Press Release No. 51/2015 IG Metall Calls for Fair Financing of Public Investments

Berlin – IG Metall has spoken out against the federal government’s plans to establish a state-controlled infrastructure company that would use private capital to build federal highways. “Private investors are profit-driven; they want to achieve high returns. The money for these returns doesn’t just fall from the sky. It must be provided by the client—that is, the state,” said Wolfgang Lemb, executive board member of IG Metall, at the union’s investment policy conference on Wednesday in Berlin.

Instead, the government could finance itself much more cheaply by borrowing directly. Interest rates on long-term federal bonds are currently extremely low and therefore represent the better alternative. Furthermore, the Federal Audit Office’s analysis has shown that public-private partnerships are more expensive than conventional public financing for nearly all highways.

Instead of paying high interest rates on private capital with public funds, IG Metall is calling for a pact on the fair financing of public investments: “This includes ensuring that public investments are financed primarily through tax revenue,” said Lemb. This is the most cost-effective way to utilize private funds—which cannot find sensible investment opportunities—to finance public investments. To achieve this, existing tax breaks for high net worth individuals, high incomes, and inheritances would have to be phased out. IG Metall opposes further corporate tax cuts because they have not triggered additional investment in the past.

Furthermore, Lemb called on the government to fully utilize its fiscal policy leeway for borrowing. In 2016, this leeway was estimated at 18.6 billion euros. In addition, public investments must once again be exempted from the debt brake enshrined in the Basic Law. Under the so-called “Golden Rule,” new public borrowing equal to the amount of public investments would then be permitted again. “This is also in the interest of future generations,” said the union leader.