Federal Digital Budget Exceeds 60 Billion Euros Over Four Years

The federal government's budget for digital transformation has significantly increased, reaching a total of over 60 billion euros from 2019 to 2024. A recent comprehensive study indicated that the funds allocated for digital initiatives doubled during this period, culminating in approximately 19 billion euros earmarked for digital projects in 2024 alone.

This amount surpasses the complete budget of the Ministry of Health, which stands at 16.7 billion euros. The findings, released by the Leibniz Centre for European Economic Research (ZEW) on behalf of the think tank Agora Digitale Transformation, highlight the increasing financial commitment towards enhancing digital infrastructures.

According to Stefan Heumann, the managing director at Agora Digitale Transformation, the surge in digital spending can largely be attributed to the COVID-19 pandemic, which accelerated the urgency for digital solutions. However, he emphasized that despite the increased investment, Germany continues to lag behind other EU countries in terms of administrative digitalization. More funding does not guarantee improved outcomes; the focus should be on establishing effective frameworks for digital solutions.

The study revealed that from 2019 to 2024, the federal budget for digitalization was divided across various areas, with the largest allocation directed towards administrative digitalization, totaling 16.6 billion euros. This was followed by investments in digital infrastructure at 13.8 billion euros, research and innovation in digitalization at 12.8 billion euros, and digital initiatives within the Bundeswehr, which accounted for 11.9 billion euros. The share of digital expenditures in the overall federal budget rose from 2.7% in 2019 to a peak of 4.5% in 2023.

Thilak Mahendran, the innovation lead for digital government actions at Agora, stressed that effective utilization of public funds is critical for successful digital policies. He called for not only the quantification of digital budget allocations but also thorough evaluations of their impact.

To arrive at these figures, researchers at ZEW undertook a complex analysis of over 20,000 budget items, employing machine learning techniques and text analysis to identify around 6,000 titles related to digital expenditures for further inspection. The analysis was complicated by the fact that comprehensive budget plans were only available in PDF format, necessitating a meticulous manual review of selected items.

Thomas Niebel, co-author of the study from ZEW's Digital Economy research area, noted the lack of a standardized system for ensuring transparency in digital spending, urging policymakers to provide clearer guidelines, as digitalization represents a major transformation for the country.

While the federal ministries often struggle to fully utilize their allocated budgets--evident in cases like the National Education Platform--the actual expenditures may be lower than reported. The study did not factor in special funds, such as those for the military, nor did it consider the significant investments being made by state and municipal governments in digitalization. Therefore, estimating the total government expenditure on administrative modernization remains challenging.