Berlin Airport shows the new German government how not to finance growth

Last fall, in the first few months of the Covid pandemic, the new Berlin Brandenburg Airport made its debut Opened the door — 10 years late, the total cost is at least 7 billion euros, which is twice and a half of the original budget.

The state-run airport project, which has been widely regarded as an embarrassment for the country, has lasted for 30 years, and this is not an isolated case in Germany’s transportation infrastructure record.The construction of the new railway station in Stuttgart is now Fraud allegations, Has cost 8.2 billion euros, higher than the initial 2.5 billion euros.

For the FDP, the “Amber” member of Germany’s incoming traffic light coalition government, these examples highlight the shortcomings of entrusting large infrastructure projects to public sector managers and budgets.

As the government prepares to take office this week, this 176-page Alliance agreement The obvious impact of FDP is the foundation that supports it, especially in the “Future Investment and Sustainable Financing” section.

In order to ease the consumption instincts of the dominant Social Democratic Party and the Green Party, despite the alliance’s promise of “10 years of investment”, it still insists on maintaining the country’s “debt brake” to limit Germany’s structural deficit. The plan includes “unprecedented additional expenditures”, partly because of promises to “activate more private capital for transformation projects.”

Professional infrastructure operators, cash-rich insurance companies and capital markets in the country have been long-awaited Union of Capital Markets in the European UnionAccording to senior officials, they will all become important providers of this private capital.

A key paragraph inserted at the insistence of the FDP advocates the expansion of public-private partnerships, which has been a key pillar of the UK’s infrastructure renewal since the 1990s-although not so frequently recently.UK National Audit Office data show Peak volume It reached 8.6 billion pounds in 2007, when more than 60 transactions were concluded, and in recent years it has been almost zero.

Germany’s enthusiasm for PPP also shows a similar declining pattern, although the number is much smaller— At the peak of 2007According to the consulting group Partnerschaft Deutschland, 38 transactions were completed with a total value of 1.5 billion euros. 2019 was the last year for which data was available, and only three transactions were completed, valued at only 66 million euros.

These models reflect mixed judgments on the effectiveness of PPP. Since the 1990s, the UK National Audit Office has been criticizing the value of funds obtained for a series of projects. Advocates in Germany, such as the BDI Employers’ Federation, point out the benefits: Without the partnership of the private sector, the world’s leading fast-upgrading highway network would not be possible. The prices paid by drivers through toll roads diverged public opinion.

The new alliance agreement clearly states that private sector funds should be used to support a wide range of investment priorities-environmental protection, digitalization, education, research, and infrastructure.

By design, the tension lies between the government that wants to minimize costs and the private sector that is keen to maximize returns. This was not recognized in the alliance agreement, although some figures in the new government were clearly skeptical of private sector funding, especially given the ultra-low interest rates on German government debt. “Why should we pay the private sector when we can have zero financing?” Ask one.

An insurance executive stated that officials’ view of private funds as relatively expensive debt financing is wrong: on the one hand, private sector funds should bring operational expertise; on the other hand, cash is best not used as debt , But used as equity, protected by a state-backed first loss buffer to help control cost overruns that undermine Berlin Airport’s budget.

With or without PPP, the new government has other strategies to get rid of the debt brake. For example, the existing development bank KFW appears to be recapitalized—a process that should not increase government debt. The bank can then help fund large transformation projects. The agreement proposes a similar method to increase the financing of state-owned Deutsche Bahn and state-owned real estate agency Bima.

As Olaf Schultz The incoming Prime Minister of the Social Democratic Party is seeking the right balance with his new Liberal Democratic Party Finance Minister Christian Lindner, and perhaps they should look up. Even in the Covid era, there are enough planes flying overhead to Brandenburg Airport to remind you not to do this on a regular basis.

patrick.jenkins@ft.com

Source link

Leave a Reply

Your email address will not be published.