The German Spending Spree

Why the incoming government’s new billions create exceptional opportunities for foreign businesses.

It was a long and rocky road to the renewed German coalition government. To pave the way ahead, the incoming government plans to spend at least an extra €46 billion.

After the Jamaica negotiations failed, there was a lot of pressure on the Christian Democratic Union (CDU), their Bavarian sister party the Christian Social Union (CSU), and the Social Democratic Party (SPD) to form a government. All three parties feared that they would lose a substantial number of votes in the event of a re-election. As a result, they were pressed to deliver a deal that they could present as a partial victory to their member base.

Whilst part of the billions promised by the incoming government will go towards tax cuts, social security, and education, a more than substantial amount of the investments will be allocated towards infrastructure development. One case in point is Germany’s digital infrastructure. To this end, the incoming government promised a fund of €10-12 billion until 2021. If Germany becomes serious about true gigabit infrastructure (which it must), even more money will have to be made available. The next four years will provide exceptional opportunity for ISPs and underground construction companies to expand their business to Germany.

On a similar note, the new coalition deal acknowledges that the lack of affordable housing, especially in big cities, has become a pressing concern for many of its voters. Under the banner of a new “housing offensive,” the incoming government promises to construct at least 1.5 million new homes until 2021. However, the current landscape of construction business cannot satisfy the demand creating exceptional opportunity to break into the German housing market.

Additionally, the new coalition deal vows to strengthen structurally weak regions to a much larger extent than before. The government pledges €8 billion for the continuation and expansion of ongoing programs designed to assist the states in coping with migration. A point of interest for the renewable energy sector is that another €1.5 billion will be made available to further abandon coal and strengthen renewable sources. Municipalities will have another €1 billion to invest in public regional transport; rural agricultural regions will be supported with an additional €1.5 billion.

In summary, Merkel’s renewed coalition with the SPD will be the most expensive of her tenure and thus creates exceptional business opportunities.

The experienced Berlin-based public affairs team of Interel Germany is eager to assist you with these tasks to secure a smooth expansion of your business to Germany. The timing for such an expansion could not be better.

Authors: Markus Weidling and Linus Sehn

Download the full report here.

Author

Markus Weidling

Managing Partner, Germany

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