Economic Policy and Infrastructure

Infrastructure

The need for action can no longer be denied. The German federal government has therefore decided to significantly increase the level of investment. For the years 2016 through 2018 investments of 6.15 to 6.63 billion euros are planned.

Infrastructure investments

Too little has been invested in infrastructure in Germany for decades. This has caused a backlog of investment to get bigger and bigger. For proper financing of federal highways, the Federal Ministry of Transport estimates around 7 billion euros annually. The Cologne Institute for Economic Research places the need even higher, at 8.3 billion euros. Despite increasing government revenues, actual investment in the past 15 years averaged only 5.2 billion euros. 

Because expansion has long been neglected, traffic backups are becoming longer and longer. In 2015, they added up to a length of 1.1 million kilometers on freeways alone. At the same time, the condition of existing roads deteriorated. In the last extensive quality measurement in 2009/2010, according to the Federal Ministry of Transport, 17 percent of freeway kilometers were found to have exceeded warning levels. This means that the roadway surface is in a condition at which planning for preservation measures must be started. For federal roadways, this number is almost 35 percent of total road kilometers. Almost half of bridges (47 percent) exceed the warning value. This is a serious safety problem. Bridge closing also often causes backups, lost time and emissions. 

The need for action can no longer be denied. The German federal government has therefore decided to significantly increase the level of investment. It will not actually reach the necessary 8.3 billion euros per year. Nevertheless, investments of 6.15 to 6.63 billion euros are planned for the years 2016 through 2018. This will give a substantial boost to the modernization of federal highways. This level should be further increased in subsequent years.

User financing

The higher investments, however, are largely financed by new burdens on road users. The truck road charge has been significantly expanded. In July 2015 the fee was extended to an additional 1,100 kilometers of federal roadways. Three months later, commercial vehicles above 7.5 tons total permissible weight also became subject to the charges. The previous limit for the fee was 12 tons. The tax authorities expect additional revenues of 380 million euros per year from the two measures. In a further step, the truck road charge will be extended to all federal roadways by mid-2018, which should bring another 2 billion euros per year into federal coffers. This demonstrates that the additional investment is largely paid for by road freight transport. 

The expansion of truck road charges to include federal roadways in particular does cause problems, however: federal roadways have a regional economic function that is different from that of freeways. They serve as transport routes for local small businesses for short or medium distances, supplying the surrounding region. A universal federal roadway charge would not only affect the small-business economy, but also put structurally weak regions far from freeways at a disadvantage. 

In addition, the CDU, CSU and SPD agreed to introduce a passenger-car road charge in their coalition agreement of 2013. This charge, according to the text of the contract, should include foreign passenger cars in the financing of infrastructure, without increasing the burden on domestic vehicle owners. The coalition agreement does stipulate, however, that passenger car road charges must conform to European law when instituted. Draft legislation to this effect from the Federal Transport Ministry, however, has been criticized by the EU Commission. It alleges discrimination against foreign vehicle owners, and has therefore initiated breach of contract proceedings that could lead to a ruling by the European Court of Justice.

In response, the German government put the legislative process on hold in June 2015. The German automotive industry fundamentally rejects any further burdens on road transportation, and therefore rejects the passenger car road charge as well. 

Higher feeds for road transport are also unjustified because road users pay nearly three times as much in taxes and fees as the state pays out for roads. In 2015 alone, payments for petroleum taxes, value-added tax on the petroleum tax, motor vehicle registration taxes and truck road charges added up to over 54 billion euros. Construction and maintenance of federal, state and municipal roads received just 19.6 billion euros. The majority of tax revenues are used for other purposes that have nothing to do with transportation. This means that the money for proper investment is there.

Politicians have now recognized the problem of inadequate financing for the transport infrastructure. The grand coalition has agreed to increase the volume of investments in transport routes by about 1.3 million euros annually during this legislative period. However, the level of investment going into federal highways will only increase to 5.5 billion euros on average during the years from 2014 to 2017, meaning that it will continue to remain well short of actual requirements even over the next few years.

Reform of contract management

Because infrastructure investment remains well below need, efficient use of resources is all the more important. The system for contract management, above all, needs reform. Today, the federal government determines the need for expansion and new construction and provides financing to the federal states. The states, in turn, are tasked with planning the individual construction project with their own personnel. For example, they set priorities for projects based on the interests of their own state. The effect of this is that federal objectives for the federal highway system are not always implemented, or additional costs can occur. Reform of contract management is overdue. 

The German government is therefore pursuing a reorganization of responsibilities. It plans to establish an infrastructure organization at the federal level. This would take over financing, planning, construction, maintenance and operations, at least for the freeway system. The organization would also receive the road charges for freeways in order to be able to plan and finance projects over several years. The income from these charges would also need to be supplemented by resources from the general budget, for example by dedicating part of the income from petroleum taxes.

Dr. Michael Niedenthal
Dr. Michael Niedenthal Head of Department Transport policy

Tel: +49 30 897842-360 Fax: +49 30 897842-600
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