Berlin launches ‘Germany Fund’ to lure private equity investors
Initiative aims to raise €130bn in investments amid growing interest from firms including KKR and Apollo
Friedrich Merz’s government is launching a “Germany Fund” to attract up to €130bn in private investments for higher-risk projects, a move designed to supercharge a massive public infrastructure and defence spending drive aimed at reviving the German economy.
The so-called Deutschlandsfonds, which will be anchored in state development bank KfW and led by its chief executive Stefan Wintels, would be seeded with about €30bn in public money and loan guarantees, according to two people with knowledge of the matter.
It will offer an array of investment vehicles and projects to channel private funds into sectors including tech and defence start-ups, energy infrastructure and critical minerals projects. An official announcement by the finance and the economy ministers is scheduled for Thursday.
The initiative is part of efforts by the ruling coalition to pull Europe’s largest economy out of stagnation, as it battles high energy prices and fierce Chinese competition in its traditional export markets.
Stagnation and deindustrialisation are also fuelling support for the far-right Alternative for Germany party, which won more than a fifth of seats in parliament in elections earlier this year.
Since taking office in May, Merz has set out plans to inject more than €1tn in public spending over the next decade to renovate Germany’s dilapidated infrastructure and upgrade its neglected armed forces. But his government was also seeking to attract private capital to amplify the growth effect, according to government insiders.
“We have done a lot in terms of unlocking funds for public infrastructure and the military, but Germany needs much more and we can’t just rely on public money,” said economist and finance ministry adviser Jens Südekum.
The idea was to facilitate debt financing for projects banks are reluctant to fund, he said, referring to a lithium mining project in Saxony, which just received federal state support.
One of the people with knowledge of the details said US private equity fund managers KKR and Apollo had recently met German officials in Berlin to express an interest in investing in the country.
The finance ministry declined to comment on the details.
Start-ups have long complained that the lack of capital was pushing them to seek funds and list abroad. The Germany Fund initiative was a “step in the right direction”, said Verena Pausder, head of Germany’s start-up association.
Merz’s government has sought to put the finishing touches to a series of reforms before the end of the year. This week, the cabinet approved a plan to encourage Germans to tap capital markets to boost their private pensions. From next year, it will offer all six-year-olds €10 a month until the age of 18, which their parents will be able to invest in state-backed savings accounts.
After some coalition infighting between Merz’s Christian Democrats and its Social Democrats partner, the cabinet also agreed on speeding up planning permits for infrastructure projects, which have often been blocked by stringent environmental rules. But the big test will come next year, with a planned overhaul of the country’s costly pension system and health insurance.
“We will also have to make further structural reforms next year so that our economy becomes competitive again, because we’re still a long way off where we really need to be,” Merz told parliament on Wednesday.