Concerns Raised Over Use of Special Funds by Merz Administration

Debate has intensified in Germany regarding the allocation of the government's special investment funds, initially established to support infrastructure development and climate neutrality. Critics, including economic experts and political opposition leaders, have expressed concerns that the administration is diverting these funds to cover existing budgetary expenses rather than investing in new projects as originally intended.

The special fund, totaling 500 billion euros, was designed to modernize transportation networks, expand renewable energy, renovate educational and healthcare facilities, and support research and digitalization initiatives. Recent assessments indicate, however, that a significant portion of these resources has been used to finance expenditures already accounted for in the regular budget, rather than enabling additional investment.

Economic advisors tasked with reviewing the government's fiscal policies have noted that the special fund has not yet produced a measurable positive impact on Germany's gross domestic product. Their annual report for 2025/26 attributes this to the fund's use for budgetary reallocations and the financing of ongoing operational costs, rather than for investments that drive economic growth. These experts have called on the government to ensure that the entirety of the special funds is allocated exclusively to additional, investment-oriented purposes.

Opposition parties have echoed these concerns, arguing that the current approach fails to address Germany's pressing needs in housing, railway infrastructure, and industrial transformation. They advocate for structural reforms in the tax system--such as reintroducing a wealth tax and revising inheritance tax regulations--and also call for a reassessment of the debt brake, which they consider an impediment to necessary investment.

Further analysis from the Institute of the German Economy in Cologne supports these observations. Their research found that, while the government meets the legal requirements for additionality, various accounting practices allow for the special funds to replace rather than supplement regular budget spending. For instance, in 2026, the fund is expected to cover six billion euros in hospital financing that was originally slated to be paid by regional governments and health insurers. Projections suggest that by 2029, around half of the special fund's spending may be diverted from its intended purpose.

These developments have drawn criticism at both federal and state levels. Some regional leaders have pointed out that the lack of clear investment stipulations for the additional funds distributed to states has led to a situation where the money is used to fill budget gaps instead of supporting new projects. This, they argue, reduces the effectiveness of the special fund in delivering tangible benefits to citizens.

Calls for policy adjustments continue as stakeholders urge the government to enforce stricter guidelines on the use of special funds, ensuring that these resources are dedicated to forward-looking investments rather than short-term financial management.