Berlin The requirement sounds clear: “We will guarantee the necessary future investments within the framework of the constitutional debt brake, especially in climate protection, digitization, education and research as well as the infrastructure”, the SPD, FDP and the Greens have stated in their exploratory paper. So the traffic light coalition promises to raise enough money for investments and at the same time to adhere to the debt brake.
At the moment, the negotiators in the “Finances and Budget” working group are desperately looking for ways to implement these requirements. And already on the first lap it was clear that it would be an extremely difficult undertaking.
That is why the traffic light housekeepers are discussing unusual ways of mobilizing investment funds without having to finance this from the federal budget. Four tricks are discussed. However, they all have major disadvantages.
Olaf Scholz (SPD) has already provided the blueprint for this household trick. When it became clear that the Federal Minister of Finance would have to take on record debts due to the corona crisis, he decided to use some of the loans to create reserves for the future. Around 26 billion euros flowed into the energy and climate fund (EKF), which is part of the federal budget, in order to finance measures from the economic stimulus package from 2021 onwards.
26 billion euros flowed into the energy and climate fund (EKF), which is part of the federal budget, in order to finance measures from the economic stimulus pact from 2021 onwards.
(Photo: dpa)
This strategy could be repeated under a Chancellor Scholz. According to current planning, 2022 should be the last year in which the debt brake is suspended due to Corona. Scholz’s financial plan provides for almost 100 billion euros in new debt in the coming year. The coalition could, according to the idea, take out even more loans and park the money in the EKF.
However, this idea is controversial. Even the debt-financed replenishment of the EKF 2020 is considered a fall from grace to some in the Federal Ministry of Finance. And there are lawyers who doubt that such a procedure is constitutional. The traffic light would at least run the risk that their very first household could be classified as unconstitutional.
FDP boss Christian Lindner has therefore at least partially rejected the EKF trick. “The already planned net borrowing of 100 billion euros in the coming year, I think, to put it cautiously, is already adequate,” said Lindner of the “FAZ”.
The FDP boss has at least partially rejected the EKF trick.
(Photo: imago images / Chris Emil Janßen)
Basically, however, the topic should continue to waver. According to information from the Handelsblatt, the department heads of the state finance ministries have already discussed in an internal round whether the climate emergency could be used as a reason for a permanent exception to the debt brake. The debt brake has even prescribed zero debt for the countries since 2020.
The department heads were extremely skeptical. Two high tax officials from Hamburg also wrote down their concerns in an article. “Financing the reduction of the effects of climate change by borrowing would not only burden the next generation with the consequences of climate change, but also the financial burden,” it says.
2. Expansion of the KfW development bank
The most realistic option is currently another: an expansion of the state development bank KfW. It is to be expanded into an “innovation and investment agency”, as it is called in the exploratory paper. The open question, however, is how exactly KfW can be involved.
KfW could distribute more grants and loans, for example to companies that invest in climate protection. The deliberations of the negotiators go even further: KfW could also serve as a kind of “transformation fund”. The development bank would step in financially where companies and their banks are overwhelmed by the climate change.
The advantage from the perspective of the traffic light coalition: KfW would finance the investments, money from the federal budget is not necessary. And even if KfW had to be financially strengthened by the federal government for the new tasks, this would not fall under the debt brake.
But the KfW plan is also controversial. In addition, although private investment could be strengthened, the public investment need remains.
In addition, the state bank – and ultimately the taxpayers with it – would take risks where private investors do not want it. KfW would also have to reinvent itself. So far, the development bank itself has not taken any risks, everything has been secured by the federal government. And it only does business that is profitable – of which there aren’t that many.
It is therefore not certain whether more private investments can really be encouraged. Interest rates are already close to zero. So the interest rate environment is such that there should be as many private investments as possible. It is unclear what additional effects a promotional bank should achieve.
And success cannot be measured either. Nobody knows how many additional investments a similar program of the European Investment Bank (EIB) initiated a few years ago.
3. Expansion of public companies
In addition to KfW-Bank, a traffic light alliance could also involve other public companies in order to increase investments. These can take out loans without these being counted towards the debt rule and thus restricting the financial scope of the federal government.
The federal government could create new public companies, for example for the development of a hydrogen infrastructure. Or a state-owned company that sets up solar modules along railway lines and builds wind turbines in order to promote the expansion of renewable energies. The company could then generate income from the sale of electricity.
It is also obvious to expand the debt leeway of existing public companies such as Deutsche Bahn, combined with the condition that the additional funds would have to be invested in the track infrastructure, for example.
But these considerations also harbor problems: The decisions would then be made in the companies, the Bundestag would lose influence and control.
From the taxpayer’s point of view, higher indebtedness for public companies would not necessarily be efficient either. For example, it is a bit more expensive for Deutsche Bahn to go into debt than for the federal government. Admittedly not essential, but with larger sums the interest costs become noticeable.
4. Establishment of an EU climate fund
Because the debt brake leaves little room for maneuver nationally, the explorers are also considering a European solution: the creation of a European fund from which climate investments are financed.
The Federation of German Industries (BDI) estimates Germany’s investment needs by 2030 at 860 billion euros if the climate targets are to be achieved.
Since all other EU countries have to invest a lot to cope with the climate crisis, a European solution is obvious. As with the EU reconstruction fund, the EU Commission itself would then incur debts in order to fill the pot with money. The BDI has already welcomed the idea.
The signal that this step would send would be tremendous. Germany, of all places, which was skeptical about a stronger European debt pooling, would now itself propose exactly that.
But this is also where the crux lies: While the SPD and the Greens would certainly participate in such an EU climate fund, the FDP cannot actually go along. So far it has always been strictly against the communitisation of debts at the European level.
In addition, such a fund would be associated with high hurdles. A new decision would have to be made to increase the EU’s own resources, and each EU country would have to agree to this individually, as the unanimity principle applies here. And all of this against the background that the distribution of the money from the EU reconstruction fund has not even started properly. Like the other three, this option shows that every alternative to circumventing the debt brake has major pitfalls.
More: SAIs warn against loosening the debt brake.