If money alone is not enough to build bridges, will the ramp-up of investment in real-world construction, digital and energy projects succeed?
1. Introduction
One year on from the introduction of the exemption from the debt brake for climate neutrality measures, it is time to assess its implementation.
With the introduction in March 2025 of Article 143h of the Basic Law (“GG” which sets out the constitution of the Federal Republic of Germany), the legislature paved the way for the ‘Infrastructure and Climate Neutrality’ Special Fund (SVIK) with a credit line of up to 500 billion euros. The aim is to enable additional investment in infrastructure and measures to achieve climate neutrality by 2045. This applies a principle of additionality to the core budget.
Back in April 2025, we already examined the constitutional foundations of the special fund and the unresolved implementation issues. Since then, a framework for implementation has emerged from the landmark constitutional decision. This article traces the transition from announcement of the measure to its implementation, whilst highlighting the underlying legal risks.
2. The legal framework
2.1 Establishment of the special fund and three-pillar structure
The parliamentary process proceeded swiftly: on the basis of Article 143h of the Basic Law, the governing parliamentary groups of the CDU/CSU and SPD introduced the draft Act on the Establishment of a Special Fund for Infrastructure and Climate Neutrality (SVIKG) to the Bundestag in July 2025. Following its adoption in September 2025 and promulgation on 2 October 2025, the special fund was established with retroactive effect from 1 January 2025.
The structure of the SVIKG rests on three pillars: 300 billion euros will be channelled as federal investments into the sectors of transport, energy, digitalisation and hospitals; 100 billion euros will be allocated to the Climate and Transformation Fund (KTF) in ten annual instalments until 2034; and a further 100 billion euros will be made available to the federal states and local authorities. Approvals must be granted by the end of 2036, and repayment of the loans is to begin no later than 1 January 2044.
The allocation of funds is accompanied by a constitutional requirement of additionality (Article 143h(1) sentence 2 of the Basic Law). This is specified in ordinary law in Section 4(3) of the SVIKG. Investments from the special fund are considered ‘additional’ if the investment ratio of the core federal budget reaches at least 10% of total expenditure. This is a sum-based criterion that relates to the total volume of expenditure and not to individual measures. For the year 2026, the draft report of the Federal Ministry of Finance (BMF) shows a ratio of 10.5%, which is just above this threshold.
2.2 State and Local Infrastructure Financing Act (LuKIFG)
The LuKIFG implements the federal states’ share of 100 billion euros. The distribution is based on the Königstein quota system: for example, North Rhine-Westphalia receives around 21.1%, Bavaria around 15.7% and Baden-Württemberg around 13.1%. Capital expenditure projects eligible for funding are broad-based, including population, transport, hospital, energy/heating, education/care, science and digitalisation infrastructure) with a minimum investment volume of 50,000 euros. To ensure a rapid start to investment, the federal states must commit at least one third of their state-specific allocation by the end of 2029. Approvals are possible until the end of 2036, with payments until the end of 2043.
The federal government may conduct risk-based checks, and in the event of misuse of funds, recovery claims are possible until the end of 2045. Utilisation of the funds requires an administrative agreement between the federal government and the federal states. This came into force on 11 December 2025 and has since been implemented in the federal states.
3. Initial implementation – business plans and cash outflow
The SVIK’s financial planning is set out as an annex to Section 60 of the federal budget. The first financial plan for 2025 provided for expenditure of around 37 billion euros with a focus on transport infrastructure and bridge maintenance. In the economic plan for 2026, the budget – excluding the annual KTF allocation of ten billion euros – rises to 48.1 billion euros.
According to the Federal Ministry of Finance (BMF), around 24 billion euros were disbursed from the SVIK in 2025, whilst the federal government’s investment expenditure rose by approximately 17 per cent compared to 2024. A further ramp-up in investment is planned for 2026 with a total of around 120 billion euros to be invested this year, of which around 58 billion euros will come from the SVIK.
The statutory provisions require cost-effectiveness analyses in accordance with Section 7 of the Federal Budget Code (BHO) as well as accompanying evaluations in accordance with Section 10 of the SVIKG. For every measure financed from the SVIK, specific objectives must be formulated, which are subject to prior, ongoing and final performance reviews. In addition, the Federal Ministry of Finance (BMF) has established an Investment and Innovation Advisory Board to oversee the implementation of the 500-billion-euro package and to enhance transparency regarding progress and the achievement of objectives. Private companies can participate through public contracts and by taking part in funding programmes. The LuKIFG (Section 3(4)) expressly permits the involvement of private companies within the framework of contractual cooperation throughout the entire life cycle of infrastructure projects. This is also to be welcomed against the backdrop of the current skills shortage, as public contracting authorities often lack sufficient human resources and expertise for large-scale projects. This enables companies, as partners in PPP projects, to benefit from the funds of the special fund – particularly for investments in transport infrastructure, energy and digitalisation projects. Many funding programmes stipulate that private-sector recipients of funds are bound by public procurement law.
