Economists warn German government is misusing investment spending

"Some 95 percent of the special fund's money did not lead to additional investment, Ifo institute economists calculated, while the IW Koeln estimated a figure of 86 percent. Emilie Hoeslinger, co-author of the Ifo study, told AFP that railways, motorways and broadband were among the areas where the government had simply shifted spending out of the core budget and into the special fund."

"Investment activity in the core budget, the actual budget, was too low. While debt-financed investments have been made, tax-financed investments in the core budget have fallen very, very sharply. The findings are set to pile pressure onto Merz, who is taking increasing flak as signs of an economic turnaround prove elusive and more warning lights flash red."

"Chancellor Friedrich Merz last year vowed to borrow and spend hundreds of billions for an infrastructure special fund over coming years in what was dubbed a spending bazooka aimed at getting Europe's top economy back on its feet. But after a year of the fund's operation, economists warned that most of the new debt so far was being used to fund day-to-day spending or previously planned schemes."

Chancellor Friedrich Merz's infrastructure special fund, designed to revitalize Germany's economy through hundreds of billions in borrowed spending, is being misused according to economists. Analysis by the Ifo institute and IW Koeln reveals that 86-95% of the fund's money has not generated additional investment. Instead, the government has shifted existing spending from the core budget into the special fund for railways, motorways, and broadband. Meanwhile, tax-financed investments in the regular budget have declined sharply. These findings intensify pressure on Merz as economic indicators disappoint, industrial orders decline, and investor confidence reaches near-year lows. Major corporations like Volkswagen warn Germany's current business model is unsustainable.

Read at The Local Germany