State Investment Backing Suggested by Achleitner
In a significant move aimed at boosting private investment, former Deutsche Bank chairman Paul Achleitner has proposed the use of state-guaranteed loans for Germany's infrastructure and defense investments. This proposal is part of a historic public investment push, with the German budget for 2025 allocating €115 billion, or 22.8% of total spending, towards public investments to enhance growth and military readiness[1][2].
The proposal, which focuses on Germany's renewable energy sector as well, is intended to stimulate private capital in large-scale projects. The German government plans to create a €500 billion infrastructure fund over 12 years to finance transport, decarbonization, housing, and defense projects[1][2].
While the specific details of the state-guaranteed loans proposal are not yet fully outlined, it forms part of Germany’s broader fiscal strategy to increase public and private investments in critical sectors, supported by constitutional reforms allowing defense borrowing above previous limits and large-scale public funding[1][2].
It is important to note that this proposal does not guarantee the effectiveness in attracting private investment, whether for renewable energy projects or otherwise. However, the success of this approach has been demonstrated elsewhere[1][2].
In contrast, Hermes covers are insurance guarantees provided by the German government to secure export transactions. These guarantees protect exporters and banks against political and commercial risks, facilitating exports by reducing financial risk for private companies dealing internationally[3]. The European Investment Bank (EIB) Group recently approved a deal with the German Export Credit Agency to provide pan-European guarantees for companies trading with Ukraine, demonstrating how Hermes-like cover arrangements facilitate secure trade and investment[3].
Comparing the two, state-guaranteed loans are designed to encourage private capital in large-scale infrastructure and defense projects domestically, with extensive government backing, forming part of a broad public investment agenda. Hermes covers, on the other hand, primarily facilitate secure trade and international transactions by mitigating risk for exporters[1][2][3].
Paul Achleitner's proposal does not mention any potential risks or drawbacks associated with state-guaranteed loans for renewable energy projects. It is also unclear whether the terms or conditions of the state-guaranteed loans for renewable energy projects will differ from those for infrastructure and defense investments. Furthermore, the proposal does not specify the amount or duration of the state-guaranteed loans for renewable energy projects[1][2].
References: [1] Handelsblatt (Monday edition) [2] German Federal Ministry of Finance [3] European Investment Bank (EIB) Group press release, 12th April 2023
The proposal, intended to stimulate private capital in large-scale renewable energy projects, is part of Germany's plan to create a €500 billion infrastructure fund for financing various projects, including transport, decarbonization, housing, and defense.
This state-guaranteed loans proposal, forming part of Germany’s broader fiscal strategy, aims to increase public and private investments in critical sectors, focusing on infrastructure and defense investments, as well as renewable energy.
