Germany’s finance ministry has countered claims by leading economists who accused the government of having misspent most of a debt-financed “special fund” (SVIK) meant to boost investment infrastructure and climate neutrality.
In an op-ed for newspaper FAZ this Friday, the finance ministry’s head economist, Armin Steinbach, disputed allegations of misuse, writing that if the correct frame of reference was applied, 95 per cent of the special funds were being used to make new investments.
Steinbach – a confidante of finance minister Lars Klingbeil (Social Democratic Party, SPD) – argues that normally the German Government would have been obliged to cut back on investment and expenses in the current legislative period.
The SVIK – which comprises €500 billion in means financed through new debt – thus allowed Germany to keep up public investments despite deteriorating public finances.
“A large part of the investments through the SVIK of circa €177 billion until 2028 would not have been made under these circumstances. Therefore, from a fiscal policy standpoint 95 per cent of these expenditures are in fact additional investments,” Steinbach said.
He added that his ministry would soon publish a study, detailing how public investment would have developed without the special fund.
In March, two leading economic research institutes, Ifo Munich and IW Cologne, had published analyses that showed the overwhelming part of the special fund had been “misappropriated”.
Ifo set the quota at 95 per cent, while IW Cologne calculated a misappropriation ratio of 86 per cent.
Ifo president Clemens Fuest said at the time: “The means from the additional debt were used almost exclusively to plug budget deficits- Additional investments largely did not happen. It is imperative that this policy be revised in the coming years.”
The German Council of Economic Experts – a legal body tasked with independently assessing the economic development of Germany – also criticised that the SVIK did not really provide additional investments in its 2025/26 annual report: “The planned expenditures of the SVIK and for defence have only small effects on growth … The SVIK should not be used for funding questionable measures in the core budget,” it said.
“To ensure this, effective rules are needed regarding transparency, additionality, and targeting.”
To finance their special fund, German Chancellor Friedrich Merz (Christian Democratic Union, CDU) along with the SPD deactivated the country’s legal debt ceiling in 2025.
In the coming years, Germany is expected to take on new debt of more than €170 billion annually.
