BERLIN – Germany announced the establishment of an exceptional investment fund of one trillion euros ($ 1.1 trillion) to update infrastructure, strengthening health and education sectors, and supporting the economy that faces increasing challenges, and the German parliament was forced to pass the plan to amend the constitution, bypassing the policy of (curbing debt), which allowed the government the possibility of huge borrowing, after the decision had the approval of more than two -thirds of the members Bundestag.
Between stagnation and pressure
Investment comes in difficult economic and political conditions; Since the outbreak of the Russian -Ukrainian war, the German economy has incurred losses of 280 billion euros (310 billion dollars) during the past three years, as well as providing more than 40 billion euros (44.27 billion dollars) as military aid to Kev.
Germany has also witnessed an economic stagnation for the third year in a row, prompting more than 55,000 companies to declare bankruptcy since the war began.
Structural repairs
The director of the Evo Institute for Economy Research, Clemence Voyce, believes that the increasing concern about Germany’s competitiveness as a justified business site, noting that the country needs radical economic reforms and that “economic policy must move quickly to counter economic power, and thus decline the level of prosperity in Germany.”
He called, with a group of experts, (in statements to reporters earlier published on the Evo Institute website) to implement reforms that include:
- Reducing taxes for companies.
- Reducing bureaucracy.
- Increased investment in general infrastructure.
- Energy security enhancement.
- Provide larger incentives for employment.
Technology investments
The Investment Fund focuses on the areas of advanced technology, including digitization, satellites for reconnaissance, safe communications and drones and promoting European defense industries, and aims to reduce dependence on external supply chains, especially in the areas of raw materials and energy, in a step that seeks to reduce the European dependency of the United States.
Business sector support
Industry federations and investors welcomed the plan, and include huge investments such as 500 billion euros (553.5 billion dollars) to develop infrastructure, roads, and railways along with 100 billion euros ($ 110 billion) to support environment and climate.
The head of the German Industries Union, Peter Leibinger (according to a published statement published on the Union website) believes that these investments will be decisive in stimulating growth, noting the importance of supporting startups and innovative business models.
“It is necessary to enhance state digitization to be more supportive for companies, as the digital infrastructure and the encouraging organization of innovation must become the top priority,” Leibinger added.
He also stressed the importance of supporting strategic industries, such as semiconductors and batteries, to ensure greater European economic independence.
Taxes threatening competitiveness
Germany faces high tax rates, as the tax on companies reaches 45%, which is the highest among the major industrialized countries, and the economist in the German Arab Chamber of Commerce, Dr. Ali Al -Absi, sees in an interview with Al -Jazeera Net that high taxes were one of the main reasons behind the transfer of many German and European companies its factories to the United States, where more attractive tax incentives are available.
In turn, Leibinger called on the German government to provide gradual tax exemptions to support investment, reduce income tax and sales tax to stimulate consumption, and provide additional tax incentives to enhance employment.
Huge borrowing
The amendment of the constitution and allowing the government to borrow huge sums is a major shift in German fiscal policy; (Debt Call), which was approved in 2009, has limited the government’s ability to borrow, but this restriction was overcome due to the urgent need for investments.
Despite this, the percentage of German public debt is still moderate compared to other European countries. Before the new borrowing, the percentage was 64%of GDP, and is expected to reach 90%, which is less than France (more than 100%) or Italy and Spain (137%).
But Dr. Al -Absi warns that the next generation may have to bear the burden of these debts, indicating that increasing public debt means high costs of benefits, however, he believes that smart investments will lead to the achievement of tax returns that enhance the ability to pay loans, especially if money is directed towards developing schools and universities, improving hospitals, expanding infrastructure, and supporting digitization and technology.
The EURO plan is one of the largest government investments in modern German history, and aims to revive the quiet economy, and while it is seen as an opportunity to renew infrastructure and support innovation, fears of high public debt and taxes are still ongoing.
