Draft bills on Germany’s infrastructure fund: what matters after this strong signal

With an infrastructure package worth hundreds of billions of euros, the German government wants to respond to outdated infrastructure, housing shortages and the faltering energy transition. The aim is to enable the federal government, federal states and local authorities to implement investments for climate protection and structural change more quickly. The focus is on forward-looking projects in the field of renewable energy. However, the implementation of this “special fund”, which was approved by the German Bundestag in March by amending the Basic Law, still needs to be specified in more detail.

Ministry of Finance presents drafts for two establishment laws

In June, the German Federal Ministry of Finance (“BMF”) presented draft bills for an Act on the Establishment of a Special Fund for Infrastructure and Climate Neutrality (“SVIKG”) and an Act on the Financing of Infrastructure Investments by the Federal States and Municipalities (“LuKIFG”). The two laws are intended to create central financing instruments for the transformation of infrastructure and administration.

The draft laws of June 11, 2025 implement the coalition agreement with regard to the 500 billion euro package in binding structures, with a clear legal basis, budgetary security and a financial volume of EUR 100 billion for the federal states, distributed according to the “Königstein” key.

What is regulated

• Investment measures from EUR 50,000 per project are eligible for funding, no replacement financing, no double funding.
• Non-city states must invest 60 % of the funds in municipal infrastructure.
• Funding for state and municipal projects starts on November 1, 2025; federal funds take effect upon budget release.
• One third of the funds must be legally committed by the federal states by the end of 2029.
• Reporting obligations of the federal states and municipalities as well as the audit rights of the federal government and the Federal Audit Office are comprehensively regulated.

What remains open

• The content of the funding has so far been vaguely formulated; concrete types of measures, quotas and climate criteria are lacking.
• The future role of the development banks and the use of suitable funding instruments have not been clarified.
• Federal funding is implemented via annual business plans, which must be approved by the Bundestag. The first business plan is scheduled for fall 2025. The state funding will be specified via bilateral administrative agreements between the federal government and each state. A uniform funding practice at state level is therefore not foreseeable.

Bilateral agreements between the federal and state governments: Is there a looming federal hotchpotch?

The administrative agreements between the federal and state governments are the bottleneck for implementation. They determine procedures, responsibilities and funding conditions and decide whether the programs are designed to be impact-oriented and relieving or small-scale and bureaucratic. Although this system creates country-specific leeway, it also creates the risk of a federal hotchpotch in the already confusing funding landscape.

Experience has shown that the draft bills will still undergo some changes during the ongoing legislative process. We will keep you informed of changes and developments on our website.

This is what the federal government, federal states and municipalities should consider in further implementation

Reducing bureaucracy can only be successful if structures are created at an early stage – not only when the funding measures are started in practice. The federal, state and local authorities, including the state development banks, should take the following measures with regard to the infrastructure package’s upcoming implementation:

Creating structure instead of special paths

The administrative agreements must be designed to work nationwide, but also leave room for state-specific solutions.

Setting clear standards

Minimum requirements for evidence, deadlines and procedures should be defined in advance in a legally secure and practicable manner, thus allowing for a smooth implementation of the funding measures at the start of funding.

Select suitable financing instruments

Experience from the development of funding programs shows that it is not only the funding content that matters, but also the appropriate financing instrument or financing structure. The infrastructure package can only have the desired leverage effect if the appropriate financing structures are created.

As experienced funding and financing specialists, we bring together both the administrative logic and the financing structure. We bring a neutral view from the outside and ensure that processes become simpler and implementation succeeds before bureaucracy even arises.