Economic stimulus packages: missed opportunities for long-term growth

DIW Berlin Weekly Report 43/2009, pp. 748-752

50 billion euros – the federal and state governments have responded to the severe recession with an unprecedented economic stimulus package. With 23.6 billion euros, almost half of these funds are earmarked for public investments. These debt-financed measures are not only intended to support the economy in the short term. Rather, the declared aim of the policy is to ensure long-term growth with the package. But can this work? In order to verify the claim it has made, DIWecon examined the use of the economic stimulus funds from the special fund “Investment and Redemption Fund” and the “Investment for the Future Act” that had been earmarked by mid-August 2009. Specifically, the consulting subsidiary of DIW Berlin analysed whether and to what extent the funds were used in growth-relevant fields in which Germany has a particular need to catch up compared to other European countries. These include measures to promote research and development and the information society, the expansion of a modern, fast internet infrastructure, improvements in the quality of education, improvements in the health sector and measures to improve energy efficiency and climate protection. Overall, the analysis comes to a less optimistic conclusion than hoped for by the policy announcements. Only about 30 percent of the expenditures earmarked for investments go beyond maintaining the status quo and actually represent the politically conjured “investments in the future”. The scrapping premium and the high investments in the existing transport infrastructure stand out negatively in particular. Education and health, on the other hand, were hardly promoted by the stimulus funds.

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