4. Accelerating planning through the Infrastructure Future Act (InfZuG)
Money alone is not enough to build bridges especially if the approval procedures take several years. The Federal Government is therefore pursuing a procedural offensive alongside the increase in funding. The InfZuG was debated at first reading on 26 February 2026.
Essentially, it concerns three points:
- Firstly, the classification of key transport and energy projects – including SVIK projects – as projects of “overriding public interest”,
- secondly, the standardisation of procedural law in planning approvals, streamlining spatial planning and environmental impact assessment (EIA) requirements, and
- thirdly, the systematic digitisation of the procedures.
According to the Federal Minister of Transport, this is expected to reduce the duration of proceedings by up to 30%.
The debate is polarised: whilst business and transport associations, as well as local government representatives, welcome the draft as “practical legislation”, environmental organisations and environmental law experts warn against a lowering of nature conservation standards and an overly broad interpretation of the “overriding public interest”. The Bundesrat has put forward over 100 proposed amendments.
5. Additionality
The principle of additionality is not merely a political promise but is also enshrined in constitutional law under Article 143h(1) sentence 2 of the Basic Law and specified in the SVIKG (investment ratio of approx. 10% in the core budget). The BMF’s 2026 target report certifies compliance or slight over-fulfilment. At the same time, there is public debate as to whether funds from the special fund are partially substituting existing allocations in the core budget. Representatives from academia and associations urge that the ‘shuffling’ effect be avoided and that genuine additional investments in line with the constitutional mandate be secured.
This concern is empirically underpinned by the ifo panel of economists from October 2025. The panel estimates the proportion of genuinely additional investment at just around 47%. In a recent study, the German Economic Institute (IW) concludes that around half of the funds are reallocated to current or already planned expenditure. The Federal Audit Office also criticised “recurring shortcomings” in the planning in a report to the Budget Committee in October 2025 . According to the report, the Federal Ministry of Finance (BMF) is “unable to define concrete economic growth targets and assess the contribution of the SVIK to this”.
The question of additionality is not only politically sensitive but also entails a tangible constitutional risk. If the investment ratio in the core budget remains permanently below 10%, there is no basis for classifying SVIK investments as ‘additional’ within the meaning of Section 4(3) of the SVIKG. As the additionality requirement is based on the constitutional provision of Article 143h(1) sentence 2 of the Basic Law, the relevant budget law would be open to challenge and the Federal Constitutional Court could declare the budget unconstitutional.
However, this would not result in any immediate legal consequences for already concluded contracts and completed procurement procedures. A declaration of nullity by the Constitutional Court generally has no effect on legal relationships that have already been settled, including contracts under private law. The risk therefore lies not with the individual contracts, but at the budgetary level: the legislature would have to secure funding for the investments in question by other means. In practice, this means that the investment ratio is not merely a programmatic statement, but a legally binding control mechanism, falling short of which could call into question the entire budgetary framework of the special fund.
On a positive note, however, the legislature has provided for numerous transparency mechanisms, including the public documentation of business plans, regular reports from the Federal Ministry of Finance (BMF), the Investment and Innovation Advisory Board, and the risk-based spot checks and clawback mechanisms enshrined in the LuKIFG. These form a tight-knit network of controls. Whether this holds up in practice remains to be seen.
6. Outlook and conclusion
The legal and organisational framework for the SVIK has been established with a constitutional basis (Article 143h of the Basic Law), an enabling act (SVIKG) and an economic plan. Furthermore, initial disbursements have been made and there is a growing project pipeline at both federal and state level. Three questions will determine the programme’s effectiveness:
Firstly: Will it be possible to implement the investment ramp-up into actual construction, digital and energy projects – particularly in the bottleneck areas of rail, bridges, energy/heating networks, education and digitalisation?
Secondly: Can the InfZuG have an accelerating effect without undermining constitutional standards (EIA, public participation, nature conservation)? The further parliamentary process will show whether the balance between speed and quality can be achieved.
Thirdly: Will additionality in the strict sense be maintained? Although the constitutional and budgetary mechanism is in place, the political assessment – including in the future – will depend on whether the special fund actually enables ‘new’ investments or replaces core budget funds. As shown above, this is not merely a political requirement but a constitutionally binding one, failure to comply with which could jeopardise the entire budgetary framework of the SVIK. The use of funds to date shows that compliance with the additionality principle is by no means a given. Looking ahead, the involvement of private capital in the context of PPP projects will therefore continue to gain in importance (see our article https://www.taylorwessing.com/de/insights-and-events/insights/2025/07/sondervermoegen-infrastruktur-und-klimaschutz-und-oeffentlich-private-partnerschaften). In short: The path from “whether” to “how” has largely been navigated. The funding has been constitutionally secured, the distribution mechanism for the federal and state governments is enshrined in law, and the disbursement of funds has begun, accompanied by an ambitious procedural reform for planning and approval. It is now up to the implementation to determine whether the SVIK lives up to its claim of providing an investment-driven modernisation boost.
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