Lars Klingbeil, the Social Democratic Party finance minister who calls himself the “Minister of Investment,” has more money at his disposal than predecessors. In 2025 the Bundestag approved a special fund for infrastructure and climate neutrality that allows for €500 billion in additional debt.
A year on, two economic research institutes have issued critical progress reports. The Ifo Institute in Munich and the German Economic Institute in Cologne say that instead of financing new projects, money from the special fund has been used to plug holes in the federal budget.
Klingbeil has denied any misuse. He says loans from the special debt fund were spent exclusively on infrastructure, as the law requires, and that the priority is ensuring the released funds reach municipalities. “What matters is that swimming pools are being renovated, that bridges are being repaired, that high-speed internet is being installed. That is what matters most right now. And that is what we at the Finance Ministry will continue to work toward,” he said in Berlin.
‘Funds misappropriated’
Clemens Fuest, head of the Ifo Institute, warned when the credit package was passed that it could create fiscal problems. In his institute’s latest study he reiterated that criticism and said 95% of the funds were used to balance the 2025 budget rather than fund new investments.
“In light of the current situation, indirect financing of such expenditures or tax cuts through debt is clearly not appropriate,” Fuest told public broadcaster ARD. “What we need is not the distribution of handouts and favors, including some justified grants and subsidies, but rather cuts to non-priority spending. The coalition is headed in the exact opposite direction.”
Have legal requirements been met?
Senior Finance Ministry officials accused the economic institutes of making inappropriate comparisons between the old 2024 budget plan and the 2025 one. The ministry says federal budget investments plus additional investment from the special fund totaled €87 billion last year, a 17% increase on 2024, and that this meets the legally mandated 10% investment target in the core budget.
Experts at the institutes interpret the numbers differently. They allege that €23 billion from the special fund was used to finance investments previously earmarked in the core budget — an accounting sleight of hand, they and opposition parties say. The Greens and the far-right Alternative for Germany have threatened to sue at the Federal Constitutional Court.
The special fund is intended to run for 12 years. Federal investments are projected at €128 billion in 2026, with €58 billion drawn from the special fund. Spending is expected to remain similar through 2029; from 2030 to 2036 only about €20 billion per year can be taken from the fund. From 2037 onward, investments must return to the regular budget.
Economic researchers and Bundestag budget policymakers will keep monitoring the situation. A commentator in Handelsblatt concluded that Klingbeil’s “investment minister” narrative has so far failed, and he instead appears as a “minister of reallocation.”
This article was originally written in German.
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