a way that problems are tackled and solved in retrospect over the twelve years for which the special fund is designed.
The special debt for infrastructure and climate neutrality totals 500 billion euros and was approved by the previous Bundestag last year, even though a new parliament had already been elected. The required two-thirds majority was achieved because the Union, SPD, and Greens all voted in favor.
Frequently Asked Questions
What percentage of the new special debt was not used for investment?
According to the Ifo Institute, 95 percent of the 24.3 billion euros in new special debt taken on last year was not used for investment.
What did the Institute of the German Economy identify regarding the apply of the funds?
The Institute of the German Economy found that 86 percent of the funds were misused.
What did Ifo President Fuest say about how the funds were used?
Ifo President Fuest said that policymakers used the debt-financed funds almost entirely to plug holes in the budget.
As the government navigates these financial challenges, will it be able to restore confidence in its commitment to long-term infrastructure and climate goals?
