Clarion call

Social Democrats Propose Infrastructure Upgrade

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Wired up for action. Investment in Germany's Internet would bring it up to par with its European neighbors.
  • Why it matters

    Why it matters

    Germany’s Social Democrats are hoping a new electoral platform, including an ambitious spending proposal for Germany’s crumbling infrastructure, will revive their electoral fortunes.

  • Facts

    Facts

    • Sigmar Gabriel, the SPD chairman and economy minister, has proposed spending €60 billion per year to modernize the country’s infrastructure by 2025, partly using public-private partnerships to reach the goal.
    • The goal of a proposed €100 billion upgrade in digital infrastructure is to create a fiber-optic gigabite network.
    • Another objective of the modernization plan is to increase R&D spending from about 2.8 percent of GDP today to 4 percent by 2025.
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    Audio

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Germany’s economy is growing and the country has more jobs than ever before. But it’s time to spend before the good times end, according to Germany’s vice chancellor and economics minister, Sigmar Gabriel.

Mr. Gabriel, who leads the Social Democratic Party, the junior partner in Angela Merkel’s governing coalition, has proposed a major new public-private investment plan to address the country’s crumbling infrastructure. He argued that cheap oil, the weak euro and low interest rates are helping Germany’s economy and its budget – but these benefits won’t last for ever.

“If we want to continue living well in the years ahead, we need to make reforms today and address our huge modernization backlog,” Mr. Gabriel said.

He set out a reform program worth an annual €60 billion, or $65 billion, up to 2025, to upgrade the country’s broadband Internet and improve innovation, electric mobility and education.

It marks the latest effort by Mr. Gabriel and the Social Democrats to increase their party’s fortunes ahead of key state elections and another federal election scheduled for 2017 – and also answers some international criticism that Germany has been too frugal over the past few years.

Angela Merkel’s Christian Democrats, who have made balancing the budget a priority in recent years, are unlikely to agree to the new spending proposal.

“Germany has what it takes to continue growing.”

Nils Schmid, SPD politician

Mr. Gabriel presented the plan in a speech in Stuttgart, as his party launched an election campaign in the surrounding state of Baden-Württemberg.

Country-wide, the center-left Social Democrats’ approval ratings are stagnating and the party is trying hard to gain a foothold in three state elections which take place this coming March. Mr. Gabriel, who leads the SPD party, was nominated last month to once again challenge Ms. Merkel for the chancellorship in 2017.

Mr. Gabriel presented his program as part of a three-pronged attack. Beyond launching the Social Democrats’ campaign in Stuttgart, he has issued the annual economic report on Wednesday and will deliver a government policy statement on Thursday. He also chaired a meeting with the party’s state economics ministers in Stuttgart.

The new infrastructure program’s chief focus is upgrading broadband infrastructure, which would receive €100 billion up to 2025 to raise bandwidth to 500 MBit per second, “mainly from private but also from public funds.”

Mr. Gabriel’s proposal envisages spending from the government and the private sector, and he called for an end to “ideological taboos.”

But the investment proposal was met skepticism both for its involvement of the private sector in public projects and for its cost.

Germany has balanced its budget under the governing Christian Democrats and has been reluctant to take on new debt, though voices from the left have criticized that the achievement came at the cost of failing to invest in infrastructure.

The Social Democrats argued that government debt cannot be off-limits, as the investment proposal could threaten the country’s balanced books.

The largest chunk of money would be invested in digital infrastructure, aiming to create a fiber-optic gigabit network. The governing coalition is already working to achieve connection speeds of up to 50 megabits per second throughout Germany by 2018 but this, according to the SPD, is merely an “interim step.” The policy statement noted that bandwidths of 500 megabits per second and higher would soon be needed as technical requirements increase.

The government’s targets have been criticized in the past for lacking ambition. Germany lags behind other countries: In the United States and Japan, for example, Internet connections are faster.

Mr. Gabriel also promoted a major investment in innovation. By 2025, the proposal sought to raise research and development spending to more than 4 percent of gross domestic product, compared to the current 2.8 percent. Germany has only once reached the level recommended by the European Union of 3 percent, despite urging from the government’s innovation team.

An increase would be costly for the federal government because it currently pays for a third of R&D expenditure. One casualty of the SPD’s proposal is a long-anticipated tax credit for small and mid-sized companies. The tax bonus, common among industrialized nations, was on all the parties’ electoral platforms before the election but wasn’t included in the coalition agreement.

Nils Schmid, the finance and economy minister from the state of Baden-Württemberg, also promised a “moratorium on bureaucracy for business founders in the first year of their company’s existence.”

“Germany has what it takes to continue growing,” Mr. Schmid said.

E-mobility was another element of the proposal. To speed up the switch to renewables, part of Germany’s transition away from nuclear power and toward renewable energy, the SPD wants to make road traffic more environmentally friendly.

To reach the government’s goal of putting one million electric cars on roads by 2020, the party wants to create purchase incentives for e-vehicles – incentives it has failed to achieve in the governing coalition so far. The SPD also called for “targeted investments in expanding the charging infrastructure.” In general, the Social Democrats want to bring Germany’s investment ratio to a level “significantly above the OECD average” by 2025.

In parallel to investments in infrastructure, the SPD also stressed the need to invest in people and the government aims to support states in the short term.

As people continue to come to Germany fleeing war and poverty in the Middle East and North Africa, the pressure on schools has also increased.

According to estimates by the SPD, 25,000 more teachers are needed to educate the children of refugees alone. There had been initial estimates that 20,000 more were needed and the party had hoped many of these positions could be filled by the additional numbers of trained teachers who aren’t employed as the student population has declined.

But politicians of all stripes agree that schools and daycare centers, in particular, need to be upgraded both quantitatively and qualitatively. According to the SPD estimate, at least 20,000 new educators will be needed alone for daycare centers.

 

Barbara Gillmann writes about education, research, family policy, demographic development and Germany’s Green party. To contact the author: b.gillmann@handelsblatt.com

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