Germany wants to mobilize trillions of private capital for its infrastructure. At least international investors seem to be ready for this. But private capital is not free for the state. So why would it want it at all?
Germany has an infrastructure problem. There seems to be less and less lack of money. By 2040, the German government wants to mobilize up to 3.75 trillion euros in private capital – in addition to 1.9 trillion euros in public investment.
At least among international investors, there seems to be no lack of interest or capital.
Martin Blessing, Chancellor Friedrich Merz’s personal investment representative for foreign investment in Germany, recently reported in the Financial Times on talks with more than 200 international investors. Many of them are even consciously looking for ways to reduce their strong dependence on the US and the US dollar. Germany can score points with economic stability, high state creditworthiness and a reliable legal system.
Blessing sees the bigger bottleneck on the other side: in the willingness of German public authorities to cooperate with private investors. International investors would like to see more speed, especially in public-private partnerships and leasing models. Blessing is convinced that infrastructure projects can often be implemented faster and more efficiently with private capital than by the state alone.
At first glance, this sounds like another German investment blockade. But the reluctance of the public sector raises a quite legitimate question: Why should the state be particularly keen on private capital in the first place?
After all, if the sole purpose of a private investor was to provide the state with money for a bridge, this would be a rather questionable business for the public sector in a state like Germany. The federal government can procure the required capital more cheaply via government bonds. A private investor, on the other hand, expects an appropriate return on the capital it invests.
The surplus value of private capital must therefore arise beyond the mere provision of capital .
And this makes the actually interesting question from Blessing’s statements visible: If private capital is more expensive – what can it do better than the state?
For example, managing risks. The planning, construction, operation and maintenance of infrastructure entail very different risks. The purpose of a public-private partnership can be not simply to transfer these risks to the private sector as much as possible, but to locate them where they can best be controlled. Construction and cost risks can be distributed differently than, for example, regulatory or political risks.
A second advantage can lie in terms of the entire life cycle . Those who only build a road initially have an incentive to build cheaply. Those who then have to operate and maintain it for decades are more interested in what the supposedly inexpensive solution will cost later. If planning, construction, operation and maintenance are thought of together, other economic incentives can therefore arise.
And finally, it is about speed and implementation capacity. Germany can provide a great deal of public money for infrastructure. However, this does not mean that a power line has been planned, a bridge has not yet been renovated, and no kilometre of rail has been built. If private capital mobilises know-how, management and additional planning, construction and implementation capacities at the same time, this could be its most important contribution at the moment.
In the end, therefore, there is not an ideological, but a rather sober calculation: Are the advantages of private participation greater than the additional costs of private capital? The discussion about whether public or private capital is better should not be ideological or characterized by fundamental reservations. Rather, the decisive factor is: Who can do what better – and how can project risks be distributed sensibly?
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In any case, the fact that international capital wants to finance German infrastructure is good news. And if German fund structures and thus the German fund location also benefit from this, all the better. After all, infrastructure policy, capital mobilisation and location policy do not have to be separate disciplines . But for the time being, this is probably no more than a faint hope.
