Germany's multi-billion-dollar investment package: A turning point for European investments?

The German Bundestag and Bundesrat have given the green light to a multi-billion-euro investment package. Large public investments in defense and infrastructure are planned. This marks a significant departure from Germany's previously conservative fiscal policy.

According to current plans, some 500 billion euros, or nearly 12% of today's GDP, will be invested in infrastructure modernization over the next ten years. This special fund will be financed by new loans and will be issued as "special debt". This means that it will not be subject to the strict requirements of the debt brake. The aim of these measures is to promote economic growth in Germany.

These sectors could benefit from the multi-billion-euro package

The program is likely to strengthen the economy of the entire eurozone. In addition to the defense sector, which has come under increasing scrutiny in recent years, several other sectors of the economy are likely to benefit significantly from these investments.

1. Infrastructure and Construction

   Much of the planned investment will go into renewing and modernizing Germany's infrastructure. This includes roads, bridges, railways, and waterways, which are in urgent need of repair after decades of underinvestment.

   Housing construction will also be encouraged. The aim is to address the ongoing shortage of affordable housing. Companies in the construction industry, i.e. manufacturers of building materials and providers of infrastructure technologies, could receive a particular boost. Manufacturers of building materials could also benefit from increased demand for insulation and windows.

2. Industry and Engineering

   Germany is one of the world's leading industrial nations. As a result, a significant portion of investment is expected to go toward expanding industrial production capacity. In particular, companies in the mechanical engineering and automation technology sectors are expected to benefit from the investments. Large companies could benefit from an increase in government contracts for infrastructure modernization and smart factories. At the European level, suppliers should also be among the beneficiaries.

3. Energy and Sustainability

   A significant part of the investment package, 20%, will be devoted to energy transformation. Germany has ambitious targets for reducing CO2 emissions and promoting renewable energies. As a result, the expansion of wind and solar energy will be significantly advanced, which could strengthen a large number of companies in the energy sector.

4. Transport and Mobility

   The modernization of local and long-distance public transport will be another focus of the planned investments. Deutsche Bahn will receive up to 150 billion euros to expand and modernize its rail network and trains. This should lead to increased order volumes for suppliers such as brake manufacturers for rail vehicles. In addition, the expansion of electric mobility will be further promoted in order to reduce CO2 emissions in the transport sector. The major German car manufacturers could see increased sales due to higher subsidies for electric vehicles and charging infrastructure. Suppliers specializing in electric mobility components are also likely to benefit from government investment. It should be noted that the German automotive industry is currently under pressure and is the target of US sanctions. The logistics sector is also expected to gain momentum.

5. Digitization and Technology

   Digitization is one of the key tasks of the investment package. In particular, the expansion of the fiber optic network and the implementation of 5G technologies are to be promoted. This should strengthen telecommunications companies. Companies that offer software solutions for digital infrastructures should also benefit from the increased digitization in government and industry.

Conclusion

The German government's multi-billion investment package represents an opportunity for many sectors of the economy. While the defense sector is at the center of the investment, there are many other areas that are likely to be strengthened by the government's spending spree: infrastructure, energy, construction, transportation, industry, and digitalization all offer potential opportunities for investors.

In addition to German companies, there are also companies outside of Germany that could potentially benefit as suppliers or partners. In the long term, we believe that the investment package could not only boost the German economy, but also have a positive impact on the whole of Europe, including Switzerland.