Germany faces enormous challenges in modernizing its capital stock. After neglecting public investment over the last two decades, it is now necessary to update the infrastructure and gradually reduce the investment backlog.

For a sound fiscal policy: Make investments possible!
IW-Policy Paper
German Economic Institute (IW)
Germany faces enormous challenges in modernizing its capital stock. After neglecting public investment over the last two decades, it is now necessary to update the infrastructure and gradually reduce the investment backlog.
Managing demographic ageing and decarbonising the economy will also require major efforts in the coming years. The infrastructure needs both to be adapted to a post-fossil age and to meet the requirements of an ageing population. The education system also needs investment to deliver significantly better results in the future. New concepts must be developed in order to ensure prosperity in this country. The state plays a key role in all these tasks. It can indirectly stimulate private investment with its own investments, and it can provide favorable conditions and appropriate support measures for private investors.
Unfortunately, the German state has not carried out these tasks sufficiently since the early 2000s. Most recently, there has been some trend reversal in public investment, but previous increases of public investment have been too tentative, and implementation is not progressing fast enough. Overall, Germany is increasingly putting its own economic future and thus the prosperity of future generations at risk.
There is a considerable need for investment which adds up to at least €450 billion in the next ten years. In order to finance this volume of public investment, it is important to remove obstacles in the political decision-making processes and in financial relations between public subsectors. However, these reforms should not question the financial soundness of the state. The state should and can fulfil its central mandate to invest in the public capital stock and to stimulate private investments in a fiscally, economically and environmentally sustainable manner. A path is presented here that is constitutional and addresses both the temporal and financial dimensions.

Hubertus Bardt / Sebastian Dullien / Michael Hüther / Katja Rietzler: Für eine solide Finanzpolitik – Investitionen ermöglichen!
IW-Policy Paper
German Economic Institute (IW)
More on the topic
Reforming Economic and Monetary Union: Balancing Spending and Public Debt Sustainability
Fiscal policy in the EU faces the dilemma of having to meet large spending needs despite the existence of elevated public debt ratios. Fiscal policy therefore needs to put the member states on a sustainable path to gradual debt reduction.
IW
Single Market Emergency Instrument: A Tool with Pitfalls
In reaction to disruptions of the Single Market, the European Commission put forward an emergency instrument. It proposes far-reaching measures in order to maintain the proper functioning of the Single Market and ensure the supply and distribution of goods and ...
IW