Investments of 500 billion euros: Will the German economy be saved?

Investments of 500 billion euros: Will the German economy be saved?

On March 17, 2025, the Volkswagen Foundation announced that it was planning extensive investments in German infrastructure of around 500 billion euros in the coming years. However, this massive spending has not gone without criticism: economists warn that it may not guarantee the hoped-for economic recovery. The discussion about appropriate fiscal policy strategies is intensifying, especially with regard to the challenges posed by fiscal policy.

As part of this debate, the research project “Democratically Legitimized Fiscal Policy in Times of Change” was launched. Various institutions are involved in this project, including the University of Mannheim, the University of Jena and the Kiel Institute for the World Economy (IfW) as well as the Future Department (DZ).

Fiscal policy in focus

Fiscal policy plays a central role in economic management. Their goal is to compensate for economic fluctuations and create stable economic conditions, such as finanzen-und-wirtschaft.de explained. Fiscal policy includes adjustments to both government spending and tax revenue. The strategies can vary: from an expansionary fiscal policy to stimulate the economy to a restrictive fiscal policy aimed at slowing economic growth and reducing debt.

The challenges of fiscal policy are diverse. Measures therefore require time to develop their effect. Capital tied up in the long term, for example in infrastructure projects, cannot be redeployed quickly. Social acceptance of measures such as tax increases is also often problematic.

Development of a sustainable fiscal policy

In this context, the research project led by Prof. Dr. Michael Müller's goal is to develop a sustainable and trustworthy fiscal policy that simplifies the regulatory framework. Müller focuses on analyzing the legal framework for national debt in Germany, also taking the European Union and the Basic Law into account.

Questions that will be addressed as part of the project relate, among other things, to the limitations of the principle of democracy and European regulations that affect Germany's ability to act fiscally. Another goal is to strengthen trust in major investments, such as in education or infrastructure projects.

A clever design of fiscal rules could be crucial for economic change and ensure long-term social, ecological and financial sustainability.

Prof. Dr. Michael W. Müller from the University of Mannheim and Yvonne Kaul in research communication are available to answer questions. Müller can be reached at +49 621 181-1429 or by email at m.muellermail-uni-mannheim.de. Kaul can be contacted at +49 621 181-1266 or kaulmail-uni-mannheim.de.