Opening the floodgates to German infrastructural investment

It’s been a disaster for thousands of people employed in water and boating tourism in Berlin, the surrounding state of Brandenburg, and the tourism infrastructure in Mecklenburg-Vorpommern, home to Germany’s largest network of lakes and waterways. For hundreds of boat charter companies, small marinas, commercial barge operators and countless motorboat tourists, the season just ending has been a write-off.

North-south traffic on the Havel river ground to a halt at the beginning of the summer. The Havel is the most important waterway linking Berlin and Potsdam to the Polish river network for hundreds of barges carrying coal and scrap metal for recycling, and the myriad lakes and tourist hotspots around the Müritzsee, Germany’s biggest stretch of inland water and the centre of tourism in Mecklenburg-Vorpommern, Germany’s poorest federal state – which has precious little other industry.

It started with the closing of the locks at Zaaren, in Brandenburg north of Berlin, then at another locks near Oranienburg, and then in May at the locks in Spandau, in Berlin itself, when a 3.5-tonne, 5-metre long bolt became defect, causing the locks to seize up, which they’ve remained since, closing the river to all traffic. The deadline of August for repairs has now been replaced by a new December date, and experience suggests that boat traffic will be lucky to see the locks on this key artery re-opened by the spring.

Water traffic around Berlin is often as critical for transport as the Rhine is for shipping goods between Rotterdam and the heart of Europe, although it’s much less visible. But those suffering heavy losses this year will be joining in the chorus of complaint about Germany’s crumbling infrastructure, and asking just how it is possible that routine jobs of engineering maintenance are simply not being carried out, or are subject to interminable delays.

For the problems on the river are being replicated up and down the land, with a massive backlog of infrastructure repairs blocking critical modernisation of roads, bridges, schools, social housing, and other public amenities. Germany’s neighbours have been screaming at it for years, urging it to spend and improve its facilities and cast aside the obsession with its ‘black zero’ approach to balancing the federal books. With recession approaching, they say, Germany should embark on a major investment drive and address the years of neglect of its public infrastructure.

What is now clear, though, is that money is not the problem. There’s plenty of money. The government has been putting money aside for years to tackle infrastructural challenges. Finance minister Olaf Schulz said recently that there is €15bn of unused funds lying around, fully 4% of the overall federal budget, but these are just not being drawn down. The speaker of the Bundestag, former finance minister Wolfgang Schäuble, told business leaders that of a €7bn fund for municipal investment, only €1.7bn had been drawn down, while a €9bn digital infrastructure fund remained untapped.

KfW, Germany’s state investment bank, reported in a survey recently that the country’s municipalities had planned investment expenditure of €35bn in 2018, but could only spend €23bn. They would have to spend €139bn to clear the backlog of urgent investment tasks, they reckoned.

So why is the money not being spent? We heard up at Spandau that the main man who could handle the task of replacing that 3.5-tonne screw had been let go through austerity cuts, and by the time he and a newly-trained crew could get back on the case, it would take a further six months.

This may be apocryphal, but it’s clear that Germany’s steady economic boom has sucked a lot of capacity into the private sector, with good people being lured away from public sector and municipal bodies to take the lucre available from private employers. Good public staff say they are frustrated by the lengthy tedious public tendering processes, and procurement rules sometimes so complicated that nobody bothers to bid to do the work.

Frustration, too, is mounting at the level of opposition to almost any infrastructural project, whether from bird or animal lovers, environmentalists, or any number of eco-warriors who can drag out the approval process for any project, from bridges to roads to windmills to mobile phone masts (phone operator Telefonica has a map showing 270 locations where there is known public resistance to installing more of its masts – don’t be surprised when your call gets dropped when passing near these areas). We’re hearing of competent municipal authorities who, anticipating inevitable resistance and opposition, make their planning procedures so complicated that they tie themselves up in helpless knots.

There are signs that things have come so far that the courts are looking at ways to cut through the opposition and accelerate planning and implementation for critical infrastructure projects. Given Germany’s recent history of troubled infrastructure projects – Stuttgart21, Berlin Airport, to name just two – some new laxative will have to be found to open the floodgates to all that public money that needs to be spent. Investors in real estate should get ready to broaden their gaze to embrace new opportunities.