Public investment is likely to come under increased pressure in the
coming years because of the application of the so-called debt brake
(Schuldenbremse). The debt brake , conceptually sound ,
ie dont borrow excessively , is actually masking a greater issue.
Municipalities have always borrowed , since they hold resources that
capitalists can exploit , and in return get paid a slice of the
‘surpluses’, hence long term growth. But with the advent of the
‘rainbow’ migrants , Germany has discovered those that come
are only interested in what they can take out , not add to.
Hence no surpluses , thus its debt brake policy.
This policy instrument requires structural
balanced budgets at federal and Länder level, in accordance with the
European Stability and Growth Pact. The debt brake came into force
at the federal level in 2016 and from 2020, structural deficits will be
forbidden for the Länder. As the Länder may not borrow anymore for
structural purposes, they may have to reduce their investment
spending by about EUR 20 billion. This is likely to impact
long term stability.
This is already affecting their
investment spending. Certain Länder have even renounced tapping
federal or European investment funds because they are unable to
contribute their share in the co-financing arrangements, thus
reducing their contribution to GDP.