Merkel challenger plans investment offensive in Germany

Reuters News
Posted: Jul 04, 2013 11:43 AM
Merkel challenger plans investment offensive in Germany

BERLIN (Reuters) - Germany's main opposition party plans to boost infrastructure spending by 80 billion euros a year if it wins a federal election in September, with the help of funds raised by hiking taxes on high earners.

"Germany needs an investment offensive to help it modernize," the Social Democrats (SPD) said in a paper emailed to Reuters.

After years of restrained government spending, the low level of investment in Germany's infrastructure ranging from the 12,800-kilometre network of motorways to public buildings has become the subject of intense debate between federal and regional authorities.

The SPD said in the paper that its plan, spearheaded by party leader Peer Steinbrueck, would increase the investment quota of Europe's biggest economy by three percentage points to 20 percent of gross domestic product (GDP).

The center-left party is lagging Chancellor Angela Merkel's conservatives by up to 19 points in opinion polls, but after September's vote the two groupings could in theory find themselves together in a coalition, as happened from 2005 to 2009.

Michael Heise, chief economist at Allianz has described the lack of investment as "Germany's only weakness".

Steinbrueck wants private investors to raise the lion's share of the 80 billion euros, with the government funding its contribution via higher taxes for high earners and the rich. He does not intend to take on new public debt.

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"We cannot use new loans to finance our investment for the future," said the paper, which gave no details of tax or other incentives for private contributors.

The government and Germany's 16 regional states would spend a combined 20 billion euros per year on education and science, the paper said.

Steinbrueck also said the federal government's annual budget for infrastructure should be raised by 2 billion euros to 12 billion euros. He also wants to spend more on developing the country's broadband infrastructure.

(Reporting by Matthias Sobolewski; Editing by John Stonestreet)