Whether street, bridge or waterway, Germany's infrastructure is financed through taxes - but for how long? Low interest rates are prodding private investors to look for new investment opportunities.
Germany's roads and highways are crumbling, its waterways and locks falling into disrepair. Much of this country's infrastructure has its structural heyday behind it, yet more patches is not what this leaky pipe needs.
Much will have to be replaced completely.
The federal government would rather not cover all of the costs alone and is seeking new financing models that would involve private investors. Such "public-private partnerships" already exist on a small scale.
One model: Public-private partnerships (PPP)
At one construction site in downtown Hanover, everything is going according to plan. Builders must be ready to hand over the keys to the city's new court complex by the end of June. The project was co-financed by one of Germany's larger insurers, Gothaer Asset Management in Cologne.
Low interest rates, new investment opportunities
Traditionally insurers have invested their clients' money in government and mortgage bonds, but interest on such deposits has fallen so sharply in recent years that they are hardly cost-effective anymore.
"The liquid bond markets are all but dried up, not least because of the bond purchases of the European Central Bank," said Gerd Weidenfeld, head of corporate finance at Gothaer. "They just don't offer any significant yields anymore."
With that in mind, the folks at Gothaer are increasingly investing their clients' money in infrastructure projects, which according to Weidenfeld offer a long and predictable lifespan and stable cash flow.
According to the German Insurance Association (GDV), insurers in Germany have invested less than 1 percent of their capital assets in infrastructure projects. Gothaer has been the exception, putting more than 4 percent of its assets into real estate and renewable energy projects, such as solar power facilities and wind farms.
Germany's strict capital requirements
Gothaer and other insurers have a mind to soon finance the construction of bridges and highways too, but there are still legal barriers and tight regulation on capital in Germany. That's why Germany has so few major building projects compared to, say, Great Britain.
Tim Ockenga of the GDV advises looking to other countries where "private investments in infrastructure are more common and learning from those experiences."
To the north of Hamburg, a Dutch pension fund has been funding the construction of the A7 highway. The project is a perfect example of how Germany could relax its regulations and pave the way for German investors to get involved in large infrastructure projects.
Critics fear a double burden for taxpayers
But such financing models are not without opposition. Alex Kleinlein from Germany's Insurance Agency Association, for one, categorically rejects the involvement of private insurers. German taxpayers already pay taxes for the construction and maintenance of infrastructure. Pouring their retirement savings into such projects as well would be a double burden in Kleinlein's eyes.
"When a highway is refurbished someone has to pay the toll - and that responsibility usually falls to the taxpayer," he said. "If these projects ultimately become risky investments, then it is again the taxpayer who has to come up with the money in the end."
Gerd Weidenfeld from Gothaer is aware of the risks. Any invested capital must bring absolutely reliable returns. There are enough negative examples, such as in Spain, Italy or Romania, where feed-in tariffs for photovoltaic power stations were cut retroactively.
"Even in Norway feed-through charges for pipelines were reduced by 90 percent after they were sold to private investors," Weidenfeld said. "In Germany, we must be absolutely certain that things like this don't occur."
Insurers require a safe framework
In order to avoid jeopardizing members' retirement savings, insurers like Gothaer are calling for state guarantees over the long run. When it comes to highways or bridges, Weidenfeld says, it has to be clear "that the federal government stands behind its projects or at least have the states paying remuneration for them in regular intervals."
That's comparably easy when it comes to real estate projects like Hanover's court complex. Gothaer has already rented the facility to public authorities, thereby securing a fixed rental income for the next 30 years.