Habeck Proposes 10% Investment Bonus to Spur Germany’s Growth
(Bloomberg) -- The German economy ministry aims to bolster domestic investment by providing 10% of the funds directly to companies, in the latest plan to revive economic growth.
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According to a proposal by Economy Minister Robert Habeck, a so-called Germany Fund envisages subsidizing investments with the exception of building projects. The bonus would be offset against tax liabilities or paid out in cash if the company isn’t profitable, according to the economy ministry’s plan for a “modernization agenda.” It hasn’t been adopted as government policy.
“Climate-neutral modernization, a new innovation dynamic and a future-proof industry require massive investments — both private and public,” the ministry said in a statement on Wednesday. Targeted investment support would cost the state less than general corporate tax cuts, according to the statement, which didn’t provide figures.
Germany is struggling to identify ways to spur growth with Europe’s biggest economy expected to contract for the second consecutive year in 2024. Despite the rising urgency, the ruling coalition in Berlin is at odds over how to spur the economy. Habeck and Chancellor Olaf Scholz are advocating for a stronger role for the state, while Finance Minister Christian Lindner wants to rein in subsidies.
The fronts have hardened ahead of next year’s elections. Habeck, who is expected to lead the campaign for the Greens, is effectively making a counter-proposal to an industrial pact, which was floated by Scholz, a Social Democrat.
The paper didn’t offer details on how the fund would be financed, but notes that greater economic growth would ensure that national debt would only rise moderately in relation to output, indicated that debt-financing is part of the plan.
The economy ministry statement also called the country’s debt brake — which Lindner and the Free Democrats staunchly defend — as a “growth brake” in its current form.
The proposed Germany Fund would be limited to five years with the goal of revamping ailing infrastructure and support education and digitalization. The two latter areas combined with transport would need more than €200 billion ($216 billion) of public investment by the end of the decade, according to estimates in the report.
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